CUB 7015
IN THE MATTER OF THE Unemployment Insurance Act, 1971, as amended
- and -
IN THE MATTER of claims for benefit by
TONY LASELVA, LUIGINO MINICUCCI, and LOUIS VENDITELLI
- and -
IN THE MATTER of appeals to an Umpire by three claimants from
the unanimous decision of a Board of Referees given in
St. Catharines Ontario on 23rd July 1980.
CORRESPONDING FEDERAL COURT DECISION: A-300-81
DECISION
CORNISH, D.J.
These three claimants for unemployment insurance benefits requested that their appeals be considered together as their claims are essentially the same. This request was granted by the Board of Referees and I am content to treat the appeals in similar fashion. However for the purpose of simplifying matters I intend to consider the appeal of Tony LaSelva and my decision in his case will apply to the other two men.
Briefly the history of these appeals is that all three men who are plasterers by trade applied for benefits about the same time in the spring of 1980. In Tony LaSelva application, dated April 18th, 1980, he stated that he had worked for LTL Homes Ltd. from 3rd January 1979 to 1st February 1980 and that he had stopped working because of "Shortage of Work". In the Self-Employment Questionnaire he states that he was using the trade name of L.T.L. Home Ltd. and that there were "Three partners 1/3 owners".
It appears that these three appellants caused this company to be incorporated in 1973 and since then the three men have each owned one-third of the shares and have occupied the offices of President, Vice-President, Secretary and Treasurer while there were various members of their families employed by the company and holding offices therein.
This company has since 1973 been paying unemployment insurance premiums and so have the men. On at least four occasions the men have received benefits on the grounds of shortage of work without any opposition from the Commission. However, in 1978 the Commission asked the Minister for a determination as to whether the plastering work the three men were doing was insurable employment and received the answer that it was insurable employment.
The Commission on 29th May 1980 issued a Notice of Refusal (Exhibit 6) to Tony LaSelva on the ground that he was engaged in business on his own account as a plasterer and had not proven that he was unemployed and that payment of benefit was suspended from 6th April 1980 for so long as this condition exists.
An appeal from this decision was launched on behalf of all three men by Quattrini and Quattrini Public Accountants by a letter dated June 27th, 1980 (Exhibit 8). This letter after requesting a joint trial states what the writer considers the reasons for the Commission's refusal which it must be assumed was obtained from the report of interview between the Insurance Officer and Mr. Venditelli which is Exhibit 7 and reads as follows:
(i) L.T.L. Homes Limited is their principal means of livelihood.
(ii.) Messrs. Venditelli, LaSelva and Minicucci had no intention of obtaining employment during their layoff and the Commission implies they were not seeking employment.
(iii) Messrs. Venditelli, LaSelva and Minicucci were soliciting customers for L.T.L. Homes Limited during their period of layoff.
(iv) The Unemployment Commission's intention is not to subsidize employees during their employer's slack periods.
This letter then goes on to state the grounds of appeal which although very lengthy I feel I must quote in full:
1. L.T.L. Homes Limited has been in the past Messrs. Venditelli, LaSelva and Minicucci's principal means of livelihood but it will not nor has it been looking ahead from the past necessarily their principal means of livelihood in the future.
They are in a similar situation as many General Motors workers and school teachers in St. Catharines whom have counted on G.M. or the Board of Education in the past as their principal means of livelihood but can no longer nor could they ever necessarily count on their employers in the future.
There is nothing that ties Messrs. Venditelli, LaSelva and Minicucci to L.T.L. Homes Limited. Their total investment in non-liquid assets is approximately nil as it has been in the past and if they could obtain employment they seek they would take it without hesitation.
The employer owns no expensive equipment with the net book value of its fixed assets only being $4,573 and the profits of the business have not been up to par for any business to be continued.
2. Messrs. Venditelli, LaSelva and Minicucci have intended to obtain employment during their layoff which they would have kept indefinitely had or if they obtained it. These men are all skilled workers who have sought after employment during the subject period as well as throughout the year whether or not they were employed by L.T.L. Homes Limited at the time. Their job search are supported by the attached appendixes which cover some of the employment opportunities they have investigated.
