Date: 20010629
Docket: 2000-4684-EI
BETWEEN:
JASWINDER HOTHI,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
HOTHI ENTERPRISES LTD.,
Intervenor.
Reasonsfor Judgment
Rowe, D.J.T.C.C.
[1] The appellant appeals from a decision of the Minister of National Revenue (the "Minister") dated October 30, 2000 wherein the Minister decided the employment of the appellant with Hothi Enterprises Ltd. (payor or Enterprises) for the period May 5, 1999 to May 5, 2000 was not insurable employment because the parties were related and the Minister was not satisfied that the contract of employment would have been substantially similar if the appellant and the payor had been dealing with each other at arm's length.
[2] Jaswinder Hothi testified he is a university student residing in Winnipeg, Manitoba. In referring to the assumptions of fact set forth in paragraph 6 of the Reply to the Notice of Appeal (Reply), the appellant agreed the following assumptions were correct:
"(a) Hothi Enterprises Ltd. operated a grocery, meat and deli retail store called Classy Meats & Deli (hereinafter the "Store");
(b) the two shareholders of Hothi Enterprises Ltd. were Harjit Hothi and Jaswant Hothi who owned 51% and 49% of the voting shares, respectively;
(c) the Appellant is the son of Harjit Hothi and Jaswant Hothi;
(d) the Appellant's duties included operating the cash register, ordering, stocking shelves, wholesale shopping, cleaning and inventory;
(e) the Store was open to the public from 9:00 a.m. to 7:00 p.m. Monday to Saturday, however work was done at the Sotre from 6:00 a.m. to 8:30 p.m.;
(f) Hothi Enterprises Ltd. had no other workers other than Harjit Hothi and Jaswant Hothi and the Appellant during the period May 5, 1999 to May 5, 2000;"
[3] The appellant stated his duties also included cleaning and stocking shelves which were performed after the store was closed. In paragraph 6(g) of the Reply, the Minister assumed that the appellant's brother - Balraj Hothi - had worked at the store for the period from February 3, 1998 to December 31, 1998 at which time he was laid off due to a shortage of work. The appellant agreed Balraj Hothi had worked as a meat cutter in the store until that date but stated that when he began working on January 4, 1999 he was performing work that did not require special training as a meat cutter. The appellant agreed he was laid off - due to a shortage of work - on May 5, 2000. He also concedes that his brother - Balraj - was hired to work at the store on May 22, 2000. The appellant stated he spoke with a Rulings Officer regarding his hours of work and later provided additional information concerning the actual hours worked during a certain period. He agreed that, in a response to a questionnaire, he indicated his hours were as set forth in paragraph 6(m) of the Reply as follows:
"(m) in a response to a questionnaire from the Appeals Officer, the Appellant indicated his hours were as follows:
Time Period Days worked Time
January 4, 1999 to September 1, 1999 Monday to Friday 9:00 a.m. to 5:00 p.m.
September to December 1999 Monday 6:00 a.m. to 6:30 p.m.
Tuesday 6:00 a.m. to 8:00 a.m.
5:00 p.m. to 8:00 p.m.
Wednesday 7:00 a.m. to 3:30 p.m.
Thursday 6:00 a.m. to 8:00 a.m.
5:00 p.m. to 8:00 p.m.
Friday 6:00 a.m. to 2:30 p.m.
5:30 p.m. to 8:00 p.m.
January 1, 2000 to April 24, 2000 Monday 7:00 a.m. to 11:00 a.m.
1:00 p.m. to 6:00 p.m.
Tuesday 6:00 a.m. to 11:00 a.m.
5:00 p.m. to 8:00 p.m.
Wednesday 7:00 a.m. to 11:00 a.m.
1:00 p.m. to 6:00 p.m.
Thursday 7:00 a.m. to 11:00 a.m.
5:00 p.m. to 8:00 p.m.
Friday 9:00 a.m. to 11:00 p.m.
1:00 p.m. to 6:00 p.m.
April 25, 2000 to May 5, 2000 Monday to Friday 9:00 a.m. to 5:00 p.m."
