Tax Court of Canada Judgments

Date: 19980817

Docket: 96-1814-UI

BETWEEN:

CHARLES REYNOLDS,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent,

and

EVANS SERVICE CENTRE, DIVISION OF GARRY EVANS ENTERPRISES INC.,

Intervenor.

Reasons for Judgment

Rip, J.T.C.C.

[1] The issue in this appeal from a determination by the Minister of National Revenue ("Minister") is whether or not Charles Reynolds is eligible for unemployment insurance benefits pursuant to the Unemployment Insurance Act ("Act") with respect to the period September 26, 1994 to May 1, 1995[1] ("period") when Mr. Reynolds claims he worked for Garry Evans Enterprises Inc. ("Employer").

[2] In the Minister's view Mr. Reynolds' earnings on which unemployment insurance premiums were payable totalled $1,717 and that he worked for the Employer only seven weeks of insurable employment during the period. Mr. Reynolds claims he commenced working for the Employer on September 26, 1994 until he was injured in a work related accident on or about May 1, 1995. The Employer intervened in Mr. Reynolds' appeal and denied several allegations in the Notice of Appeal.

[3] The Employer carries on the business of operating a garage for the repair of motor vehicles and construction equipment and sale of parts under the name Evans Service Centre. Garry Evans is the sole shareholder of the Employer and is its President.

[4] Mr. Evans is a Class A mechanic. During the period, he testified, the Employer engaged a Mr. Larry Kellestine as a full-time employee, and Mr. Reynolds on a part-time basis. In early May 1995 the Employer moved to new premises and hired another Class A mechanic and a helper.

[5] Mr. Reynolds testified he commenced working for the Employer on September 26, 1994 as an apprentice mechanic at a salary originally set at $250 a week; the salary was reduced to $200 a week when Garry Evans realized he could not guarantee Mr. Reynolds a minimum of 28 hours of work every week for 50 weeks as required by a provincially funded employment program called Jobs Ontario. Mr. Reynolds would be paid on the basis of $10 per hour for a 20 hour work week.

[6] Mr. Evans' evidence was that Mr. Reynolds started working for the Employer during the first week of August on a part time basis. He said that when Mr. Reynolds first approached him for a job, work was slow and he did not require an additional employee. He tried to keep Mr. Kellestine busy and he, himself, would take the overload. Mr. Evans, at the time, was looking for new premises and thought that Mr. Reynolds could help with any overload. He said he warned Mr. Reynolds he could not hire him on a full-time basis but could provide him with a few jobs. Mr. Reynolds agreed to work for the Employer on that basis, Mr. Evans said.

[7] When the Employer interviewed a potential employee, said Mr. Evans, he would ask the potential employee how much salary he required and if that person required more than the Employer could afford, the person was not hired. Mr. Evans summarized the terms of the agreement he had with Mr. Reynolds:

A. Yes, First of all, I said -- oh, first of all he supplied me with a resume and on the resume it said he had done piece work for RV Enterprises, he said he worked for them as a subcontractor. I said if you are set up with a business already it is easier for me, you just give me a bill after each job when it is completed and then that saves my overhead and also makes the book work easier for me. Because he is working by the job that is much easier. That is how we initially started, he said okay, I'll just keep track of what I do and when I need some money I will give you a bill for what I do. I said, fine. We discussed money and I said if you make yourself available that I can find you if I need you, I said I will pay you $10.00 an hour, because he is running his business and I am running a business. That was fair to me. That was fair to me to have somebody around to be available when I needed him.

[8] Mr. Evans agreed that after he hired Mr. Reynolds, Mr. Reynolds informed him that the appellant's employment could be subsidized by Jobs Ontario. Upon investigation with Jobs Ontario, Mr. Evans learned it was not possible in the circumstances to obtain a subsidy. Mr. Evans was not in a position at that time to permit Mr. Reynolds to work alongside him to learn to be a mechanic, as required by the program. Mr. Evans said Jobs Ontario would "evaluate" how much time he was required to spend with Mr. Reynolds and he could not commit himself since he was often out of the garage. Mr. Evans suggested to Mr. Reynolds that he be "around the shop" to watch what was happening and to "pick up knowledge". Mr. Evans insisted that Mr. Reynolds was not hired as an apprentice, although Mr. Reynolds expressed his desire to become a mechanic. Mr. Evans described Mr. Reynolds as having "not much" skills but was a person who "wanted to learn and ... was a good worker".

