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Reasons and decision
Decision
[1] The appeal is dismissed.
Introduction
[2] On March 13, 2017, the General Division of the Social Security Tribunal of Canada (Tribunal) determined the following:
- The disentitlement imposed under sections 9 and 11 of the Employment Insurance Act (Act) and section 30 of the Employment Insurance Regulations (Regulations) was justified because the Appellant had failed to prove that he was unemployed;
- The Respondent was justified in reconsidering the benefit claim under section 52 of the Act (files GE-16-2985, GE-16-2986, GE-16-2987).
[3] On April 13, 2017, the Appellant filed an application for leave to appeal with the Appeal Division after he had been notified of the General Division’s decision on March 16, 2017. Leave to appeal was granted on May 1, 2017.
Type of hearing
[4] The Tribunal decided that the hearing of this appeal would proceed by teleconference for the following reasons:
- The complexity of the issue or issues;
- The fact that the parties’ credibility was not a key issue;
- The information in the file, including the need for additional information;
- The form of hearing respects the requirement under the Social Security Tribunal Regulations to proceed as informally and as quickly as circumstances, fairness and natural justice permit.
[5] The Appellant attended the hearing and was represented by Counsel Simon Delisle. The Respondent did not attend, despite having received the notice of hearing.
The law
[6] According to subsection 58(1) of the Department of Employment and Social Development Act (DESDA), the only grounds of appeal are the following:
- a) the General Division failed to observe a principle of natural justice or otherwise acted beyond or refused to exercise its jurisdiction;
- b) the General Division erred in law in making its decision, whether or not the error appears on the face of the record; or
- c) the General Division based its decision on an erroneous finding of fact that it made in a perverse or capricious manner or without regard for the material before it.
Issues
[7] The Tribunal must decide whether the General Division erred when it concluded the following:
- The disentitlement imposed under sections 9 and 11 of the Act and section 30 of the Regulations was justified for the periods in question because the Appellant failed to prove that he was unemployed;
- The Respondent was justified in reconsidering the benefit claim under section 52 of the Act (files GE-16-2985, GE-16-2986, GE-16-2987).
Submissions
[8] The Appellant submits the following arguments in support of his appeal:
- He disputes the qualifying period extension to 72 months, since in no case did he make a false or misleading statement permitting the Respondent to use its discretionary power;
- The Canada Revenue Agency (CRA) confirmed in its decision that he was employed and that it therefore could not, at the time when he filed his application for benefits, determine whether there was a dependent relationship with the business;
- It cannot be found that the Appellant was self-employed when the CRA had itself found that he was an employee of a business;
- Contrary to the General Division's findings, the Appellant indicated that he had looked for work and that following several information sessions, he had been told that since he already had a part-time job, his job search was not necessary;
- Contrary to the General Division's findings, the Appellant does not spend all his time working for the business; he works only seven hours per week during the unemployment period;
- Contrary to the General Division's findings, the Appellant does not own the business’s website because history shows that the site was sold to 9204-0633 Québec Inc., and he is not the business’s only employee;
- Therefore, the Appellant asked the Tribunal to revise the General Division’s decision because the decision was based on the Appellant operating a business, when he was actually an employee;
- Furthermore, it is clear from the Appellant's testimony and from the rest of the General Division decision that he worked for the business to a very limited extent during the unemployment period (seven hours per week), and that no benefits or profits come from the trust of which he is a beneficiary.
[9] The Respondent submits the following arguments against the Appellant’s appeal:
- The General Division did not err in fact or in law and properly exercised its jurisdiction;
- According to section 52 of the Act, the Respondent may reconsider benefits that have already been paid to a claimant. It has 36 months to reconsider any benefit claim. However, under subsection 52(5) of the Act, when the Respondent is of the opinion that a false or misleading statement or representation has been made in connection with a claim, the time for reconsideration of any file may be extended to 72 months;
- However, the General Division has to determine to what extent the Appellant was self-employed, and whether it was to such a minor extent that he would not normally rely on it as his principal means of livelihood;
- To decide on the matter, the General Division looked at all the facts in the case and analyzed them against the six factors in subsection 30(3) of the Regulations. By doing this, the General Division met all the legal criteria for determining unemployment status;
- The facts gathered show that the company is active, that the Appellant is a co-adventurer and that he currently works there. He contributes to all activities that are necessary for the continuation of the business, regardless of whether he was on unemployment;
- According to the Federal Court of Appeal’s teachings, the General Division is the trier of fact and its role is to assess the facts and all the evidence before it, in addition to the witnesses’ credibility;
- The Appellant argues that his employment is insurable according to the CRA and that he is an employee and not the owner of the business. In the present case, the Respondent recognizes that the claimant had insurable employment, but that he is still not eligible for benefits because he did not show that he was employed to such a minor extent. He was a co-adventurer in the business, regardless of whether it was in his name;
- The Appeal Division does not have the authority to retry a case or to substitute its discretionary power for that of the General Division.
