Lalande v. M.N.R. (February 4, 2016 – 2016 TCC 33, Sommerfeldt J.).
Précis: Mr. Lalande worked for a corporation controlled by his wife. When his employment was terminated on May 2, 2014 he applied for EI benefits. The benefits were denied on the basis that he was not engaged in insurable employment since the terms and conditions of his employment were not similar to arm’s length employment. He appealed to the Tax Court. The Tax Court concluded that the terms of his employment were not arm’s length and dismissed the appeal.
Decision: The Court engaged in a detailed factual analysis of Mr. Lalande’s situation. It concluded that the facts did not support his argument that his employment was similar to an arm’s length relationship:
 As mentioned above, when Mr. Lalande began to work for the Corporation, the amount of his remuneration was initially left undetermined and, when it was finally determined unilaterally by Ms. Mulder, it was not written on the Agreement. As an employee’s rate of pay is a fundamental term of a contract of employment, I would expect that, in a typical arm’s-length employment situation, the rate of pay would generally be negotiated and agreed upon by the employer and the employee at the commencement of the employment and would be set out in writing. As this was not done here, it suggests that the Minister’s conclusion was reasonable, i.e., that Mr. Lalande’s contract of employment was not one into which arm’s-length parties would have entered.
 The Minister assumed that Ms. Mulder controlled the day-to-day operations of the Corporation’s business and made the major business decisions. Neither Mr. Lalande nor Ms. Mulder disputed or challenged this assumption. In fact, Mr. Lalande repeatedly testified that all major decisions were made by Ms. Mulder, that she was the manager, that she told him what to do, that she was extremely experienced in the fast-food industry, and that he had no experience in that industry. When Mr. Lalande and Ms. Mulder described his duties, in subparagraph 3(a) of the respective questionnaires completed by them (i.e., Exhibits R-3 and R-4), neither of them referred to any managerial responsibilities. Therefore, it appears that, although Mr. Lalande had some supervisory or managerial functions, his managerial responsibilities may not have been as significant as he suggested in his testimony.
 Based on the questionnaires completed by Mr. Lalande and Ms. Mulder, the Minister understood that Mr. Lalande was expected to be “punched-in” and to work from 8:30 a.m. to 4:00 p.m. on Mondays, Thursdays and Fridays, and from 8:30 a.m. to 2:00 p.m. on Tuesdays and Wednesdays. This would have resulted in either 33.5 “punched-in” hours per week, or, as Mr. Lalande was entitled each day to an unpaid half-hour break (when he was “punched-out”), 31 “punched-in” hours per week. The evidence is somewhat confusing in this regard, particularly as the responses to the questionnaires completed by Mr. Lalande and Ms. Mulder indicated that he was required to work 33 “punched-in” hours per week. Nevertheless, regardless of whether Mr. Lalande was required to work 31, 33 or 33.5 “punched-in” hours each week, he did so infrequently.
 The attached Schedule to these Reasons analyzes Mr. Lalande’s required and actual “punched-in” hours each week during the year that is the subject of the Decision, as those weeks are set out in the Pay Summary Reports (or timesheets) in Exhibit R-7. The focus of the Schedule is the number of “punched‑in” hours that Mr. Lalande was required to work in a particular week and the number of “punched-in” hours that he actually worked in that week. The third column of the Schedule shows the number of “punched-in” hours that were required each week. In a typical five-day work week, Mr. Lalande would have been required to work 31, 33 or 33.5 “punched-in” hours, depending on the view that one takes of the evidence that was presented. In a week containing fewer than five working days, the required number of “punched-in” hours would have been less and would have been a function of the days on which Mr. Lalande worked (as he was expected to work two hours more on Mondays, Thursdays and Fridays than he was on Tuesdays and Wednesdays). The fourth column of the Schedule shows the actual number of “punched-in” hours worked each week by Mr. Lalande, as set out in Exhibit R-7. The fifth column of the Schedule shows whether Mr. Lalande met the required number of “punched-in” hours each week. A review of that column indicates that, particularly during the latter portion of the year in question, the number of “punched-in” hours actually worked by Mr. Lalande was frequently less than the required number of “punched-in” hours. In my view, in an arm’s-length employment relationship, it is unlikely that an employer would countenance an employee frequently working fewer hours than required.
 Although the Corporation had a sophisticated system for tracking the hours worked by the Corporation’s employees, including Mr. Lalande, when they were working at the restaurant while it was open, there was no system for tracking the number of hours worked by Mr. Lalande away from the restaurant premises (when he was going to the bank or picking up supplies) or when he was doing repairs while the restaurant was closed. The lack of a system to track, or at least record, Mr. Lalande’s hours in those circumstances may perhaps be indicative of a non-arm’s-length contract of employment.
 The Minister assumed that Mr. Lalande was paid by the Corporation, on average, $28.52 per hour. As discussed above, Mr. Lalande and Ms. Mulder provided evidence to satisfy me that his average rate of pay was less than $28.52 per hour; however, by reason of the fewer-than-required number of “punched‑in” hours actually worked by Mr. Lalande, as set out in the Schedule to these Reasons, even if it were to be accepted that each and every week of his employment Mr. Lalande worked an additional 7 to 10 “non-punched-in” hours, his average rate of pay would still have been greater than $20 per hour. As I am of the view that Mr. Lalande’s average hourly rate of pay was greater than $20 per hour (which, according to Mr. Lalande and Ms. Mulder, is a typical hourly wage for a restaurant manager), I am reinforced in my view that the Minister’s conclusion was reasonable, i.e., that Mr. Lalande’s contract of employment was not one that would have been entered into by arm’s‑length parties.
 The Minister assumed, and the evidence confirmed, that, after Mr. Lalande’s employment was terminated, the Corporation did not replace him with another worker. Rather, Ms. Mulder and third-party contractors took over Mr. Lalande’s former duties. The fact that Mr. Lalande was not replaced by the Corporation might suggest that his employment was not essential to the operations of the Corporation, which, in turn, would support the Minister’s conclusion that arm’s-length parties would not have entered into a contract of employment with terms, conditions and circumstances similar to those pertaining to Mr. Lalande’s contract of employment.
 The Minister assumed, and the evidence confirmed, that the Corporation paid vacation pay to Mr. Lalande, as was done in respect of the Corporation’s other employees. Although this factor is indicative of an arm’s-length employment relationship, I am of the view that this factor does not outweigh the factors set out above, which support the reasonableness of the Minister’s conclusion.
As a result the appeal was dismissed.