[9] The dispute between Mr. Reynolds and Mr. Evans - and the Minister - is whether Mr. Reynolds worked for the Employer during most of August and better part of September 1994. Mr. Reynolds says he did not; Mr. Evans says he did as a sub-contractor, not as an employee.

[10] Mr. Reynolds testified that during August, at least, he spent most of the time camping and fishing and part of the time looking for a job. He camped near Goderich, Ontario during the first week of August. In September he was "fishing a lot" as well. He recalled going on many fishing expeditions "back and forth" between London and the fishing area with two women he was living with at the time and a friend, Don Vermist. He said he did not fish by himself because he cannot swim.

[11] Erika Burton, who was his girlfriend and who is now a "friend", agreed that she accompanied Mr. Reynolds to a campground in the first week of August and remained there for one or two weeks. She remembered that the campground was "not packed" and that Cathleen Benjamin, who lived with her and the appellant, accompanied Mr. Reynolds and her.

[12] Ms. Burton stated during August 1994 when they were in their apartment Mr. Reynolds did not "get up for work". She was not aware of Mr. Reynolds' source of income at the time. In September, she said, Mr. Reynolds spent most of his time fishing away from London; he was "obsessed" with fishing. She also testified Mr. Reynolds moved out of the apartment in October 1994 to be closer to the Employer's garage.

[13] Ms. Benjamin, who at the time of trial lived with Mr. Reynolds, remembered reserving a campsite in advance for early August 1994. She produced a calendar indicating she was camping on August 2, 3, 4 and 5 of 1994. (After August 7, only days she was to receive "pay" are indicated on the calendar.) She said she was fishing with Mr. Reynolds who had an "obsession" with fishing. Friends joined them at the camp.

[14] Mr. Vermist has known Mr. Reynolds since 1983 and considers himself a "good friend" of the appellant. He also testified that he went salmon fishing with Mr. Reynolds during August and September 1994, as he had in previous years. Mr. Vermist was confident he fished with Mr. Reynolds "within" the first two weeks of September. Mr. Reynolds had earlier informed him that he would be starting work at the end of September. In cross-examination, Mr. Vermist acknowledged he worked "full-time" in 1994 and would go fishing on weekends only.

[15] One of the main thrusts of the debate between the appellant, on one hand, and the respondent and the intervenor, on the other hand, was their disagreement as to the use and application of work orders and time sheets to determine when a person worked and his hours of work. A work order (Exhibits R-7, R-8, R-9) was used by the Employer to identify, among other things, the owner of the vehicle to be repaired, the vehicle, the work done and the unit price of labour and parts; a work order is numbered and dated. The Employer's time sheet (Exhibits R-3, R-4, R-11) usually, but not always, identified the work order number, the duration of the work, the customer, the type of service, parts or work undertaken and the time charged. The time charges and the duration of the work performed are usually the same. The mechanic entered the hours for a job on the time sheet.

[16] Page 1 of Exhibits R-3 and R-11[2] purports to be a time sheet for the period commencing August 1, 1994 and ending September 2, 1994, in particular, the weeks of August 1 to August 5, August 8 to August 12, August 15 to August 19, August 22 to August 26 and August 29 to September 2; page 2 purports to be a time sheet for the period September 5, 1994 to September 23, 1994, in particular, the weeks of September 5 to 9, September 12 to 16 and September 19 to 23. The first item on page 1 refers to work performed for a customer, Tri County Paving. Exhibit R-11 refers to work order No. 1432. Work order No. 1432 (part of the bundle of work orders in Exhibit R-9) is dated August 19, 1994. A comparison of handwriting on page 1 of the time sheet in Exhibit R-3 to the handwriting of Mr. Reynolds on several pages in Exhibit R-9, suggests the same person wrote both documents.

[17] Mr. Reynolds recognized the writing on time sheets produced as Exhibits R-3 and R-4, except for pages 1 and 2 of Exhibit R-3 (and R-11), to be in his hand. In his view pages 1 and 2 were "help sheets" to teach him how to prepare time sheets. The Minister, to support the position that work described on time sheets and work orders was legitimate, produced a copy of a statement of account from one of the Employer's suppliers, dated August 17, 1994, for sub-contracting services relating to work described on page 1 of Exhibit R-3.

