[1995] 1 F.C. 393
A-61-94
The Attorney General of Canada (Applicant)
v.
Leonard Sears (Respondent)
Indexed as: Canada (Attorney General) v. Sears (C.A.)
Court of Appeal, MacGuigan, Létourneau and Robertson JJ.A.—Toronto, September 7; Ottawa, September 15, 1994.
Unemployment insurance — Application for judicial review of Umpire’s decision respondent’s weekly benefit calculated based on former full-time employment only — Upon loss of full-time employment, respondent’s eligibility for U.I. benefits deferred due to receipt of severance pay — Securing part-time employment — Benefit rate calculated based on 20 weeks of part-time employment — Unemployment Insurance Act, s. 13 providing qualifying weeks last 20 weeks of insurable employment — Amendments to Regulations, s. 57(2)(a) not detracting from reasoning of Marceau J.A. in Canada (Attorney-General) v. Fortin — Only lost employment considered in calculating benefits — Purpose of Act to provide financial support while seeking employment, not to discourage claimants from accepting part-time work — Receipt of severance pay should not deprive claimant of entitlement otherwise flowing from loss of full-time position.
This was an application for judicial review of the Umpire’s decision that only the insurable earnings from the respondent’s full-time employment could be used to calculate his weekly benefit rate.
The respondent was permanently laid off from full-time employment in 1990. The respondent had to wait until May, 1991 to become eligible for unemployment insurance benefits because he was in receipt of severance and vacation when laid off. In December 1990 he accepted insurable employment as a part-time security guard. In May 1991, the respondent’s weekly rate of benefit was calculated on the basis of the twenty weeks of his part-time employment. His full-time employment was not used in the calculation because the Commission held that it had ended in the twenty-first week of insurable employment preceding the commencement of his claim. The Commission relied upon Unemployment Insurance Act, section 13 which provided that the qualifying weeks were the last twenty weeks of insurable employment in his qualifying period. A board of referees dismissed his appeal. The Umpire allowed the appeal, relying on Canada (Attorney-General) v. Fortin, wherein the Federal Court of Appeal upheld the Umpire’s decision that when an insured person holds concurrently more than one insurable employment, the weekly benefit must be calculated on the basis of the lost employment only. The Attorney General argued that Fortin was no longer good law because Unemployment Insurance Regulations, paragraph 57(2)(a) had since been amended. When Fortin was decided, paragraph 57(2)(a) provided that the entire income of a claimant arising out of any employment was to be taken into account to determine whether an interruption of earnings had occurred and for all other purposes related to the payment of benefits under Part II of the Act. “For all other purposes related to the payment of benefit under Part II of the Act” was subsequently deleted and section 36.1 was added which provided that the earnings for which a premium was payable were to be taken into account to determine the average weekly insurable earnings in the qualifying weeks of a claimant.
The issue was whether employment held between the date the claimant was laid off and the date on which benefits could be claimed was to be used in calculating the weekly benefit rate.
Held, the application should be dismissed.
The amendments to the Regulations did not detract from the reasoning of Marceau J.A. in Fortin, but rendered inapplicable the reasoning of Hugessen J.A. The claimant in that case had been working full-time for one employer and at the same time part-time for another. Marceau J.A. had held that (1) there was no provision which authorized cumulative treatment of concurrent employment; (2) a weekly benefit rate could not be established on the basis of employment which had never been lost without clear provision therefor in the Act; and (3) the Commission’s interpretation that the employments must be combined and dealt with together defied the legal requirement that the claimant have suffered an interruption of earnings in order to be eligible for benefits. In most cases there could never be an interruption of earnings. Hugessen J.A. had held that claimant’s earnings from insurable employment in the qualifying period included those amounts allocated weekly from severance pay. The principle of general application to be derived from Marceau J.A.’s reasoning was that only the employment lost by the claimant should be considered in calculating benefits.
The purpose of the Act is to provide a claimant with financial support until he or she is able to find comparable employment. The Act is not intended to discourage claimants from seeking part-time employment. By seeking and obtaining part-time employment, the respondent would be penalized by the Commission’s interpretation, not because he had obtained part-time employment, but because he was in receipt of severance pay which had the effect of deferring the date on which it could be said that he suffered an interruption of earnings. Had the respondent not received the lump sum payment, he would have been entitled to a weekly benefit rate based on his full-time earnings. In accordance with the limitations set out in section 15, any part-time insurable earnings received during a benefit week would be deducted from the respondent’s unemployment benefits if they exceeded the limits provided in that section. The additional fact that the respondent received severance monies from his employer should not deprive the claimant of the entitlement that would otherwise flow from the loss of his full-time position.
