[OFFICIAL ENGLISH TRANSLATION]
2000-5201(EI)
BETWEEN:
LAITERIE LAMOTHE ET FRÈRES LTÉE,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
FRÉDÉRIC BUREAU, DANIEL DESROSIERS, MARIO LABONTÉ,
CLAUDE RENAUD, JOCELYN ROBIDOUX, JEAN-YVES BRETON,
Interveners.
Appeal heard on July 16, 2002, at Montréal, Quebec, by
the Honourable Deputy Judge J.F. Somers
Appearances
Counsel for the Appellant: Michel Parent
Counsel for the Respondent: Dany Leduc
Counsel for the Interveners: Robert Toupin
JUDGMENT
The appeal is dismissed and the assessments are confirmed in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 10th day of September 2002.
|
"J.F. Somers" |
D.J.T.C.C.
Translation certified true
on this 15th day of December 2003.
Sophie Debbané, Revisor
[OFFICIAL ENGLISH TRANSLATION]
Date: 20020910
Docket: 2000-5201(EI)
BETWEEN:
LAITERIE LAMOTHE ET FRÈRES LTÉE,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
FRÉDÉRIC BUREAU, DANIEL DESROSIERS, MARIO LABONTÉ,
CLAUDE RENAUD, JOCELYN ROBIDOUX, JEAN-YVES BRETON,
Interveners.
REASONS FOR JUDGMENT
Somers, D.J.T.C.C.
[1] This appeal was heard at Montréal, Quebec, on July 16, 2002.
[2] On September 2, October 22, October 29 and November 4, 1999, as a result of requests by the Department of Human Resources Development Canada, an authorized officer of the Canada Customs and Revenue Agency determined that the appellant's employees involved in the distribution of dairy products held insurable employment.
[3] On November 30, 1999, the appellant appealed the determination of the Minister of National Revenue ("the Minister") concerning the distribution employees.
[4] On March 30, 2000, the Minister informed the appellant of his decision that the employment of Jean-Yves Breton, Frédéric Bureau, Daniel Desrosiers, Mario Labonté, Claude Renaud and Jocelyn Robidoux was insurable because it met the requirements for a contract of service; there was therefore an employer-employee relationship between the appellant and those employees.
[5] The appellant did not appeal the Minister's decision of March 30, 2000, to the Court, and that decision on the insurability of the employment is not at issue in these proceedings.
[6] By notices of assessment dated June 9, 2000, the Minister assessed the appellant:
- in respect of 1998, for $29,312.77 in unpaid employee's and employer's employment insurance premiums and $3,935.00 in interest, minus a credit of $18,915.20, for a total of $14,332.57 for 13 employees, the workers;
- in respect of 1999, for $17,541.92 in unpaid employee's and employer's premiums and $697.00 in interest, for a cumulative total of $32,571.49 for 10 employees; and
- in respect of 2000, for $4,800.00 in unpaid employer's premiums and $90.00 in interest, for a cumulative total of $37,461.49.
[7] On June 27, 2000, the appellant asked the Minister to reconsider the assessments of June 9, 2000.
[8] By letter dated October 3, 2000, varied on March 1, 2001, the Minister informed the appellant that a decision had been made to confirm the assessments for 1998, 1999 and 2000 on the ground that the workers held insurable employment because there was an employer-employee relationship between the appellant and the workers.
[9] By Notice of Appeal filed in this Court on December 28, 2000, the appellant appealed the Minister's decision of October 3, 2000, which was varied on March 1, 2001.
[10] Subsection 5(1) of the Act reads in part as follows:
5.(1) Subject to subsection (2), insurable employment is
(a) employment in Canada by one or more employers, under any express or implied contract of service or apprenticeship, written or oral, whether the earnings of the employed person are received from the employer or some other person and whether the earnings are calculated by time or by the piece, or partly by time and partly by the piece, or otherwise;
. . .
[11] The burden of proof is on the appellant, which must show on a balance of probabilities that the Minister's decision is unfounded in fact and in law. Each case turns on its own facts.
