http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/110062/index.do
V.Y.F. Express inc. v. M.N.R. (June 8, 2015 – 2015 TCC 139, D’Auray J.).
Précis: In this decision the Minister argued that three family members working for two family companies were engaged in insurable employment since they had “entered into substantially similar contracts of employment [as] if they had been dealing with the employer at arm’s length” (para. [6]). The Court rejected this conclusion finding that the terms of their work arrangement did not accord with comparable private sector positions. As a result the Court held that they were not engaged in insurable employment and the appeals were allowed.
Decision: The facts were not complex:
[1] These are appeals by V.Y.F. Express Inc. (VYF) and Vipro Inc. (Vipro) from the decisions of the Minister of National Revenue (the Minister) (finding) that Francine Vincent Allard (Francine) and her brother, Yvon Vincent (Yvon) held insurable employment with VYF during the period from January 1, 2012, to February 13, 2013, and that Jasmin Allard (Jasmin) held, according to the Minister, insurable employment with Vipro during the period from January 1, 2012, to March 6, 2013.
[Footnote omitted]
In a somewhat unusual twist the Minister argued that they were engaged in insurable employment even though they dealt at less than arm’s length with VYF and Vipro since they had “entered into substantially similar contracts of employment [as] if they had been dealing with the employer at arm’s length” (para. [6]). Normally this argument is raised by the Minister to argue that the worker was not entitled to employment insurance.
In any event, the Court found that the circumstances did not support the Minister’s position:
[54] Since the incorporation of VYF in 1998, the pay has been based on Francine and Yvon’s financial needs. This approach continued so that the company could prosper. It is clear that had Francine, Yvon and Jasmin been dealing with the companies at arm’s length, they would not have agreed to salaries that were not market-based.
[55] I am also of the view that it was not reasonable for the Minister to conclude that Francine, Yvon and Jasmin should agree to be available 24/7, to work 60 to 70 hours per week and to respond to any emergency at all times without compensation for overtime.
…
[57] Again according to the documents from Emploi Québec, a director of sales, marketing and advertising in 2005 earned an average annual salary of $65,000 in central Quebec and $76,000 in Quebec as a whole. However, the document indicates that the hourly salary in the third quartile was between $42.00 and $43.99 in 2012. Based on that document, Yvon’s salary in 2012 should have been between $109,200 and $114,348 for 50 hours and between $131,040 and $137,228 for 60 hours, which is also higher than what Yvon received, $82,700.
…
[59] The Minister also concluded that there was a relationship of subordination between VYF and Francine, VYF and Yvon, and Vipro and Jasmin. I am of the view that the evidence showed the opposite. Francine, Yvon and Jasmin make decisions in their respective areas without consulting the other directors. The authorization of the other directors is not required with respect to their leave, work schedules and vacation. Obviously, they notified each other in advance of their leave, which is, in my opinion, a matter of courtesy and work organization, but this does not create, however, a relationship of subordination.
[Footnote omitted]
As a result the appeals were allowed.