Standard of review
[10] The Federal Court of Appeal determined that the Appeal Division's mandate is conferred to it by sections 55 to 69 of the DESD Act. The Appeal Division cannot exercise the review and superintending powers reserved for higher courts—Canada (Attorney General) v. Jean, 2015 FCA 242; Maunder v. Canada (Attorney General), 2015 FCA 274.
[11] Therefore, unless the General Division failed to observe a principle of natural justice, erred in law, based its decision on an erroneous finding of fact that it had made in a perverse or capricious manner or without regard for the material before it or its decision was unreasonable, the Tribunal must dismiss the appeal.
Analysis
[12] Because the facts submitted before the General Division are similar in each of the Appellant’s records, this decision concerns the following records: AD-17-320, AD-17-321, AD-17-322, AD-17-323, AD-17-324, AD-17-325, AD-et AD-17-326.
Extension of the qualifying period
[13] The Appellant disputes the qualifying period extension to 72 months, since in no case did he make a false or misleading statement permitting the Respondent to use its discretionary power under section 52 of the Act.
[14] He notes that the CRA confirmed in its decision that he was employed and that it therefore could not, at the time when he made his application for benefits, determine whether there was a dependent relationship with the business.
[15] The Federal Court of Appeal determined in Langelier (A-140-01), Lemay (A-172-01) and Dussault (A-646-02) that, to be granted the extended time to reconsider set out in subsection 52(5) of the Act, the Commission does not have to establish that the claimant in question made false or misleading statements but must instead simply show that it could reasonably find that a false or misleading statement was made in connection with a benefit claim.
[16] At the reconsideration stage, the Respondent therefore did not have to show that the Appellant had indeed made a false or misleading statement. The Respondent had to simply suspect that a false or misleading statement had been made.
[17] In the circumstances of this case, could the Respondent reasonably believe that the Appellant had made a false or misleading statement or representation?
[18] In this case, the Respondent found that the Appellant failed to provide information on the operation of the business 9206-3007 Québec Inc. (Bois Sec F.), for which he had worked as an administrator since 2009.
[19] When he made his claims, the Appellant did not indicate that he was an owner or co-adventurer in the business for which he worked. He also responded that he was not self-employed (GD3-9 to GD3-10).
[20] As part of an investigation conducted by the Respondent because the Appellant had completed his own Records of Employment, it gathered information concerning a business administered by the Appellant—Bois Sec F. The business operates in the sale and delivery of firewood.
[21] During an initial telephone interview on March 16, 2015, the Appellant stated that he had prepared his Records of Employment because he was the administrator of the business and did everything (GD3-22). In a second interview in person on April 1, 2015, the Appellant said that he was an employee of the business 9206-3007 Québec Inc., and that since 2009, he was the administrator of the business.
[22] In response to the self-employment questionnaire, the Appellant said that he had personally participated in starting the business by setting up the system and taking care of day-to-day management. He continues to participate in the day-to-day management of the business. He says he is responsible for issuing cheques, paying and producing invoices, making bank deposits, balancing accounts, processing pay, purchasing, estimates and inventory (GD3-28 to GD3-34).
[23] On the business register, the Appellant is described as an administrator and more specifically as president and secretary of the business. The business's primary shareholder is 9204-0633 Québec Inc. (GD3-42), of which the majority of shares are held by the family trust T. (GD3-68). The Appellant is among the list of trustees and beneficiaries of said trust (GD3-70 to GD3-103).
[24] In applying the teachings of the Federal Court of Appeal to this case, the General Division correctly concluded from the evidence that the Respondent could reasonably find that the Appellant made a false or misleading statement and could therefore be granted a period of 72 months to reconsider the Appellant's benefit claim.
[25] Therefore, the Tribunal cannot accept this ground of appeal from the Appellant.