[12] In making the assessments, the Minister relied on the following assumptions of fact set out in paragraph 13 of the Amended Reply to the Notice of Appeal:
[TRANSLATION]
(a) the appellant manufactured and distributed dairy products;
(b) the appellant hired the workers as distributors;
(c) at the start of their day, the workers loaded dairy products at the appellant's place of business;
(d) at the end of the day, the workers came to store the remaining products in a refrigerated room at the appellant's place of business;
(e) the workers gave the appellant a report on the day's sales and ordered products for the next day;
(f) on the basis of the sales reports, the appellant provided a weekly report concerning each worker's account;
(g) the workers had a logbook that was given to the appellant so that it could replace them on the days they were absent;
(h) the workers had to sell the appellant's products exclusively;
(i) the appellant set the sale prices for the products;
(j) (removed)
(k) the appellant billed the major customers directly, and they paid the appellant directly for the products distributed by the workers;
(l) the workers did account collection for the small businesses;
(m) the appellant could establish the workers' earnings by the difference between the purchase cost and the sale price of the products sold;
[13] The only issue is whether the assessments at issue for 1998, 1999 and 2000 are valid; the workers' insurability is not in dispute.
[14] During his testimony at the hearing, Jean-Yves Breton, one of the workers and interveners, stated that he had worked for the appellant from 1976 to 2002. In 1993, he signed a contract of employment with the appellant, and a sample of that contract was filed as Exhibit I-1. The workers/distributors purchased the appellant's products at a price set by the appellant. They sold the products to businesses and private residences; 35 percent of the total sales were made to businesses and 65 percent to private residences.
[15] At the start of the day, the distributors loaded products at the appellant's place of business. In the evening, they gave the appellant a load sheet showing the quantity of products they wanted for the next day, and the appellant's employees prepared those products for the next day.
[16] The appellant set the purchase price of the products sold to the distributors and the sale price for consumers. Jean-Yves Breton explained that he could sell the products to private homes for less than the price set by the appellant but that businesses had to pay the price set by the appellant.
[17] With respect to the earnings from the residential sales, the witness explained that he kept the money without reporting on it to the appellant. He added that, if a customer did not pay a bill, the distributor was the one who incurred the loss. As for the earnings from the business sales, the distributors invoiced the customers and gave the appellant the invoices. When from time to time the distributors collected money from the merchants, they filled out a bank slip and gave it to the appellant along with the money collected. If certain products were returned, the distributors were given a credit for them. The distributors gave the appellant a weekly report on returns and on wholesale and retail sales.
[18] Martin Langlois, the appellant's chief financial officer, corroborated Jean-Yves Breton's testimony. He explained that the appellant could not know about the cash sales, whether wholesale or retail; the distributors kept the difference between the price paid to the appellant for the products and the price paid by the customers. The distributors were not required to report to the appellant on the amount of their income.
[19] The appellant did not pay the workers (distributors) by cheque but credited them the difference in the amounts owed. The witness added that, since the appellant was assessed, the purchase and sales records have been more complete and, as a result, source deductions, such as employment insurance premiums, are made in accordance with the statutory requirements.
[20] Claude Renaud, a distributor for the appellant, stated that he had not received any cheques from the appellant in 1998. On this point, he filed as Exhibit A-2 hisincome tax notice of reassessment, which shows $76,708 as his [translation] "total income - adjusted amount". The witness could not explain whether that figure was accurate and said that he relied on his accountant.
[21] Nicole Villeneuve, an auditor with the Canada Customs and Revenue Agency, explained how she had been able to determine the amount of the unpaid employee's and employer's employment insurance premiums. During her investigation, she checked the data with the appellant's supervisor and controller and with the workers (distributors). The appellant was unable to provide her with the workers' gross income. She also examined the weekly, monthly and yearly reports prepared by the distributors and the distributors' tax returns. On the basis of that information, she established the amount of the premiums as set out in paragraph 13 of the Amended Reply to the Notice of Appeal.