There was no reason to adopt a strict interpretation of section 13, which is effectively penal in nature and which has not been shown to further any legislative intent. This was a case of a legal issue within a factual context not contemplated by Parliament. Neither the Act nor Regulations touched on the issue herein. It is prima facie illogical that unemployment benefits be based on employment which has never been lost. This conclusion was reinforced by subsection 13(1) which referred to a weekly benefit payable “for a week of unemployment.”
STATUTES AND REGULATIONS JUDICIALLY CONSIDERED
Unemployment Insurance Act, R.S.C., 1985, c. U-1, ss. 2 “interruption of earnings”, 6(2)(b), 7(1) (as am. by R.S.C., 1985 (3rd Supp.), c. 14, s. 1), 13, 15.
Unemployment Insurance (Collection of Premiums) Regulations, C.R.C., c. 1575.
Unemployment Insurance Regulations, C.R.C., c. 1576, ss. 36.1 (as enacted by SOR/88-142, s. 2), 37 (as am. by SOR/82-778, s. 1; 88-277, s. 2; 90-756, s. 8; 92-164, s. 10), 57 (as am. by SOR/82-673, s. 2; 82-778, s. 2; 84-32, s. 8; 86-58, s. 1; 88-142, s. 3; 89-160, s. 2; 90-207, s. 1; 90-756, s. 17; 90-761, s. 16; 93-351, s. 1; 93-434, s. 1; 93-470, s. 1), 58 (as am. by SOR/82-778, s. 3; 86-58, s. 2; 87-614, s. 10; 89-412, s. 1; 89-550, s. 1; 90-756, s. 18; 92-164, s. 16).
CASES JUDICIALLY CONSIDERED
APPLIED:
Canada (Attorney-General) v. Fortin (1989), 67 D.L.R. (4th) 564; 30 C.C.E.L. 117; 90 CLLC 14,004; 109 N.R. 385 (F.C.A.).
DISTINGUISHED:
Canada (Attorney General) v. Rose, [1993] F.C.J. No. 1127 (QL).
CONSIDERED:
Re Anderson and Umpire under Unemployment Insurance Act, 1971 (1985), 23 D.L.R. (4th) 292 (F.C.A.).
REFERRED TO:
Lépine-Desmarchais v. Canada (Umpire appointed under Unemployment Insurance Act, 1971), A-907-88, Pratte J.A., judgment dated 24/10/89, F.C.A., not reported.
APPLICATION FOR JUDICIAL REVIEW of the decision of an umpire that only the insurable earnings from lost employment could be used in calculating the rate of U.I. benefits where part-time work had subsequently been obtained. Application dismissed.
COUNSEL:
E. Gail Sinclair for applicant.
Paul Dusome for respondent.
SOLICITORS:
Deputy Attorney General of Canada for applicant.
Simcoe Legal Services Clinic, Orillia, Ontario, for respondent.
The following are the reasons for judgment rendered in English by
Robertson J.A.: This judicial review application brings into consideration two earlier decisions of this Court and the proper interpretation of section 13 of the Unemployment Insurance Act, R.S.C., 1985, c. U-1 (the “Act”). Broadly stated, we must determine whether the respondent’s weekly benefit rate is to be calculated by reference to the full-time employment which he lost or to the part-time employment subsequently obtained and held by him at the time he became eligible for unemployment insurance benefits. Both the Unemployment Insurance Commission (the “Commission”) and the Board of Referees selected the latter formula. On appeal, the umpire chose the former. The applicant now seeks to have that decision set aside. I turn first to the essential facts underlying the issue.
The respondent was employed full-time by Dominion Bridge until October 19, 1990 when he was permanently laid off. Soon thereafter, he applied for unemployment insurance benefits. The claim was rightly denied on the ground that there had been no interruption of employment earnings as required by paragraph 6(2)(b) of the Act. That condition precedent had not been satisfied as the respondent was in receipt of severance and vacation pay (hereinafter “severance pay”) in the amount of $17,541.99 from his employer at the time he was laid off.