[18] Mr. Evans testified that Mr. Reynolds "was working piece work". He said he instructed Mr. Reynolds to keep track of all of his hours and instructed him how the time sheets were to be prepared. He explained to Mr. Reynolds how the time sheets were maintained and how the various columns were to be completed. The time sheets were kept on an employee's clipboard. Each employee had a clipboard and would "scratch down whatever he was working on to write the work orders afterwards". Mr. Evans testified he stressed to Mr. Reynolds the importance of keeping track of all the work. The word "Paid" on the time sheet, said Mr. Evans, "is what I owed Charlie for the job".

[19] Mr. Evans testified in great detail how time sheets are prepared and how the employee transfers the information on the time sheet when completing a work order. He explained all work orders are numbered sequentially and can be cross-checked to the information on the time sheets. After his examination for discovery Mr. Evans attempted to match time sheets with work orders. He produced Exhibit R-11, basically a duplicate of Exhibits R-3 and R-4, and compared work orders to jobs on Mr. Reynolds' time sheets. For example, work order number 1431 indicates the work started on August 17, 1994 and the time sheet for that job indicates Mr. Reynolds did the work and was paid for the work.

[20] Mr. Reynolds acknowledged work orders numbered 1671,1674 and 1677, for example, dated February 16, 1995, February 21, 1995 and February 24, 1995, respectively, were in his hand, at least in part. Mr. Evans and the Employer's bookkeeper, Ms. Radford, identified Mr. Reynolds' handwriting on these work orders. They also say that pages 1 and 2 of Exhibit R-3 is in Mr. Reynolds' handwriting. Mr. Reynolds, Mr. Evans testified, gave these time sheets to Mr. Evans and together, they reviewed items on the time sheet to determine Mr. Reynolds' pay. Ms. Radford said she recognized Mr. Reynolds' handwriting from other writings he provided her. The handwriting on work orders numbered 1467 and 1482, dated September 7, 1994 and September 19, 1994 appears to be the same. A comparison of the handwriting of the word "safety", and individual letter "f", for example, confirms Mr. Evans' and Ms. Radford's opinion that Mr. Reynolds wrote the work orders.

[21] Mr. Evans recalled that the first job Mr. Reynolds had with the Employer was with "Ronson". Mr. Kellestine was originally assigned the job, to repair a tractor, but Mr. Evans offered it to Mr. Reynolds who had indicated he had repaired tractors in the past. This was in August 1994 and is the first job listed on page 1 of the bundle of Mr. Reynolds' time sheets (Exhibit R-3).

[22] Mr. Reynolds' agent submitted that the Employer supplied the time sheets in Exhibit R-3 to the Human Resources Development Canada ("Human Resources") when that Department was investigating Mr. Reynolds' objection denying his request for unemployment insurance benefits. However, he asserted that the Employer provided only those select work orders that would match time sheets.

[23] The Human Resources appeals officer, Ms. Patricia Lyn Meston, reviewed Mr. Reynolds' objection. She met Ms. Radford who gave her the Employer's books and records to review at her office. In her report, Ms. Meston wrote that:

Employer advised that when claimant first started working there, he wanted to be paid under the table. Bookkeeper advised against it, so employee refused to use the employer's regular time keeping forms, showing dates etc. The attached are the hand written time sheets kept by claimant, left to right: work order #, hours worked, job identifying customer, comments identifying type of work done, pd identifying number of hours paid by the employer. Note, there are no days, dates etc. on any time sheets except for that written on by the bookkeeper. Vicki Bradford [sic] advised that claimant's FDW was Aug 1/93, LDW May 6, 1994. The only way employer could determine number of hours claimant worked per week was by totalling each sheet, determine hours worked by date on the work order numbers and comparing to the date of the employer sales records. She advised she did this for each entry made by claimant on each sheet. She then divided the total hours by the number of weeks during that period to determine average weekly wage. Vicki verified that claimant never worked more than 15 hours each week, with the exception of several weeks during March as employer was preparing to move to new location April 1, 1995. Vicki advised that no other employee they have ever employed has refused to complete the employer time sheets, except this employee. First page of both sets of time sheets are summaries provided by bookkeeper. 1994 T4 slip does not add up to time sheets by approximately $86 as T4 slip was issued based on when earnings were actually paid.