[22] Counsel for the appellant acknowledged that the workers/distributors whose names are on a list appended to the Reply to the Notice of Appeal held insurable employment with the appellant because there was an employer-employee relationship between the parties. The employment was insurable, and the appellant made the necessary deductions. The distributors purchased the appellant's products and, if some products were returned, they were credited for the amounts in question. The appellant did not know how much cash the distributors collected from the customers, and the distributors were not required to provide the appellant with their total income from sales to customers.
[23] Counsel for the appellant argued that it was impossible for the appellant to determine the workers' income. He also argued that the auditor, Nicole Villeneuve, could not base the assessments on the information obtained or on the workers' tax returns. He used the following legal maxim to support his argument: "no one is bound to do the impossible".
[24] Relying on decisions by the courts, including the Supreme Court of Canada, counsel for the Minister argued that the Act must be interpreted broadly to guarantee that people who hold insurable employment will benefit from the Act when they lose their jobs; the Act must therefore be applied so as to achieve its intended purpose.
[25] In its Notice of Appeal, the appellant argued:
[TRANSLATION]
. . . the employer cannot owe an amount for 1998-99 that it could not collect because it was unaware of the insurability of the employment held by the agents/distributors and, above all, because making such deductions to pay the employee's premiums was impossible in fact and in law given the purchaser-vendor situation between the employer and the agents/distributors.
[26] On November 30, 1999, the appellant asked the Minister to rule on the insurability of the employment of the workers/distributors. It was not until March 30, 2000, that the Minister determined that the employment was insurable. The Minister has the power to claim all the premiums payable under the Act from the employer.
[27] It was possible for the appellant in this case to determine the income of the workers/distributors. The controller kept some control over all purchases and over the business sales; owners of commercial establishments were billed for purchases of the appellant's products. Only the sales made by the workers that were paid for in cash were not recorded by the controller. The appellant could have done that type of accounting; in fact, it now does.
[28] The facts in Mangat v. Canada (Minister of National Revenue - M.N.R.), [2000] F.C.J. No. 1464, were analogous to those of this case. In its decision dated September 11, 2000, the Federal Court of Appeal stated the following at paragraph 29:
Clearly, the words "paying remuneration" should not be read so narrowly so as to exclude the situation at issue in this case. The drivers are "rewarded" for their work as they keep a certain portion of the day's earnings. Interpreting the words "paying" and "remuneration" broadly it becomes clear that this is the effect of the arrangement between the Applicants and the taxi drivers.
The appellant therefore had to deduct the employee's premiums from the employees' remuneration.
[29] Section 66 of the Act provides:
The Commission shall, with the approval of the Governor in Council on the recommendation of the Minister and the Minister of Finance, set the premium rate for each year at a rate that the Commission considers will, to the extent possible,
(a) ensure that there will be enough revenue over a business cycle to pay the amounts authorized to be charged to the Employment Insurance Account; and
(b) maintain relatively stable rate levels throughout the business cycle.
[30] Subsection 82(1) of the Act reads as follows:
Every employer paying remuneration to a person they employ in insurable employment shall
(a) deduct the prescribed amount from the remuneration as or on account of the employee's premium payable by that insured person under section 67 for any period for which the remuneration is paid; and
(b) remit the amount, together with the employer's premium payable by the employer under section 68 for that period, to the Receiver General at the prescribed time and in the prescribed manner.
[31] Section 2 of the Insurable Earnings and Collection of Premiums Regulations reads in part as follows:
2.(1) For the purposes of the definition "insurable earnings" in subsection 2(1) of the Act and for the purposes of these Regulations, the total amount of earnings that an insured person has from insurable employment is
(a) the total of all amounts, whether wholly or partly pecuniary, received or enjoyed by the insured person that are paid to the person by the person's employer in respect of that employment, and
(b) the amount of any gratuities that the insured person is required to declare to the person's employer under provincial legislation.