[4] Jaswinder Hothi disagreed with the assumption - at paragraph 6(n) - that he had stated his hours of work were not recorded because he was aware that his father - Harjit Hothi - used a book to keep track of the hours worked. The appellant agreed he earned the sum of $9.00 per hour and was paid - by cheque - every two weeks and was not paid for any work calculated on the basis of overtime. During the period from the beginning of September, 1999 to the end of April, 2000, the appellant agreed he had been in full-time attendance at the University of Manitoba. At paragraph 6(s) of the Reply, the Minister assumed the appellant had previously performed services for Enterprises but had not received any remuneration. The appellant stated that was not correct. He pointed out he was now 28 years old and had been an adult during the time his father and mother had owned the store - for the past 8 years - and when he worked there, he was paid. The appellant stated that in his experience many employers offer flexible hours to university students in order to allow them to attend classes. During the period from September, 1999 to the end of April, 2000, the appellant agreed he was taking classes at the University of Manitoba and he is now enrolled in the Faculty of Education, having received his Bachelor of Arts degree. Jaswinder Hothi stated his mother and father also worked in the small family business. The appellant stated that although he had the opportunity to work at a large Superstore, it would have involved commuting to and from the job. In his opinion, that would have been difficult in the context of a schedule where he balanced a full-time job with full-time studies at the university. During the relevant period, the appellant stated he was aware that when he entered into his final year of study for his degree in Education, it would involve blocks of time - 4 or 5 weeks - where he would be teaching in schools and this activity - together with the requisite study and preparation - would interfere with an ability to work. As a result, he decided to put in long hours from May, 1999 to May, 2000 in an effort to earn money which could be used to pursue future studies in order to complete his degree.
[5] In cross-examination, Jaswinder Hothi stated he recalled speaking to Karen Bright - an official from Canada Customs and Revenue Agency (CCRA) - on May 26, 2000. He recalled telling Bright that his regular shift at the store was 9:00 a.m. to 5:00 p.m., Monday through Friday. He stated he was not asked by Bright whether or not he was attending university at the time and that he did not know the reason why his brother - Balraj - had been laid off. Later, when Bright telephoned him and asked him whether he had been a full-time student at university, he affirmed that he had been. He told Bright he had to refer to his actual university class schedule in order to provide exact details and indicated he would be in touch with her later on but he cannot recall the specific details of the overall conversation. He identified his application for employment insurance benefits - Exhibit R-1 - and agreed that when completing a Questionnaire he had provided the reason for his layoff as being due to a shortage of work. After he was laid off, his father began performing his former duties and Balraj was once again working in the meat department of the store which featured a meat/deli counter and a display area. The appellant stated he had no interest in learning how to be a meat cutter as a person has to be trained to do that work by taking a college course or participating in an apprentice program. When he received the Questionnaire from CCRA, he completed the form and returned it on August 28, 2000. He explained the hours of work were arranged as a result of discussions with his father and when he began working at the store - in May, 1999 - his father was aware he would be attending university - on a full-time basis - commencing in September. In the appellant's view, it is only common courtesy to advise any employer of future plans which could impact on regular working hours. As a result, his working hours were designed to accommodate his attendance at university. Other than his mother and/or father, the business never had more than one employee at a time. The appellant stated he had worked at the store in earlier years - 1994 to 1996 - and was paid for his efforts but cannot recall whether or not any T4 slips had been issued to him. Counsel for the respondent referred the appellant to a series of photocopied cheques - Exhibit R-2 - and the appellant agreed he had been paid almost the same amount - every two weeks - but added that his wages were based on a 40-hour week and all cheques had been deposited into his own bank account. On Mondays - for example - he might work 12 hours at the store but - overall - only worked 40 hours a week and he did not consider any extra hours worked on one or more days during a week as constituting overtime work for which extra rates of pay would be applicable. He stated he had worked a similar schedule for another employer and found it to be a suitable method. While working at the store he did not study for his university courses, as he did not consider that to be appropriate because - in his view - he was an employee and not just "my father's son".
[6] In cross-examination by the intervenor - Harjit Hothi - the appellant stated the clean-up jobs required of the saw and the meat counter area were difficult and required a considerable expenditure of time in order to do it properly. He agreed he felt as though he had been treated like any other employee who was not a family member.
