IN THE MATTER OF THE UNEMPLOYMENT INSURANCE ACT
- and -
in the matter of a claim for benefit by
GEORGE KLASSEN
- and -
IN THE MATTER of an appeal by the claimant
from a decision of a Board of Referees given at
Burnaby, B.C., on the 11th day of April, 2001.
DECISION
Hon. David G. Riche
The issues in this case are whether or not the claimant was unemployed under sections 8 and 10, and Regulation 43 of the Unemployment Insurance Act. This is under the Unemployment Insurance Act because the events took place between 1993 and 1996. This matter had been previously heard by an Umpire and the decision was filed as CUB 49858. In that decision certain matters were dealt with and there were directions given for the matter to be heard by the Board of Referees. The matters to be heard were the issues which are now before me.
Umpire Salhany, when he heard this case in 1998, stated:
This appeal was heard on the 27th of September, 2000 by the Umpire, arising out of a decision of a Board of Referees in 1998. This appeal before him was heard in Vancouver, British Columbia on the 27th of September, 2000 in conjunction with the appeals of Anna Klassen, Katherine Klassen, Adrien Cyr, Leslie Taylor, Gordon Hampton and Allen Hampton because all of the issues in all seven cases arise out of the same business operation and are essentially the same. The background of this case is as follows:
Pacific Coast Cedar Products Limited is a limited company carrying on business in Maple Ridge, British Columbia. 50% of the shares of the company are held by first class holdings 33.33% of the shares are held by H.T.H. Holdings Limited and 16.66% of the shares are held by Adrien Cyr. The shares of first class holdings are held as follows: 12.5% by Klassen Enterprises Limited, a limited company which is owned equally by Richard and Patricia Klassen who are the children of George Klassen; 25% are owned by Anna Klassen who is the wife of George Klassen and 12.5% by Katherine Klassen, his daughter-in-law. The shares of H.T.H. Holdings are divided equally among Allen Hampton, Gordon Hampton and Leslie Taylor.
A search of the corporate records of Pacific Coast reveals that as of May 13, 1996, George Klassen was the President and a director of the company, Gordon Hampton was the Secretary and a director of the company and Adrien Cyr, Anna Klassen, Katherine Klassen and Leslie Taylor were all directors. George Klassen was not a shareholder of Pacific Coast Cedar Products Limited.
When George Klassen, the claimant, filed a claim for benefits in September 1993, he stated that he was not related to his employer. His record of employment (Exhibit 3.1 and 3.2) show that he was laid off from that company. I will refer to Pacific Coast Cedar Products Limited as Pacific Coast. Again, in April 1996 he made another claim for benefit and continued to state that he was not related to the company. The share structure of the company was later discovered by an unemployment insurance investigator.
A further investigation took place to determine whether or not the claimant and others were working while on claim. The investigation was also carried out to determine whether or not these were claimants of Pacific Coast or whether they were owners carrying on business and employed by the company.
When the company was busy there were three people working in the office and when the company was slow there would be one part-time person working there. He stated that the manager would be one of the last people to be laid off but not always. He was the manager.
When asked whether he worked at the Mill since his layoff in March 1996, he stated that he was not sure how he would classify work; however, the directors would meet every day to try and figure out what they were going to do. These were called strategy meetings. The meetings lasted anywhere from one hour in length to seven or eight hours in length Monday to Friday. An average strategy meeting was about four hours in length every day. His wife and daughter would attend these meetings.
During the time that he was on benefits from employment insurance the Mill was operated without a manager. He stated the Board of Directors ran the mill. The Board of Directors were as I have already stated. In addition to that Adrien Cyr was a maintenance man, Allen Hampton was a general mill worker, Gordon Hampton was the forklift driver, Leslie Taylor was the supervisor, Anna Klassen did general office help, and Katherine Klassen was the bookkeeper and office manager.
