CUB 63530

R. C. STEVENSON, UMPIRE:

Mr. MacDonald appeals from the decision of a Board of Referees dismissing his appeal from a ruling of the Commission that it could not pay him benefits as of February 1, 2001 because he was operating a business and therefore could not be considered unemployed.

Mr. MacDonald, then just short of 62 years of age, lost his employment as a foreman with Maguire Excavating Ltd. in November 2000. He applied for unemployment benefits and a benefit period was established. In 2003 as a result of matching employment insurance records against income tax returns the Commission learned that Mr. MacDonald had reported self-employment in 2001.

Mr. MacDonald and his wife had purchased a car wash business in 1997. The business had been dormant and Mr. Macdonald decided to reactivate it after he lost his regular employment.

The relevant provisions of the Employment Insurance Regulations are those found in subsections 30(1), (2) and (3):

30.(1) Subject to subsection[s] (2) ..., where 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.

(2) Where 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 working a full working week.

(3) The circumstances to be considered in determining whether the claimant's employment or engagement in the operation of a business is of the minor extent described in subsection (2) are

(a) the time spent;

(b) the nature and amount of the capital and resources invested;

(c) the financial success or failure of the employment or business;

(d) the continuity of the employment or business;

(e) the nature of the employment or business; and

(f) the claimant's intention and willingness to seek and immediately accept alternate employment.

While all six factors listed in subsection 30(3) are relevant it has been held by the Federal Court of Appeal in Charbonneau v. Canada (Attorney General), 2004 FCA 61; 324 N.R. 89 that the first and sixth factors are the dominant ones. In that case Justice Décary, speaking for the Court, said at paragraphs 8 to 10:

[8] Whatever the case may be and more fundamentally, it appears to me that the foremost reason which led Marceau J.A. adopt "time" as the paramount factor is that this factor was "most relevant", the "only basic factor to be taken into account" in all cases. The only thing that interests us, he says, is the notion of working a full week and "the conclusion ... depends directly and necessarily on the 'time spent'". This primary reason still exists. Nothing has changed in that respect.

[9] Allow me to add, however, that not very far behind the "time" factor, in terms of importance, is the factor of "the claimant's intention and willingness to seek and immediately accept alternate employment". As Marceau J.A. pointed out in Jouan, "The Act is designed to provide temporary benefits to those who are unemployed and actively seeking other work" (emphasis added). A claimant will not be considered unemployed if, all the while he is receiving payments, he merely says he is available to work and does not undertake serious, real steps to find work for himself.

[10] In conclusion, if it is true to say that all the factors listed in subsection 30(3) of the Employment Insurance Regulations must be taken into consideration, the fact is that the "time factor" (paragraph (a)) and the "intention and willingness" factor (paragraph (f)) are of utmost importance. A claimant who does not have the time to work or who is not actively seeking work should not benefit from the Employment Insurance system.

In Mr. Macdonald's case the Board of Referees said:

The Board finds that it is commendable that the claimant was trying to establish a viable business. His ignorance of the law, however, cannot entitle him to benefits which are not provided under the Employment Insurance Act and Regulations.

The Board finds that the claimant was in fact operating a business and therefore could not be considered unemployed. The Board concurs with the case law stated by the Commission in the Federal Court of Appeal decision of Veillet (A-58-94) in which "the court held that the six criteria established in Schwenk (CUB 5454) and now found in subsection 30(3) of the Regulations, are to be used for determining the status of a claimant operating a business". The board also agrees with the rational (sic) stated in CUB 39594 and CUB 23120.

The Board agrees with the Commission and maintains that the decision complies with the Employment Insurance legislation and is supported by case law.

CUBs 39594 and 23120 had been referred to in the Commission's written submissions to the Board of Referees. The Commission had also referred to the decision of the Court in Veillet v. Canada Employment and Immigration Commission (1994), 176 N.R. 308 as quoted by the Board. The quote provided by the Commission was inaccurate. The Veillet decision did not, and could not have, referred to subsection 30(3) of the Regulations as the decision was given before that Regulation was enacted.

The decision of the Board of Referees in this case is deficient. It did not comply with subsection 114(3) of the Act which requires that it include a statement of the Board's findings on questions of fact material to the decision.

In a self-employment case it is incumbent on a Board of Referees to make findings of fact with respect to each of the six prescribed factors and then determine whether the claimant's self-employment was so minor in extent that one would not normally rely on it as a principal means of livelihood.

Rather than send the matter back for re-hearing I will give the decision the Board of Referees should have given.

Time spent. Mr. MacDonald kept a business log (Exhibit 6). He spent time in January 2001 getting the car wash equipment in order and making other arrangements. In February the business was closed 17 of 28 days due to weather. On open days revenue ranged from $40 to $105 and totalled $869 for the month. In March the business was closed 15 of 31 days, revenue on open days ranged between $30 and $68 and totalled $841. In April the business was open 16 of 30 days, revenue ranged between $12 and $88 and totalled $950. Business improved from May to October with monthly revenue reaching a high of $1962 in August. Between May 1 and November 30 the business was open 120 of 214 days, just over half. Although Mr. MacDonald may have been present throughout the days the business was open, obviously much of that time was not productive.

Nature and amount of capital and resources invested. Mr. MacDonald and his wife had paid $7500 for the business in 1997. There were startup cots of over $4000 in 2001 but they were charged as expenses.

Financial success or failure of the business. In its written representations to the Board of Referees the Commission said Mr. MacDonald made a profit of $2343.70 for the tax year 2001. The Board of Referees said it had been determined that he had declared $7554 of self-employment income for the year. Both were wrong. The $7554 was taken from Exhibit 3-1, the printout of the earnings match. It was the amount of unemployment benefits Mr. MacDonald had received in 2001.

I do not know where the Commission got a profit figure of $2343.70. The earnings match shows gross business revenue of $12,069 and a net loss of $3,904. Details of expense amounts are shown on Exhibits 5-1 and 7. They do not include monthly land rent of $287.50 which would increase the loss to $7,354.

Continuity of the business. The business still exists and is now operated by one of Mr. MacDonald's children.

Nature of the business. Mr. MacDonald had been a construction or excavation foreman. The car wash business was a sideline and was not much more than a hobby business for him after he became unemployed.

The claimant's intention and willingness to seek and immediately accept alternate employment. Mr. MacDonald told the Commission he would have closed the business if he had found a job. He realized he was getting too old for construction work.

Conclusion. Having regard to all of the six factors and, particularly in this instance, to the unprofitability of the venture, I find that Mr. MacDonald was engaged in the operation of the business was to such a minor extent that a person would not normally rely on it as a principal means of livelihood.

Disposition. The appeal is allowed and the disentitlement is set aside.

Ronald C. Stevenson

Umpire

FREDERICTON, NEW BRUNSWICK
April 29, 2005