[24] Ms. Meston testified that Mr. Reynolds had been provided with two record of employment forms by the Employer. Mr. Reynolds originally complained the first form (Exhibit R-1) contained wrong information with respect to his earnings and the number of weeks he was employed. In the revised form (Exhibit R-2), amounts of pay and weeks worked, for example, are different from those in the original forms. Ms. Meston testified that the information included in both the original form and the revised form does not support Mr. Reynolds' claim for eligibility for unemployment insurance benefits.[3]

[25] Ms. Meston stated she "used averages" to calculate the numbers of insurable weeks Mr. Reynolds worked.

[26] Mr. Kellestine worked for the Employer as an apprentice mechanic from autumn 1992 to August 1993, but not continuously. He was laid off work for six weeks in December 1994 and January 1995 when the Employer's business was closed. Mr. Kellestine is a much more experienced mechanic than Mr. Reynolds. Mr. Kellestine was close to acquiring his mechanic's licence. Mr. Kellestine was originally paid ten dollars an hour for 40 to 45 hours of work a week. Later his pay was increased to twelve dollars an hour on a "flat" rate basis.[4] He recalled that Mr. Reynolds started working for the Employer "roughly" in August or September 1994 and that he worked Monday to Friday from eight o'clock in the morning until five o'clock in the afternoon, and sometimes on Saturday. He described Mr. Reynolds' duties as cleaning the shop and repairing cars.

[27] Mr. Reynolds was at the garage daily, said Mr. Kellestine, and he worked at a specific work bay. Mr. Kellestine thought Mr. Reynolds worked more than 15 hours a week.

[28] Mr. Kellestine explained how he filled out a work order: he completed a work order by describing the work to be performed on the vehicle, the parts ordered, the cost of parts and labour and taxes. Then "the bill is sent out". He maintained his own time sheet for each job to record the number of hours he worked on a "flat rate basis". After the work was done he would transfer the number of hours he recorded from his copy to a "good copy" of a work order. His own time sheet would contain all the pertinent information concerning a particular job.

[29] The date on the work sheet, Mr. Kellestine testified, is "usually" the day when the job is done. The work order is "usually" written up when the customer brings the vehicle into the shop. Any of Mr. Evans, Mr. Reynolds and he would prepare a work order.

[30] Mr. Kellestine said that when work was done on weekends the work order would be written-up on Monday. The work order for a safety inspection may experience an extended life: the work order would be prepared when the vehicle was brought into the shop and usually work was done the same day. If no work was done, the vehicle was returned to the client. If the client decided to repair the vehicle on his own and return the vehicle for inspection later on, once the repairs were made, the Employer would use the original work order at that later date. If work was done off site, for example, at the client's facility or on the road, the mechanic would make notes of the parts used and the work order would be prepared the next morning.

[31] Mr. Reynolds was paid by cheque for the work he performed during August 1994. The first cheque was for $250.00. Mr. Evans declared that Mr. Reynolds told him "when I need money I will let you know ... I have other sources ..." and "as soon as I need money I will give you the bill". In late September Mr. Reynolds said he wanted some money, pay for 25 hours work, according to Mr. Evans. Then Mr. Reynolds requested to Mr. Evans, the latter testified, that "rather than putting it through a sublet job will you put me on the books ..." Mr. Evans said it made no difference to the Employer how Mr. Reynolds was paid and he agreed to put him on the regular payroll.

[32] When Mr. Reynolds had asked for pay for 25 hours, the total hours he worked to that time were 68.2 hours. He was paid for the time he asked on or about October 1, 1994. The next cheque for Mr. Reynolds was for $200.00 because, according to Mr. Evans, he did not want pay for more than 20 hours at a time and "ever since then, if he had enough money to make the 20, had enough time in the jobs he performed for me to make the 20 hours, that is what I paid him, and I only paid him when he asked for it", even though Mr. Reynolds was on the Employer's payroll. According to Mr. Evans, "he was saving his hours".