[7] Harjit Hothi testified in his capacity as agent - and majority shareholder - of Enterprises, the intervenor. He stated he and his wife began operating the business in 1993 and in the early years had employees working in the store who were not family members. Balraj is the appellant's younger brother and was a strong individual who could cut up meat and otherwise operate the meat counter and deli department. Harjit Hothi stated that each year there is a change in sales volume with some years resulting in a decrease from the previous period and, as a result, he has to adapt to the situation and carry out a change in business direction or operation. He decided to abandon the regular business practice of cutting the meat to suit the customers' needs and - for the most part - to purchase pre-cut portions of meat wrapped in a vacuum pack. Prior to the decision to make that change, Balraj had been earning the sum of $12.00 per hour. Harjit Hothi was able to handle the meat cutting duties himself but found the work to be too physically demanding. The store sold beef, pork, lamb, goat, rabbit and several varieties of fresh cheese. Harjit Hothi stated he had to totally re-arrange the system of purchasing in the sense of having to find suppliers of the packaged product. The changeover to selling the pre-packaged meat did not turn out to be a success as the meat was not always fresh, the customers had grown accustomed to having their cuts done according to their wishes and they did not accept the new marketing plan of selling the meats in a pre-wrapped container. By the beginning of May, 2000, Harjit Hothi stated he decided the store had to return to its former policy of selling fresh meat and it was necessary to re-hire Balraj for that purpose as the amount of work required to sell meat in this manner was substantially greater as a result. Once Balraj returned to work at the store, Harjit Hothi and his wife took over the duties previously performed by the appellant and he was laid off. Harjit Hothi stated the business did not have sufficient money to pay additional employees and in the past when Enterprises had employed two or three different non-related persons - including a meat cutter - he and his wife had always been willing to be flexible in terms of working hours. He regarded Enterprises as being involved in a highly competitive business and it was not able to pay money to his sons for work that was not done and - as a result - he treated his sons in the same manner as any other employees.
[8] In cross-examination by counsel for the respondent, Harjit Hothi stated the business had not employed any non-family workers since 1996. Another son - Kulwinder - had worked in the business from time to time as a butcher and a clerk. The gross sales of the business ranged between $300,000 to $400,000 per year but some years the company lost money. A considerable amount of the sales were comprised of special or bulk orders and when the business switched to the system of selling pre-packaged meats, this eliminated the need for a full-time meat cutter and thereafter the business was operated by himself, his wife and the appellant, as clerk. If some meat cutting was required, Harjit Hothi performed that task. Harjit Hothi stated he would have been willing to accommodate a non-related employee - in terms of a flexible work schedule - in order to permit that worker to attend university or college.
[9] The appellant chose not to cross-examine.
[10] Karen Bright testified she has worked as a CPP/EI Rulings Officer at CCRA since June, 1995 and made the initial ruling concerning the appellant. She spoke with the appellant on or about May 26, 2000 and took notes which she then typed up - by herself - afterwards. She reviewed the matter and decided his employment was excepted employment pursuant to the provisions of the Employment Insurance Act (the "Act").She considered the factors set forth in paragraph 5(3)(b) of the Act. Bright stated the appellant had informed her that his working hours were Monday to Friday, 9:00 a.m. to 5:00 p.m. and that he had told her - emphatically - he did not work on Saturdays. She stated the appellant had indicated his mother and father were the only persons who worked at the store and that his father was the butcher. The appellant discussed the nature of his duties but Bright did not recall any reference by him to meat cutting duties. She had a subsequent conversation with the appellant but - in the interim - had accessed his income tax returns and had discovered a deduction for tuition for the 1999 taxation year. This caused her to call the appellant to inquire about his attendance at university and during their conversation he informed Bright he had attended university on a full-time basis since the beginning of September, 1999. Bright stated the appellant had told her during their first conversation