Insurability and availability
[26] Before the General Division and the Appeal Division, the Appellant argued for the most part that the Respondent could not apply section 30 of the Regulations and decide that the Appellant was operating a business when the CRA had previously decided that, during the periods in question, he was an employee and that his employment with 9206-3007 Quebec Inc. was insurable under paragraph 5(1)(a) of the Act. Because the Appellant was an employee, he submits that this eliminates the possibility that he was operating a business.
[27] The General Division and the Appeal Division must follow the teachings of the Federal Court of Appeal in Canada (Attorney General) v. D'Astoli, 1997 CanLII 5609 (FCA), which has already specifically answered the question that was raised in this appeal.
[28] In that case, the Federal Court of Appeal instructed that the Respondent must perform two different consecutive operations when assessing a claimant's Employment Insurance claim. It must first determine whether the claimant was employed in insurable employment during his or her qualifying period, then establish a benefit period for the claimant during which his or her entitlement will be verified.
[29] Once the first operation concerning the claimant’s insurability has been performed, as in this case with the decision of the CRA, the Respondent must establish a benefit period, and once it is established, benefits are payable to the claimant for each week of unemployment that falls in the benefit period (section 9 of the Act). A week of unemployment for a claimant is a week in which the claimant does not work a full working week (section 11 of the Act).
[30] Subsection 30(1) of the Regulations provides that during any week a claimant is self-employed or engaged in the operation of a business on the claimant's own account or in a partnership or co-adventure, or is employed in any other employment in which the claimant controls their working hours, the claimant is considered to have worked a full working week during that week.
[31] Subsection 30(2) of the Regulations provides that when a claimant is employed or engaged in the operation of a business as described in subsection (1) to such a minor extent that a person would not normally rely on that employment or engagement as a principal means of livelihood, the claimant is, in respect of that employment or engagement, not regarded as having worked a full working week.
[32] Insurability and entitlement to benefits are two factors that the Respondent must assess with respect to two different periods. Parliament determined that the analysis of these two factors would be subject to separate rules that must not be combined since the insurability process is separate from the entitlement process.
[33] There is no question that insurability must be decided by the CRA according to the terms of section 90 of the Act, and by the Tax Court of Canada if there is an appeal, and must refer to the qualifying period, whereas entitlement must be decided by the Respondent and by the General Division in case of an appeal, and must refer to the benefit period.
[34] The Tribunal finds that the CRA's insurability decision was not binding on the Respondent with respect to the question of the Appellant’s eligibility for benefits.
[35] Therefore, the Tribunal cannot accept this ground of appeal from the Appellant.
Unemployment status
[36] The Appellant submits that he was not operating a business and that he was simply an employee. He argues that if he was operating a business within the meaning of the Act, it was to a very limited extent during the unemployment periods (seven hours per week). Moreover, no benefits or profits can out of the trust of which he is a beneficiary.
[37] A person who runs a business, even as a co-adventurer, is a self-employed person. Engaged in a co-adventure in a business within the meaning of that provision when, regardless of the legal forms, he has an interest in it with others—Canada (Attorney General) v. Tremblay, A-674-85.
[38] The company 9206-3007 Quebec Inc., which operates in the sale and delivery of firewood, and for which the Appellant works, is owned by 9204-0633 Quebec Inc., registered in the Quebec Enterprise Register as holdings. The latter is owned by the family trust T., created on December 22, 2008, of which the Appellant is the primary trustee.
[39] The evidence before the General Division clearly shows that the Appellant is operating a business through a partnership or co-adventure in accordance with the provisions of subsection 30(1) of the Regulations. Regardless of the legal forms, there is an interest in the business with others.
[40] A claimant who operates their own business within the meaning of the Regulations is assumed to work a full working week unless they can show that they are involved in that business to such a minor extent that a person would not normally rely on that activity as a principal means of livelihood.
[41] The test for minor self-employment or engagement in business operations requires a determination of whether the extent of such employment or engagement, when viewed objectively, is so minor that the claimant would not normally rely on that level of engagement as a principal means of livelihood.
[42] The recent case law has established that an overall analysis of the six criteria must be conducted, without giving precedence to one or more of the criteria, and that each file must be assessed on its merits—Martens, 2008 FCA 240; Goulet, 2012 FCA 62; Inkell, 2012 FCA 290.
[43] The Tribunal believes that the Regulations must be considered in their entirety, given that a person could spend little time on their business but nevertheless make it their principal means of livelihood. In addition, a lack of sufficient income does not necessarily mean that a claimant is unemployed.