[33] Mr. Evans recalled that around Christmas 1994, Mr. Reynolds "hardly had enough hours" for which he had not yet been paid to get paid for 20 hours. Sometimes, Mr. Evans related, Mr. Reynolds would ask for a cheque on a Friday night and Mr. Evans would write a cheque for $200.00, less deductions. Mr. Evans would then advise Ms. Radford to "take 20 hours off ... and I gave her the cheque number".

[34] Ms. Radford is employed in the Business Office of London Health Sciences. During the past ten years she has worked for the Employer taking care of administrative and accounting matters such as accounts payable, accounts receivable and books of account of the business.

[35] Her understanding of the original relationship between the Employer and Mr. Reynolds was that Mr. Reynolds would bill the Employer and she was to prepare the cheque. At the end of September the procedure changed: Mr. Reynolds wanted a payroll cheque.

[36] In calculating how much was due to Mr. Reynolds, Ms. Radford used Mr. Reynolds' time sheets. She first saw page 1 of Exhibit R-3 at the end of September 1994. After she prepared and issued the first cheque to Mr. Reynolds for $250.00, subsequent cheques were made weekly and were based on a weekly salary of $200.00 (Exhibit R-12). Ms. Radford explained how she maintained a running balance of the hours she described as "banked" by Mr. Reynolds. These balances are on the cover pages of Exhibits R-3 and R-4 and are based on the information entered on the time sheets in each of these Exhibits. (The Minister relied on the information described on the cover sheets to Exhibits R-3 and R-4 and are set forth in subparagraph 4 (g) of the respondent's Reply to the Notice of Appeal. Subparagraphs 4 (g), (h) and (i) of the respondent's Reply are attached as a Schedule to these reasons.) She also prepared a summary of hours worked by Mr. Reynolds and the hours for which he was paid (Exhibit R-12 or R-13). Exhibit R-13, for example, describes the hours actually worked by Mr. Reynolds, when he got paid and the amount of pay. After recording payments for the period February 3 to March 24, 1995, she entered "(13.2) in the hole". Ms. Radford explained this means that as of March 24, 1995 Mr. Reynolds had been paid for more hours than he actually worked. (Exhibit R-12 records the cheques made out to Mr. Reynolds, including the gross pay and the statutory amounts withheld.)

[37] Ms. Radford also testified that Mr. Reynolds did not want any blank spaces in the insurable earnings boxes on his Record of Employment form (Exhibits R-1 and R-2). Ms. Radford said she did not know the effective date Mr. Reynolds became an employee of the Employer. She knew it was in September and thus she entered September 9, 1994 on the Record of Employment.

[38] The testimony of the appellant's witness and the witnesses of the respondent and intervenor are in conflict in almost all aspects. The only fact they agree on is that Mr. Reynolds was employed by the appellant from sometime in September 1994 to on or about May 1, 1995.

[39] The actual time Mr. Reynolds started work at the Employer, whether as an employee or sub-contractor, the original nature of the relationship between Mr. Reynolds and the Employer, the hours of work per week executed by Mr. Reynolds as an employee and the calculation of pay to Mr. Reynolds are several important facts on which the two sides cannot agree. At the end of the day, therefore, I am compelled to chose the evidence of one side over the other.

[40] I prefer the evidence of Mr. Evans and Ms. Radford. Their testimony was forthright and supported by the documentary evidence previously referred to. Mr. Evans was candid about his relationship with Mr. Reynolds. I did not get the impression Mr. Evans was attempting to mislead in any manner.

[41] Mr. Kellestine also gave truthful evidence but much of his evidence dealt with his impression of what Mr. Reynolds' job was and Mr. Reynolds' relationship with the Employer. Simply put, there is no evidence he was privy to the agreement between Mr. Reynolds and the Employer as to what Mr. Reynolds' chores were, and there is no reason he should have been.

[42] Mr. Kellestine's evidence did corroborate to a great extent Mr. Evans' evidence with respect to the procedures for completing work orders and time sheets.

[43] Mr. Vermist could only testify he went fishing with Mr. Reynolds on weekends in early September 1994. This is not in conflict with any of the evidence of Mr. Evans.

[44] As far as the testimonies of Ms. Burton and Ms. Benjamin are concerned, I find their evidence is self-serving. Both those ladies wished to put Mr. Reynolds in the best possible light.