that he had worked on and off for the business in earlier years but she could not confirm that on the basis of accessing income tax returns as far back as 1991. She became concerned about the absence of official record of his previous employment with the payor and this impinged on her consideration of the factor relating to the duration of the disputed employment. At one point, the appellant had left a message on her voice mail stating his records relating to past employment with Enterprises were no longer available. Bright also spoke with Harjit Hothi who informed her that Balraj - also known as Bob - was his son and that it had been Balraj who had answered the phone when she called the store. She stated she was surprised at this event since the records indicated he had been laid off a year earlier due to a shortage of work. Bright stated Harjit Hothi had explained to her that Balraj was a trained meat cutter and during their conversation had confirmed that the appellant had been able to leave work in order to attend his university classes. In Bright's opinion, this was not reasonable, especially since Harjit Hothi had informed her the appellant's working hours were not recorded. Bright was aware of a previous ruling in relation to Balraj Hothi following his layoff by Enterprises on December 31, 1998 due to a shortage of work and she noted the appellant was hired on January 5, 1999. Later, on May 5, 2000, the appellant was laid off and on May 22, 2000, Balraj was hired to work in the store. In her view, this constituted a pattern and she thought there should have been some record of hours worked by means of regular entries in a book or on a calendar. She considered the appellant's remuneration in the sum of $9.00 per hour was otherwise reasonable but - under the circumstances relating to his working conditions - she decided it was unreasonable for him to be paid the same amount of wages every two weeks without regard to the number of hours worked and she did not find it necessary to inquire into whether or not overtime pay had been applicable. Bright stated she never questioned the fact the appellant was engaged in a valid contract of service in the sense there was no disputing he had actually performed work for the payor. The working schedule later reviewed by the Appeals Officer - in the form as it appears in paragraph 6(m) of the Reply - was never provided to her by the appellant prior to the issuance of her ruling.
[11] In cross-examination by the appellant, Karen Bright agreed the previous employment of Balraj Hothi had been the subject of a ruling by another Rulings Officer and that it had been regarded as insurable employment. Bright indicated it is standard practice to review prior rulings issued in relation to a particular worker or payor and this information can be accessed - by computer - from the database.
[12] In cross-examination by Harjit Hothi - agent for the intervenor - Karen Bright stated she did not recall any mention - by him - of marking hours on a calendar as opposed to a " punch clock" during the course of their conversation. Bright stated she had examined the cancelled cheques pertaining to the appellant and was aware the appropriate payroll deductions had been made. Bright stated she recalled having explained to Harjit Hothi that the file had been referred to her because the appellant and the payor were related persons as defined by the Income Tax Act. She recalled Harjit Hothi had mentioned the appellant did not want to pursue a career in the family business and that he was attending university while working at the store. She also had been aware - from her conversation with Harjit Hothi - that Balraj was a meat cutter. She also stated that when talking to the appellant he had been very clear in describing his working schedule as being Monday to Friday, 9:00 a.m. to 5:00 p.m., without any exceptions.
[13] In re-examination by counsel for the respondent, Karen Bright stated if she had been aware of any system - at all - of recording hours of work on a calendar, book or sheet that she would have requested that either the appellant or the payor send such record to her for examination.
[14] The appellant on his own behalf and Harjit Hothi - on behalf of the intervenor - submitted the evidence demonstrated that the employment of the appellant with the payor during the relevant period was insurable employment pursuant to the legislation.
[15] Counsel for the respondent submitted that the Appeals Officer had the complete information concerning the appellant's working schedule during the academic season and the Minister had also considered whether or not it was important for the appellant to have been hired in view of the apparent losses the business had suffered, on occasion. Based on the totality of the evidence, counsel submitted the decision of the Minister should be affirmed.