In March 1996, 20 of the employees continued to work full time up to the end of May 1996. When the company laid off 13 employees who were not reporting any work or earnings, of these 13 seven were directors or shareholders of the company. None of the directors or shareholders were reporting any work or earnings.
During the interview the investigator asked the claimant, "When there was work for the claimant when the mill was shut down, how could there not be work for the claimant when the mill was operating?"
He later explained that this was the way the company wished to organize their affairs.
The Employment Insurance Commission denied Mr. Klassen's claim stating that they could not pay benefits as of August 30, 1993 because he was operating a business (Exhibit 48). Further, they could not pay him benefits from April 1, 1996 because he was operating a business (Exhibit 49). As well, the Commission stated that in order to be entitled to regular benefits the claimant must prove that they are capable and available for work, willing to work, actively seeking employment and unable to obtain suitable employment for each and every day benefit is claimed. There is no circumstances which would hinder a search for work or the ability to immediately accept any and all suitable employment.
The majority of the Board hearing this matter heard from counsel for George Klassen who argued that the appellant was a shareholder in a family-owned operation (Exhibit 80.5) but is not in control of his hours of work. He says the appellant would give evidence about efforts made to find work and maintain availability and that when automobiles belonging to the appellant were parked in the parking lot of the company, the appellant will explain what the appellants were doing in the office at all relevant times, which for the most of the time was in order to conduct a job search (Exhibit 80.6).
At the time of the hearing submissions were made to the Board of Referees. Mr. Klassen said he personally did not own any shares. He said his wife, daughter and other relatives owned first class holdings, which owned one-half of Pacific Coast Cedar. He did admit he was the president of the company.
The Board found that George Klassen said that he had spent four or more hours at the office each day even though he had laid himself off work. Mr. Klassen acknowledged that his car was on the premises as found by the investigating officer. He explained that the time he spent at the office was taken in trying to find a way to make the company work. He said that he participated in strategy meetings with Ed, Les and the Hamptons, allowing that his daughter Katherine participated on occasion, as was the case with his wife Anna. Mr. Klassen said none of the laid off shareholders actually did any work at the office, although they were laid off shareholders in the office on a regular basis. Mr. Klassen offered that laid off shareholders were there reading newspapers for want ads and were there to help each other conduct a job search. Mr. Klassen did not apply for any jobs outside his own industry and continued to give directions to those employed by his company. He added that his staff sank to a low of around 15 and rose to its present staff of around 37. He kept no record of places he looked for work but he assured the Board he did look. He has no recollection of ever been given a claimant's rights and obligations.
The Board of Referees set forth the application of the law and particularly section 8 which sets out that benefits are payable to a claimant who qualifies to receive them. Section 10 states that a week of unemployment is a week in which a claimant doesn't work a full working week. Section 43 of the Regulations sets out that someone who can close his own working hours, or is self-employed, or engaged in the operation of a business on his own account or in partnership or co-adventure isn't eligible to receive benefits unless he can establish that the employment described is so minor in extent that a person would not normally follow it as principal livelihood.
Availability defined in s. 14 of the Act says that the claimant is not entitled to be paid benefits for any period in which the claimant fails to prove the claimant was capable and available for work and unable to obtain suitable employment on that day, or, incapable of work by reason of prescribed illness, injury or quarantine on that day and would otherwise be available for work.
The Board then quoted CUB 40065 by Jerome, J., dealing with s. 43 and Childs A-48-97 (CUB 35899).
The Board also dealt with the issue of availability for work under s. 14 of the Act.
The majority of the Board found that commentation and oral evidence from George Klassen, Katherine Klassen, Anna Klassen, Allen Hampton, Gordon Hampton, Adrien Cyr and Leslie Taylor that George Klassen is and was the guiding light of Pacific Coast Cedar Products. They heard that he hired and fired employees, determined who gets laid off and when, who is to be hired and rehired and when. Further, that he directed the operation of the company at the time it was under review. The Board found that he acted with the consent of the shareholders and directors as the president of the enterprise for all material times. The majority of the Board heard George Klassen state that he decided what direction the company would take during the periods under review. The Board found that George Klassen controlled his own working hours and was engaged in the operation of a business in partnership or co-adventure with his relatives and shareholders of Pacific Coast Cedar Products. They found that George Klassen is described under s. 43(1) of the Regulations. He is not unemployed within our understanding of the legislation.