3. Messrs. Venditelli, LaSelva and Minicucci were not involved in soliciting customers for L.T.L. Homes Limited, more than a nominal amount of hours in any week which would not have prevented them from accepting full-time employment. If any of the men put in any amount of hours in a particular week they would have been put on the company's payroll which during this subject period happened only one week.
4. Messrs. Venditelli, LaSelva and Minicucci are not asking the U.I.C. to subsidize L.T.L. Homes Limited nor to subsidize themselves during any slack period. The period at question isn't a slack period or a period of low profit as in the ruling referred to by the insurance officer to CUB 5442 but rather a period of no activity on the company's part. This period which the insurance officer notes has existed at the same time every year since the beginning of the company's business can be compared to the winter months for a farmer or the off season for a seasonal business. In these latter businesses employees and even owners qualify for unemployment insurance as long as they meet the other required criteria. Support of this is found in subsection 43(3) of the Regulations for a farmer and on page 22 of the U.I.C. manual for seasonal type businesses. Quoting from the manual, "If it is seasonal work, there usually will be an off-period such that the reduction in business will, during a certain period of the year, make the engagement minor in extent and the claimant unemployed although, at other times, he will be regarded as working full working weeks." Further support for Messrs. Venditelli, LaSelva and Minicucci's cases lies in CUB's 461, 469, 544 and 558. During the period in question L.T.L. Homes Limited is essentially wound down.
5. In general, Messrs. Venditelli, LaSelva and Minicucci are three hard working gentlemen who would always be employed if they could obtain employment at any particular time.
6. In conclusion there is no material difference between the cases at hand and employees laid off in the automobile industry. Messrs. Venditelli, LaSelva and Minicucci have no more interest in L.T.L. Homes Limited than the average worker at G.M. has in General Motors of Canada and in fact they probably have less ties.
For these reasons and for others which will come forth at any appeal hearing Messrs. Venditelli, LaSelva and Minicucci believe that the Notices of Refusal are not correctly issued end grounds of appeal.
Exhibits 8-7, 8-8, 8-9 and 8-10 are what purport to be the efforts made by these men to obtain work which are mentioned in Reason 2 of their reasons for appeal.
The Observations of the Commission to the Board of Referees sets out the Commissions position as follows and concludes by noting that Revenue Canada has ruled that the employment of all three parties is insurable.
The claimant filed an initial claim for benefits on 18 April, 1980. The Insurance Officer questioned the claimant's entitlement to benefits, and, as a result, stopped pay on the claims of the other two partners, Mr. Minicucci and Mr. Venditelli, until a thorough investigation could be carried out. As a result of this investigation, it was determined that the claimant and his partners were carrying on a business to such an extent that a person would normally be considered as following this as a principal means of livelihood and be not unemployed. Disentitlements were imposed currently as to not raise overpayments.
If it is the claimant's intention to operate the business as a principal means of livelihood, he cannot be considered as unemployed. In Exhibit 4, the claimant answers in the affirmative that it is his intention to build up a full-time business. Exhibit 5 establishes they have operated the business since at least 1977, and there is no evidence of their having worked in any other employment.
Soliciting initial contracts after having formed a company, is an activity of self-employment and cannot be regarded as efforts made by an unemployed worker in search of work. A business normally followed as a principal means of livelihood may, at times, yield unsatisfactory financial returns, but this does not mean-weeks of unemployment. The test is the extent of the claimant's engagement having regard to whether the business would normally be followed as a principal means of livelihood. Once a person has gone into business otherwise than to a minor extent, he is deemed to work full. working weeks for the whole duration of the self-employment, regardless of volume. Self-Employment continues even when the business is idle due to lack of orders, bad weather, slow-down, and do not make the claimant unemployed.
In Exhibit 4, the claimant indicates that he is soliciting contracts, and again, in Exhibit 8, although his partner indicates that he is not soliciting contracts - evidence proves to the contrary.
Following investigation by an Officer of the Commission, Exhibit 5, was drawn up showing periods off work over the past four years with the shaded in areas being periods of slow-down. This would indicate that no pattern has been established. Exhibit 5(2) and 5(3) show large sums of money being paid to members of the family at different times of the year. This information was obtained from the payroll records.