[16] In the case of Crawford and Company Ltd. and M.N.R. (unreported - 98-407(UI), 98-537(UI) and 98-538(UI)), a decision of Porter, D.J.T.C.C. issued December 8, 1999, Judge Porter considered the appeals of three employees of the corporation, of whom two were brothers, falling into the category of related persons within the meaning of the Income Tax Act. The remaining appellant was not a related person to the corporation and this required a separate examination of the facts as no discretion had been exercised by the Minister pursuant to paragraph 5(3)(b) of the Employment Insurance Act. The analysis undertaken by Judge Porter, as it pertained to the two brothers is extensive, and is relevant to the requisite analysis undertaken in the within appeal. For that reason, I am quoting extensively from the Crawford judgment because it accords with my understanding of the law and the facts in that case are substantially similar to the within appeal. At page 21, commencing at paragraph 58, Judge Porter stated:
"[58] In the scheme established under the EI Act, Parliament has made provision for certain employment to be insurable, leading to the payment of benefits upon termination, and other employment which is "not included" and thus carrying no benefits upon termination. Employment arrangements made between persons, who are not dealing with each other at arm's length, are categorized as not included. Brothers and corporations controlled by them are deemed not to be dealing with each other at arm's length pursuant to subsection 251(1) of the Income Tax Act, which governs the situation. Quite clearly the original purpose of this legislation was to safeguard the system from having to pay out a multitude of benefits based on artificial or fictitious employment arrangements, see the comments of the Federal Court of Appeal in Paul v. The Minister of National Revenue, (A-223-86) unreported, where Hugessen J. said
We are all prepared to assume, as invited by appellant's counsel, that paragraph 3(2)(c) of the Unemployment Insurance Act, 1971, and subsection 14(a) of the Unemployment Insurance Regulations have for at least one of their purposes the prevention of abuse of the Unemployment Insurance Fund through the creation of so-called "employer-employee" relationships between persons whose relationship is, in fact, quite different. That purpose finds obvious relevance and rational justification in the case of spouses who are living together in a marital relationship. But even if, as appellant would have us do, we must look only at spouses who are legally separated and may be dealing at arm's length with one another, the nature of their relationship as spouses is such as, in our view, to justify excluding from the scheme of the Act the employemt of one by the other.
...
We do not exclude the possibility that the provisions may have other purposes, such as a social policy decision to remove all employment within the family unit from the operation of the Unemployment Insurance Act, 1971, as was suggested by respondent's counsel.
[59] The harshness of this situation has however been tempered by paragraph 5(3)(b) of the EI Act, which provides for such employment between related persons to be deemed to be at arm's length and thus in turn to be treated as insurable employment, if it meets all the other provisions, where the Minister is satisfied having regard to all the circumstances of the employment, including the remuneration paid, theterms and conditions, the duration and the nature and importance of the work performed, that it is reasonable to conclude that they would have entered into a substantially similar contract if they had (in fact) been dealing with each other at arm's length.
[60] It may be helpful to reframe my understanding of this section. For people related to each other the gate is closed by the statute to any claim for insurance benefits unless the Minister can be satisfied that in effect the employment arrangement is the same as that which unrelated persons, that is persons who are clearly at arm's length, would have made. If it is a substantially similar contract of employment, Parliament has deemed it to be only fair that it should be included in the scheme. However, the Minister is the gatekeeper. Unless he is so satisfied the gate remains closed, the employment remains excepted and the employee is not eligible for benefits.
[61] Subsection 93(3) of the EI Act deals with appeals to and the determination of questions by the Minister. It requires that "the Minister shall decide the appeal within a reasonable time after receiving it and shall notify the affected persons of the decision".
[62]Thus, the Minister has no discretion whether or not to decide the question. He is required by law to do so. If he is not satisfied, the gate remains closed and the employee is not eligible. If however he is satisfied, without more ado or any action on the part of the Minister (other than notification of the decision) the employee becomes eligible for benefits, provided he is otherwise qualified. It is not a discretionary power in the sense that if the Minister is satisfied he may then deem the employment to be insurable. He must "determine the question" and depending on that determination the law deems the employment to be either at arm's length or not at arm's length. In this sense the Minister has no discretion to exercise in the true sense of the word, for in making his decision he must act quasi-judicially and is not free to chose as he pleases. The various decisions of the Federal Court of Appeal on this issue reveal that the same test applies as to a myriad of other officials making quasi-judicial decisions in many different fields. See Tignish Auto Parts Inc. v. M.N.R., 185 N.R. 73, Ferme Émile Richard et Fils Inc. v. M.N.R., 178 N.R. 361, Attorney General of Canada and Jencan Ltd., (1997) 215 N.R. 352 and Her Majesty the Queen and Bayside Drive-in Ltd., (1997) 218 N.R. 150.
[17] In the case of Adolfo Elia v. M.N.R. - A-560-97 - a decision of the Federal Court of Appeal dated March 3, 1998, at page 2 of the certified translation Pratte, J.A. stated:
"Contrary to what the judge thought, it is not necessary, in order for the judge to be able to exercise that power, for it to be established that the Minister's decision was unreasonable or made in bad faith having regard to the evidence before the Minister. What is necessary is that the evidence presented to the judge establish that the Minister acted in bad faith, or capriciously or unlawfully, or based his decision on irrelevant facts or did not have regard to relevant facts. The judge may then substitute his decision for that of the Minister."
