Guillemette v. M.N.R. (January 12, 2015 – 2015 TCC 6, Lamarre J.).
Précis: Plomberie Yves Guillemette inc. (the “Payer”) employed two of its controlling shareholders, Normand and Sébastien Guillemette. It also employed Jennifer Chabot during a period when she was married to Sébastien Guillemette. The Minister alleged that these three individuals were not entitled to EI because the Payer would not have entered into substantially similar employment agreements with them during the periods at issue if they had been dealing with each other at arm’s length. The Minister also alleged that another employee, Jonathan Gélinas, was in fact dealing at less than arm’s length with the Payer because he had made a large loan ($55,000) to the company. Accordingly the Minister alleged that he was also not entitled to EI during the periods at issue.
The Court rejected the Minister’s argument that Jonathan Gélinas was factually dealing at less than arm’s length with the Payer as a result his having loaned money to the Payer. In the case of the three other employees the Court found that the facts simply did not bear out the Minister’s contention that they were treated differently than other employees of the Payer.
Decision: This decision concerned three family members employees who dealt at less than arm’s length with the Payer as well as another employee who had loaned money to the Payer and was alleged by the Minister to factually deal at less than arm’s length as a result. In all four cases the Minister argued that they were not entitled to EI since their conditions of employment were not substantially similar to those of other employees of the Payer.
The Tax Court rejected the argument that Jonathan Gélinas was factually dealing at less than arm’s length with the Payer as a result his having loaned money to the Payer:
[49] In my view, it is difficult to say that Jonathan had a factual non-arm’s length relationship with the payer. The evidence does not show that he took part in the payer’s decisions. The fact that he lent it money does not mean that he began not dealing with the payer at arm’s length in that it did not give him more shares in the payer’s business. In addition, I am not at all satisfied that he was acting in concert with Yves Guillemette, who was the directing mind of the payer, or that he exerted any influence over him. (see Parill v. Canada (M.N.R.), [1996] T.C.J. No. 1680 (QL)). I therefore consider that, even though his salary was higher than that of other clerks, it is neither for the Minister nor for the Court to become involved in the payer’s business decisions. Since I find that there is arm’s length dealing, I consider that Jonathan’s employment was insurable (which, in the case of arm’s length dealing, was not disputed by the Minister).
In the case of the three family members the Court rejected the Minister’s claim that they were factually treated in a different manner than other employees:
[52] I note from the evidence that all employees, in general, were treated in the same way and that Yves Guillemette did not necessarily favour one over another. With regard to Normand Guillemette, it is true that he acknowledged that he had kept his salary at the CCQ rate so that he could eventually receive pension benefits. However, Normand was not the only one who received an hourly rate set by the CCQ and, because of this, it is not possible to claim that he was given preferential treatment. With respect to his work schedule, even though he worked only 40-hour weeks, his work schedule was equivalent to that of the other workers.
[53] With regard to Sébastien Guillemette and Jennifer Chabot, I am of the view that the explanations and the documentary evidence provided above in my reasons also show that the facts underlying the Minister’s assumptions were not correctly assessed.
[54] In conclusion, if the respondent was of the view that the payer was trying to exploit the employment insurance system by rotating its employees, he should have disputed the existence of a contract of employment. But it is incorrect to conclude that the appellants benefited from their non-arm’s length relationship. The evidence shows that arm’s length employees could also get the same benefits (see Provost and Massignani v. M.N.R., 2005 FCA 165).
As a result all four appeals were allowed.
TAGS: Employment Insurance, Insurable Employment, Similar to Arm’s Length Employment