[32] Under section 2 above, the workers/distributors in this case received remuneration from the appellant as employees.
[33] In Mangat, supra, the Federal Court of Appeal stated the following at paragraph 26:
The simple fact that the drivers give money to the employer and not vice versa does not mean that the driver is not being paid remuneration. The actual way in which the driver receives payment is immaterial. It is a fact that the money collected by the driver belongs to the owner of the vehicle. The driver can only keep that which he/she is entitled to according to the agreement with the owner. In theory this relationship is the same as the more traditional employment arrangement. The employee generates money for the employer and the employer returns a certain portion of that money to the employee as remuneration for services rendered. In the case at bar the parties have simply skipped the step of turning over all the money to the employer only to have the employer turn around and give a portion back to the drivers. Taxi drivers simply keep their portion, as per their agreement with the employer. This does not negate the fact that the drivers are being remunerated for their work.
[34] The appellant argued that the Minister could not make the assessments either since the data obtained by the auditor, Nicole Villeneuve, from the appellant's managers and the workers, that is, the weekly, monthly and yearly reports and the workers' tax returns, were not complete. However, the burden was on the appellant to prove that the figures are wrong.
[35] Subsection 85(1) of the Act reads as follows:
The Minister may assess an employer for an amount payable by the employer under this Act, or may reassess the employer or make such additional assessments as the circumstances require, and the expression "assessment" when used in this Act with reference to any action so taken by the Minister under this section includes a reassessment or an additional assessment.
[36] The appellant did not introduce in evidence any new facts that would change the assessment made by the Minister. The appellant argued that it did not pay the workers any wages: no amount was paid to the workers since they kept the difference between the purchase price and the sale price of the products.
[37] In Canadian Pacific Limited v. Attorney General of Canada (Minister of National Revenue), [1986] 1 S.C.R. 678, the Supreme Court of Canada stated the following:
The interpretation I have given to "insurable earnings" is consistent with the purpose of the Act, which is to pay, to persons who have lost their employment, benefits calculated in terms of a percentage of their insurable earnings. Otherwise, an employee who received a good part of his earnings as tips would not benefit to the same degree as his colleagues who receive the whole of their earnings directly from the pocket of their employer. By adding to the definition of remuneration a whole series of benefits an employee receives by reason of his employment, the regulations clearly indicate that the expression should be given a broad interpretation. Moreover, as noted, a law dealing with social security should be interpreted in a manner consistent with its purpose. We are not concerned with a taxation statute. The cases of Penn v. Spiers & Pond Ltd. and Great Western Railway Co. v. Helps . . . are merely examples of the principle that I have just stated.
[38] The employment of the workers/distributors was declared insurable, and the appellant therefore had an obligation to collect the premiums and remit them to the Minister. The workers cannot be deprived of employment insurance benefits because of the employer's failure to collect the premiums. The Minister made the assessments at issue in accordance with the provisions of the Act.
[39] The appeal is dismissed and the assessments are confirmed.
Signed at Ottawa, Canada, this 10th day of September 2002.
Cases consulted
Université Laval v. Canada (Minister of National Revenue - M.N.R.), [2002] F.C.J. No. 660 (F.C.A.) (Quebec); Fédération des caisses populaires de Montréal et de l'Ouest du Québec v. Canada, [2001] F.C.J. No. 266 (F.C.A.) (Quebec); Hutton v. Canada (Minister of National Revenue - M.N.R.), [1999] T.C.J. No. 655 (T.C.C.) (Newfoundland); Pierre-André Côté, The Interpretation of Legislation in Canada, 2nd edition; Mangat v. Canada (Minister of National Revenue - M.N.R.), [2000] F.C.J. No. 1464 (F.C.A.) (British Columbia); Canadian Pacific Limited v. Attorney General of Canada, [1986] S.C.J. No. 30 (S.C.C).
|
"J.F. Somers" |
D.J.T.C.C.
Translation certified true
on this 15th day of December 2003.
Sophie Debbané, Revisor