[18] In Légaré v. Canada (Minister of National Revenue) [1999] F.C.J. No. 878 - another decision of the Federal Court of Appeal - Marceau, J.A. speaking for the Court stated at page 2 of the judgment:
"In this matter, the Court has before it two applications for judicial review against two judgments by a judge of the Tax Court of Canada in related cases heard on the basis of common evidence which raise yet again the problems of interpretation and application of the saving provision, subparagraph 3(2)(c)(ii). I say yet again because since its passage in 1990, several decisions of the Tax Court of Canada and several judgments of this Court have already considered what workable meaning could be given to subparagraph 3(2)(c)(ii). In reading the text, the problems it poses beyond its deficient wording are immediately obvious, problems which essentially involve the nature of the role conferred on the Minister, the scope of the Minister's determination and, by extension, the extent of the Tax Court of Canada's general power of review in the context of an appeal under section 70 et seq. of the Act.
While the applicable principles for resolving these problems have frequently been discussed, judging by the number of disputes raised and opinions expressed, the statement of these principles has apparently not always been completely understood. For the purposes of the applications before us, we wish to restate the guidelines which can be drawn from this long line of authority, in terms which may perhaps make our findings more meaningful.
The Act requires the Minister to make a determination based on his own conviction drawn from a review of the file. The wording used introduces a form of subjective element, and while this has been called a discretionary power of the Minister, this characterization should not obscure the fact that the exercise of this power must clearly be completely and exclusively based on an objective appreciation of known or inferred facts. And the Minister's determination is subject to review. In fact, the Act confers the power of review on the Tax Court of Canada on the basis of what is discovered in an inquiry carried out in the presence of all interested parties. The Court is not mandated to make the same kind of determination as the Minister and thus cannot purely and simply substitute its assessment for that of the Minister: that falls under the Minister's so-called discretionary power. However, the Court must verify whether the facts inferred or relied on by the Minister are real and were correctly assessed having regard to the context in which they occurred, and after doing so, it must decide whether the conclusion with which the Minister was "satisfied" still seems reasonable."
[19] I now turn to an examination of the evidence - and the relationship of the facts established before me - to the assumptions relied on the Minister as set forth in paragraph 6 of the Reply to the Notice of Appeal. It is apparent from the evidence of Karen Bright - Rulings Officer - that she considered it extremely suspicious that Balraj Hothi would be laid off on December 31, 1998 due to lack of work and that the payor then hired the appellant - on January 4, 1999 - to work in the same store. She also found it more than a coincidence that the appellant was laid off by the payor on May 5, 2000 but Balraj Hothi was re-hired on May 22, 2000. In her view this established a "pattern" and she pointed out the previous ruling reviewed by her - in which Balraj Hothi was held to have been in insurable employment with Enterprises - had been made by another Rulings Officer. She was also concerned that she had not been informed by the appellant - during their initial conversation - that he had been in full-time attendance at university between September, 1999 and the end of April, 2000. During her testimony, she mentioned - on more than one occasion - that the appellant had been emphatic in informing her that he had not worked on Saturdays. That statement by the appellant is borne out by the work schedule - reproduced at paragraph 6(m) of the Reply - on the basis of information provided by him to the Appeals Officer while completing a Questionnaire. Karen Bright was concerned that the appellant's hours of work were not recorded and, in her opinion, this lack of official record was a relevant factor to take into account when applying the facts to the issue of the duration of the appellant's employment. She was also troubled by the lack of documentary corroboration in the tax returns of the payor and the appellant in regard to the appellant's claim that he had worked for the payor in the past and had always been paid. Bright stated she had spoken to Harjit Hothi - the directing mind of the payor corporation - and recalled a discussion wherein Harjit Hothi had explained that Balraj was a trained meat cutter and that the appellant's working hours had been sufficiently flexible to permit him to attend university. Bright's testimony was that Harjit Hothi told her the appellant's hours of work had not been recorded and she could not recall any reference - by Harjit Hothi - to having marked the appellant's hours of work down on a calendar, as opposed to using a punch clock. Bright's evidence was that she had been satisfied the appellant had performed the work and that the rate of pay was reasonable under the circumstances.