[45] Now for Mr. Reynolds' testimony. I found Mr. Reynolds' evidence, at best, to be misleading. I find it difficult to accept his testimony, for example, that pages 1 and 2 of Exhibit R-3 were merely "help sheets" and not real time sheets. Actual work orders were prepared with the information contained on the time sheets on pages 1 and 2 of Exhibit R-3. Furthermore, the writing on a relevant work order (No. 1432) suggests that at least part of the work order is in Mr. Reynolds' hand.

[46] My impression from observing Mr. Reynolds during his testimony, specifically his reaction to questions put to him on cross-examination, and his demeanor while other witnesses testified is that he attempts to ingratiate himself with, or manipulate, persons who may be in a position to assist him, whether it be Mr. Evans, respondent's counsel or me. I do not give much weight to his evidence.

[47] I therefore find the appellant commenced working for the Employer as a sub-contractor sometime in August 1994 and became an employee of the Employer on or about September 26, 1994. Before becoming an employee, Mr. Reynolds provided the Employer with 68.2 hours of work as a sub-contractor. There is no evidence Mr. Reynolds worked as an employee for the Employer more than 15 hours a week for more than seven weeks during the period.[5] The Employer paid Mr. Reynolds during the period for hours worked in a particular week and for hours he worked earlier but for which he had not been paid. Mr. Reynolds is not entitled to benefits under the Act with respect to the time he worked during the period.

[48] The appeal is dismissed and the determination of the question by the Minister is affirmed.

Signed at Ottawa, Canada, this 17th day of August 1998.

"Gerald J. Rip"

J.T.C.C.

SCHEDULE

TO REASONS FOR JUDGMENT

CHARLES REYNOLDS V. M.N.R. #96-1814(UI)

(g) information and records were obtained from both the Appellant and the Employer and the following was determined:

Period 1994	Total Hours Worked	Hourly Pay	Total Earnings	Number of Weeks	Average Weekly Earnings
Aug 1-5
Aug 8-12
Aug 15-19	68.2	$10.00	$682.00	5	$136.40
Aug 22-26
Aug 29-Sep 2
Sep 5-9
Sep 12-16	31.4	$10.00	$314.00	3	$104.66
Sep 19-23
Sep 26-30
Oct 3-7	27.5	$10.00	$275.00	2	$137.50
Oct 10-14
Oct 17-21	19.5	$10.00	$195.00	2	$ 97.50
Oct 24-28
Oct 31-Nov 4	22.5	$10.00	$225.00	2	$112.50
Nov 7-12
Nov 14-18	52.5	$10..0	$525.00	4	$131.25
Nov 21-25
Nov 28-Dec 2
Dec 5-9
Dec 12-16	24.8	$10.00	$248.00	2	$124.00

Period	Hours	Earnings	Vacation Pay
1994
Dec 19 - Dec 24	5	$ 50.00
Dec 26 - Dec 31	5	$ 50.00
1995
Jan 2 - Jan 7	5	$ 50.00
Jan 9 - Jan 14	5.3	$ 53.00
Jan 16 - Jan 21	14.5	$145.00
Jan 23 - Jan 28	14.5	$145.00
Jan 30 - Feb 4	12.5	$125.00
Feb 6 - Feb 11	12.5	$125.00
Feb 13 - Feb 18	12.6	$126.00
Feb 20 - Feb 25	12.8	$128.00
Feb 27 - Mar 4	12.8	$128.00
Mar 6 - Mar 11	12.9	$129.00
Mar 13 - Mar 18	20.5	$205.00*
Mar 20 - Mar 25	20.6	$206.00*
Mar 27 Apr 1	14	$140.00
Apr 3 - Apr 8	29.7	$297.00*
Apr 10 - Apr 15	28.25	$282.50*
Apr 17 - Apr 22	19.2	$192.00*
Apr 24 - Apr 29	19.3	$193.00*
May 1 - May 6	12.75	$127.50	$214.44=
			$341.94*

(h) the earnings which are indicated by (*) in (g) above are the insurable earnings for which unemployment insurance premiums were payable and also represent insurable weeks;

(i) based on the figures in (g) above, the Appellant had total insurable earnings of $1,717.00 and had seven insurable weeks.

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