With the receipt of the letter of appeal, the only new facts considered was the job search. However, the job search alone does not establish the fact that he is not unemployed. Labour market information (Exhibit 9) indicates that there was a general slow-down in the entire construction industry. It was considered as no change in the original decision, and the appeal is thus put before the Board.
It is contended that the decision of the Insurance Officer is within the jurisprudence provided by the Umpires, and should be maintained.
Note: Revenue Canada - Taxation has ruled that the employment of all three partners is insurable.
All three claimants appeared before the Board of Referees with their accountant to present their appeal. The Board found that the three men are partners in business on their own account as plasterers and have not proven they are unemployed. The Board also pointed out to the claimants that once a person has gone into business even to a minor extent he is deemed to be working full working weeks for the duration of his self employment regardless of volume. The Board therefore upheld the decision of the Insurance Officer and dismissed the appeals of all three appellants.
The Board in its reasons makes no reference whatever to the fact that Revenue Canada has ruled that these three men while working as plasterers are in insurable employment.
Tony LaSelva appealed this decision to the Umpire by a lengthy typewritten letter which I must assume was drafted by his accountant. The letter asks for the allowance of the appeal on all three grounds set out in Section 95 of the Act.
He denies that he is a partner in L.T.L. Homes Ltd. and states that he is a minority shareholder and is an employee of this firm and further that he cannot control whether or not he will be employed by the corporation nor can he control his working hours. He then claims that the other two shareholders could lay him off or fire him if they wanted to do so. He then repeats the phrase of denial of "natural justice" based on the misconception of what this phrase means in unemployment insurance cases which is almost universal amongst appellants.
Finally he states that the Board erred in law by deeming him as working full weeks which only applies, he claims, where a claimant is self employed or controls his own working hours which is not the case at hand.
When this appeal was called Mr. Edward Werner, counsel for the appellant, stated that Mr. R. Forbes, a member of the appellants firm of accountants, was with him to assist if need be.
Mr. Werner argued the appellants case forcibly. He cited to me Umpires decisions in CUB 6148 and CUB 5472 and CUB 4085. Mr. Vida argued that this appeal must be either under subsection (b) or (c) of Section 95 of the Act and neither ground had been established. He pointed out L.T.L. Homes Ltd. was really a family company in which the three appellants each owned 1/3 of the shares issued and that the three men and their wives held the positions of authority in the company and in effect controlled it completely. He further maintained that earnings might be insurable and you still might not be entitled to benefit and that is not inequitable for LTL Homes Ltd. to pay premiums and the employees not to receive benefit.
No explanation was given to me in argument as to the sudden change in the position of the Commission to the entitlement for benefits of these three men. The evidence indicates that for some years L.T.L. Homes Ltd. and the three men paid premiums and that during slow times the men received benefits. The evidence also indicates that Revenue Canada had held that the employment of these men was insurable.
I was interested to learn how LTL Homes Ltd. operated as a corporate entity especially as the appellants counsel maintained that the three appellants were in the same relationship to the company as were the workers on the assembly line at General Motors. I enquired as to whether there was a managing director and found there was none and whether the minutes of the company recorded who made decisions as to the operation of the company and as to who would be entitled to lay off any one of the appellants if that were found to be desirable in the company's best interests. The responses to my questions led me to the conclusion that this incorporated company operates as a family affair and is in fact a three man partnership in the plastering business operating behind a corporate facade. Mr. LaSelva in a Self-Employment Ouestionnaire described himself as 1/3 partner and I am of the opinion that that exactly describes the relationship between these three men.
Having come to this conclusion that the appellants are not employees as claimed of L.T.L. Homes Ltd. but are in fact the alter ego of that company I would then have to find that they were in business for themselves and not qualified for benefits under the Unemployment Insurance Act unless it could be shown that they could bring themselves within one of the employments found in Section 12 of the Regulations under the Act. A perusal of Section 12 indicates that their plastering business is not one of those types of employment. All of this would lead to the conclusion that they are not entitled to unemployment insurance benefits. However, the fact remains that Revenue Canada has determined that they are in insurable employment and I am of the opinion that this ruling must prevail until it is rescinded.
The appeal of Tony LaSelva Luigino Minicucci and Louis Venditelli from the decision of the Board of Referees will be allowed.
_________________
UMPIRE
DATED AT TORONTO, THIS 4th DAY OF NOVEMBER, 1981.