[20] The Minister's assumptions of facts at paragraphs 6(g) to 6(j), inclusive, are as follows:
"(g) the Appellant's brother, Balraj Hothi, worked at the Store for the period February 3, 1998 to December 31, 1998 at which time he was laid off due to a shortage of work;
(h) the Appellant began working at the Store on January 4, 1999 which is four days after Balraj Hothi was laid off due to a shortage of work;
(i) the Appellant was laid off due to a shortage of work on May 5, 2000;
(j) the Appellant's brother, Balraj Hothi was hired to work at the Store commencing May 22, 2000, which is seventeen days after the Appellant was laid off due to a shortage of work;"
[21] Curiously, the Minister regarded the above information as facts which were relied upon in making the decision rather than as allegations put forth by the appellant or by Harjit Hothi, on behalf of the payor. If the Minister accepted that the layoff of Balraj was due to a shortage of work and assumed the subsequent layoff of the appellant - on May 5, 2000 - was also due to a shortage of work, then any subsequent attempt to imply the relevant hirings and layoffs were governed by improper motives will not suffice to discharge the effect of the assumptions previously made.
[22] The testimony of the appellant - and Harjit Hothi - demonstrates there was a good and sufficient business reason for having laid off Balraj as a meat cutter when the policy of the store was changed from providing fresh-cut meat to selling pre-packaged meats. After that change, the amount of meat cutting duties remaining could be handled by Harjit Hothi, although he found the work too physically demanding to have done it on a full-time basis. When Harjit Hothi discovered his customers were not pleased with the change in direction, he returned to the former business practice of selling cut meat and special orders which required Balraj or another meat cutter to assume that function. Since the store was only a family business and no outside employees had worked there since 1996, there was no longer any need for the appellant to work as a clerk and Harjit Hothi and his wife took over those duties while Balraj - once again - assumed full conduct of the meat and deli department. It is a frightening proposition that a business person should be required to seek approval of the Minister prior to making a decision concerning the prudent and efficient conduct of his or her enterprise. The evidence is that the appellant - despite attending university full time from September, 1999 to the end of the term in April, 2000 - worked a full 40-hour week to the satisfaction of his employer. Both parties stated the relationship was one normally associated with an ordinary employment situation based on a contract between non-related persons and the appellant stated it was not - in his experience - unusual for an employer to accept flexibility in a work schedule in order to accommodate someone attending an educational institution.
[23] It is apparent on an examination of the evidence that I am required to intervene in the decision of the Minister because it is obvious that it was based on irrelevant facts and there was not proper regard to other facts which were extremely relevant to the issue. Having done so, I must analyze the evidence in order to decide whether or not the appellant was in insurable employment during the relevant period or whether he was in excluded employment. The relevant provision of the Act is paragraph 5(3)(b) which reads as follows:
"(3) For the purpose of paragraph (2)(i),
...
(b) if the employer is, within the meaning of that Act, related to the employee, they are deemed to deal with each other at arm's length if the Minister of National Revenue is satisfied that, having regard to all the circumstances of the employment, including the remuneration paid, the terms and conditions, the duration and the nature and importance of the work performed, it is reasonable to conclude that they would have entered into a substantially similar contract of employment if they had been dealing with each other at arm's length."
Remuneration:
[24] The Minister accepts that the remuneration was fair and reasonable and that the issue of the potential applicability of overtime pay was not relevant. It is significant that the hourly rate paid to Balraj was in the sum of $12.00 because he possessed meat cutting skills but the amount paid to the appellant for working as a clerk/cashier was only $9.00 per hour.