The majority of the Board further found that Mr. Klassen was engaged in employment with Pacific Coast Cedar Products as his principle means of livelihood for the periods under review and the Board was not satisfied that he established his involvement was minor in extent as described in s. 43(2) of the Act. They recognized that George Klassen has been involved in the industry for 35 years and during the periods under review he attended to the premises on an almost daily basis and directed the focus of the company according to his lawyer to mitigating the circumstances the company found itself in, that George Klassen directed his attentions to the company's affairs on a daily basis rather than directing his attention to finding other employment for himself. The Board concluded that George Klassen continued to direct the affairs of the company even during the periods he drew unemployment insurance benefits. He admitted he participated in strategy meetings on a daily basis, sometimes seven or eight hours a day.
The majority of the Board recognized that he spent four to eight hours a day, five to seven days a week during the periods in question. Further they found that he had invested substantial capital through his family and through his shareholders to be well in excess of $1 million. They recognized the business to have been started through relatives and Mr. Klassen had been involved in the enterprise for decades.
They found that the enterprise continues to this day because of significant efforts by the claimant. Further they found that he did not seek other employment and failed to show that he was willing to accept and seek other employment.
On the issue of availability, they found that he significantly failed to show that he was capable of available for and unable to obtain suitable employment for the period claimed in the UI benefits. He didn't keep any record of who he approached nor did he offer any substantiation of who he spoke to. The Board found that he did not offer reliable and credible information when directly asked about his job efforts. He offered information in contradiction with his own oral testimony. His oral evidence could not be relied on because it did not survive scrutiny. George Klassen was not unemployed, did not establish his involvement of minor extent and has not shown he was available within the findings of the majority, neither was he credible in his oral evidence. For these reasons his appeal failed.
The minority member of the Board took a contrary view. The minority member of the Board seems to have accepted the arguments of counsel for the claimant. He found that Specific Coast was a corporate entity and the claimant was a director and employee. He explained that Pacific Coast was not a partnership or a co-adventure and therefore Mr. Klassen could not be linked with the Schwank decision CUB 5454. The minority member of the Board pointed out that the claimant introduced a work share program and as a result kept key employees on as he knew the mill could run efficiently without the family employees. This was a business decision to keep essential employees working. The purpose of this was to allow for financial stability in the company. He stated that the industry was in crisis with massive layoffs and the claimants major focus was to keep the company in business by keeping essential employees working. The claimant was planning on returning to Pacific Coast as soon as economic conditions returned to normal. He agreed with the layoff of the family members so as to keep expenses down.
The minority member of the Board did not agree with the statement of the Commission: "Regardless of what the directors say, it is simply not credible that the work they collectively did when not on claim would suddenly be necessary to the operation of the mill when they were on claim." The minority member relies on the credibility decision made by the previous Umpire when he allowed all appeals on the issue of the penalty.
In contradiction to the other members of the Board, he found that the claimant and his family were wholly credible. He saw nothing wrong with the fact that they were having meetings at the offices during their period of layoff because he felt that they were using this time mostly to search for employment.
When this matter came before me, counsel for the appellant, George Klassen, advised that they wished to withdraw the appeal. For these reasons I therefore allowed the appellant to withdraw his appeal.
The evidence, however, relating to his answer to questions by the investigating officer of the Commission are relevant to the remaining appeals concerning the enterprise Pacific Coast Cedar Products Limited which is owned by the family of George Klassen and others.
David G. Riche
Umpire
December 4, 2002
St. John's, NF