[44] Subsection 30(3) of the Regulations sets out the six factors to consider in determining whether the claimant’s engagement in the operation of the business is of such a minor extent that he or she would not normally rely on it as his or her main source of income. The circumstances that make it possible to determine whether the claimant’s employment or engagement in the operation of a business is of the minor extent described in subsection (2) are
- the time spent;
- the nature and amount of the capital and resources invested;
- the financial success or failure of the employment or business;
- the continuity of the employment or business;
- the nature of the employment or business;
- the claimant’s intention and willingness to seek and immediately accept alternate employment.
The time spent
[45] The Appellant argued before the General Division that he spent less than seven hours per week on his business during the off-season.
[46] However, as the Appellant admitted, he is the one who made all decisions relating to the business's operations. As administrator, he decided everything. Since it began its operations in 2009, he has been the only permanent employee. No one else can perform the same tasks as he does. He stated that he is responsible for issuing cheques, paying bills, making bank deposits, balancing accounts, preparing wages, purchasing, estimates and inventory.
[47] The business always continued its activities despite some slower periods. He also stated that the business's opening hours varied depending on demand and season.
[48] The General Division found that the evidence showed that the Appellant was clearly invested in the business even if he declared only seven working hours per week during the off-season.
The nature and amount of the capital and resources invested
[49] The General Division noted that the Appellant had not invested anything personal in the business; the furniture and tools used by the business were rented from 9204-0633 Quebec Inc.
The financial success or failure of the employment or business
[50] The General Division noted that the business had not faced financial difficulty during the periods in questions. The Appellant himself considered the business to be a success. He notes that the business starting making a profit after five years in operation.
The continuity of the employment or business
[51] As noted by the General Division, the business was in operation since its creation in 2009, until 2016, despite some drops in activity.
[52] The business has a website and advertises in the Yellow Pages, and sometimes in the newspaper. During his periods of unemployment, the Appellant still receives telephone calls, performs sales and takes orders. He also does deliveries.
[53] The Appellant has a credit card in the company's name, a cell phone and an F-150 truck that he uses year-round for the company's needs and sporadically during his periods of unemployment.
[54] The Appellant stated that he was the company's only employee, but that during two years, he had to hire staff.
The nature of the employment or business
[55] The Appellant notes that it is not a firewood manufacturing company, but a firewood sales company. It was created on February 2, 2009, and has been in operation since March 2009. The Appellant worked in landscaping before creating the company in 2009.
The Appellant's intention and willingness to seek and immediately accept alternate employment
[56] The General Division determined that the Appellant had not looked for work because he had been under the impression that the Respondent did not impose this burden on him, despite the obligation noted in his applications for benefits each year.
[57] Furthermore, the evidence before the General Division shows that the Appellant had not worked for another employer since the business was created in 2009.
Operating of a business to such a minor extent
[58] After analyzing the six criteria set out in subsection 30(3) of the Regulations, the General Division found the following on the basis of the evidence submitted:
[translation]
[49] The Tribunal is of the opinion that the claimant does not dispute the presumption under subsection 30(1) of the Regulations. The claimant is ultimately the beneficiary of a part of the profits of the company, which he has operated alone or with the help of an employee for several years, and he receives a salary for managing the business, which the trust holds through a management company [...] The claimant is the only person who devotes time to the business year-round. The company is not a financial failure and has operated consistently since its creation. Finally, the claimant has not noted to the Tribunal or to the Commission any intention or willingness to look for work between the date of his first application for benefits and the beginning of the Commission's investigation in 2016.
[50] Therefore, despite the convoluted structure of his business, the claimant cannot exempt himself from the application of subsection 30(1) of the Regulations. Clearly, the claimant is not operating a business to such a "minor extent" under subsection 30(2) of the Regulations.
[59] The General Division’s application of the objective test set out in subsection 30(2) to the Appellant’s situation shows that at least four of the relevant factors indicate that the Appellant’s engagement in the business in his benefit period was not to a minor extent. The General Division found from the evidence that the Appellant's engagement in the operation of his business was significant enough that he could rely on it as his principal means of livelihood.
[60] The Tribunal finds that the General Division’s decision on the issue of the Appellant's unemployment status was made based on the evidence submitted before it, and that this was a reasonable decision that complies with both legislation and jurisprudence.
[61] Therefore, the Tribunal cannot accept this ground of appeal from the Appellant.
Conclusion
[62] The appeal is dismissed.