Terms and Conditions:
[25] The hours of work were reasonable bearing in mind the type of business being operated. The appellant arrived at an arrangement with his employer to work a 40-hour week in accordance with a particular schedule once the university year had begun. However, he had worked at the store for 8 months before the start of university classes in September and his work schedule had been from 9:00 a.m. to 5:00 p.m., Monday through Friday. I do not find there was any attempt on the part of the appellant or by Harjit Hothi to disguise the fact the appellant attended university from September, 1999 to the end of the term in 2000. The Minister accepted that the work had been done by the appellant but questioned the need for him to have been hired if the relevant period had been during one of those times when the store had incurred an operating loss. There was no proof to support that suggestion and - in any event - it would be irrelevant under these circumstances. Whether or not a business shows a profit at the end of a fiscal period, it still requires employees to carry on operations and they must be paid. The relevant language of the provision provides that the contract of employment entered into by the related parties be " substantially similar" to one that would have been entered into by non-related persons dealing at arm's length. Therefore, it is quite reasonable for the hours of work to have been casually recorded or merely accepted by both parties that each was giving - and getting - precisely what had been the substance of their bargain with each other. The business was not an aircraft assembly plant where hundreds of workers are clocking in and out at the beginning and end of a specific shift. Nor was it the kind of employment that required signing in and out of an office building or otherwise requiring the completion of time sheets which would be used by personnel in a payroll office in order to prepare cheques for several workers.
Duration:
[26] I accept the evidence of Harjit Hothi concerning the reasons for the layoff of Balraj and for the hiring and layoff of the appellant and the subsequent re-hiring of Balraj as a meat cutter. The appellant had no interest in learning that trade or in continuing to work in the family business as a career. He has received one degree and will soon receive another from the Faculty of Education at the University of Manitoba. He was aware that his last year would require him to participate in a program of practice teaching at various schools and understood that his ability to work at a job would be severely limited as a result. Therefore, he buckled down during the relevant period and did little else except work for the payor and attend university full time.
Nature and importance of the work performed:
[27] The Minister accepted that the work was done and the evidence establishes it was necessary in order for the store to operate. This was not a job that had been made up in order to employ a relative. When the appellant was no longer needed - because Harjit Hothi and his wife once again assumed the function of clerk/cashier - he was laid off. In my view, that is a decision rooted in good business practice rather than family dynamics.
[28] In the case of Barbara Docherty v. M.N.R. - 2000-1466(EI), dated October 6, 2000 I commented as follows:
"The template to be utilized in making a comparison with arm's length working relationships does not require a perfect match. That is recognized within the language of the legislation because it refers to a "substantially similar contract of employment". Any time the parties are related to each other within the meaning of the relevant legislation, there will be idiosyncrasies arising from the working relationship, especially if the spouse is the sole employee or perhaps a member of a small staff. However, the object is not to disqualify these people from participating in the national employment insurance scheme provided certain conditions have been met. To do so without valid reasons is inequitable and contrary to the intent of the legislation."
[29] I have considered the various factors as required by the relevant provision of the Act and find that the appellant and the payor would have entered into a substantially similar contract of employment had they been dealing with each other at arm's length.
[30] The appeal is allowed and the decision of the Minister is varied to find:
The appellant was in insurable employment with Hothi Enterprises Ltd. during the period from May 5, 1999 to May 5, 2000.
Signed at Sidney, British Columbia, this 29th day of June 2001.
"D.W. Rowe"
D.J.T.C.C.
COURT FILE NO.: 2000-4684(EI)
STYLE OF CAUSE: Jaswinder Hothi & M.N.R. & Hothi
Enterprises Ltd.
PLACE OF HEARING: Winnipeg, Manitoba
DATE OF HEARING: May 25, 2001
REASONS FOR JUDGMENT BY: the Honourable Deputy Judge D.W. Rowe
DATE OF JUDGMENT: June 29, 2001
APPEARANCES:
For the Appellant: The Appellant himself
For the Respondent: Cary D. Clark (Student-at-law)
Agent for the Intervenor: Harjit Hothi
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
For the Intervenor:
2000-4684(EI)
BETWEEN:
JASWINDER HOTHI,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
HOTHI ENTERPRISES LTD.,
Intervenor.
Appeal heard on May 25, 2001, at Winnipeg, Manitoba, by
the Honourable Deputy Judge D.W. Rowe
Appearances
For the Appellant: The Appellant himself
For the Respondent: Cary D. Clark (Student-at-law)
Agent for the Intervenor: Harjit Hothi
JUDGMENT
The appeal is allowed and the decision of the Minister is varied in accordance with the attached Reasons for Judgment.
Signed at Sidney, British Columbia, this 29th day of June 2001.
|
"D.W. Rowe" |
D.J.T.C.C.