It is not disputed that a person remains ineligible for unemployment benefits until such time as the severance pay is exhausted (see sections 37 [as am. by SOR/82-778, s. 1; 88-277, s. 2; 90-756, s. 8; 92-164, s. 10], 57 [as am. by SOR/82-673, s. 2; 82-778, s. 2; 86-58, s. 1; 89-160, s. 2; 90-207, s. 1; 90-756, s. 17; 90-761, s. 16; 93-351, s. 1; 93-434, s. 1; 93-470, s. 1] and 58 [as am. by SOR/82-778, s. 3; 86-58, s. 2; 87-614, s. 10; 89-412, s. 1; 89-550, s. 1; 90-756, s. 18; 92-164, s. 16] of the Unemployment Insurance Regulations [C.R.C., c. 1576]). In effect, the receipt of severance pay has the effect of deferring the date on which it can be said that a claimant has suffered an interruption of earnings. In the present case, the $17,541.99 was divided by the respondent’s normal weekly wage of $613 from Dominion Bridge to establish the effective date on which it could be deemed that the respondent had suffered an interruption of earnings. Accordingly, the respondent had to wait until May of 1991 to become eligible for unemployment benefits.
In the interim, the respondent accepted insurable employment as a part-time security guard with Burns International Security (Burns Security) on December 20, 1990 at an average weekly salary of $147. That employment continued until June of 1992.
When the respondent reapplied for benefits on May 9, 1991, the Commission established a benefit period effective May 12, 1991, being the precise date on which the respondent was deemed to have suffered an interruption of earnings. However, his weekly rate of benefit was calculated solely on the basis of the twenty weeks of on-going part-time employment with Burns Security. His employment with Dominion Bridge was not used in the calculation because the Commission held that it had ended in the twenty-first week of insurable employment preceding the commencement of his claim. As well, the severance pay was not included in the calculation.
Ultimately, the Commission established that the respondent’s weekly benefit to be only $89 instead of the $367 that would flow from a calculation based on his weekly Dominion Bridge income. It invoked section 13 of the Act as the legal basis for its calculation of the weekly benefit rate. The relevant provisions of that section read as follows:
13. (1) The rate of weekly benefit payable to a claimant for a week of unemployment that falls in his benefit period is an amount equal to sixty per cent of his average weekly insurable earnings in his qualifying weeks.
(2) The qualifying weeks of a major attachment claimant are the last twenty weeks of insurable employment in his qualifying period. [Emphasis is mine.]
[Subsection 7(1) [as am. by R.S.C., 1985 (3rd Supp.), c. 14, s. 1] of the Act identifies the qualifying period of an insured person as being the period of 52 weeks that immediately precedes the commencement of a benefit period.]
The respondent’s appeal to a board of referees was dismissed on the ground that the “benefit rate had been correctly established.” That decision was then appealed to an umpire. Relying on the decision of this Court in Canada (Attorney-General) v. Fortin (1989), 67 D.L.R. (4th) 564, Associate Chief Justice Jerome reasoned that only the insurable earnings from the lost employment (i.e. Dominion Bridge) could be used for calculating the weekly benefit rate.
In these proceedings, the applicant’s initial argument is that Fortin can no longer be considered good law in view of certain amendments to the Unemployment Insurance Regulations. It is common ground that the relevant amendments did not apply to the facts in Fortin but are applicable to the present case. Counsel for the applicant also relies on a subsequent decision of this Court, Canada (Attorney General) v. Rose, A-528-92, judgment dated October 27, 1993, not reported [[1993] F.C.J. No. 1127 (QL)], in support of her argument. If we are to make any progress in resolving the issue before us, we must construct a proper appreciation of what was decided in both Fortin and Rose. Only then will the relevance of the amendments to the Unemployment Insurance Regulations become apparent.
The claimant in Fortin had been working full-time for one employer and part-time for another over a considerable period of time. The full-time job paid a salary of $400 per week. On the weekends, the claimant was able to earn $90 from her part-time employer. On January 23, 1987, she lost her full-time employment but was ineligible for unemployment benefits because she was in receipt of severance pay. It was accepted that the benefit period could not commence until May 10, 1987, thirteen weeks after her full-time employment had been terminated. During this period, however, the claimant continued to work at her part-time job. When the claimant reapplied for unemployment benefits in May of 1987, her weekly benefit rate for the “last twenty weeks of insurable employment” was calculated on the basis of the thirteen weeks of part-time employment preceding her claim, and the seven weeks of full-time employment preceding her termination.
In Fortin, the Commission maintained that when an insured person holds concurrently more than one insurable employment, then the employments must be combined and dealt with together. Both the Board of Referees and the umpire disagreed. They concluded that if one of the two employments is lost, then the weekly benefit rate must be calculated on the basis of that employment only, as there was only an interruption of earnings from the lost employment. On appeal, a majority of this Court (Pratte J.A. dissenting) upheld the result reached below. However, as the opinions of Justices Marceau and Hugessen JJ.A., pursued different paths they require separate treatment.
Marceau J.A. admitted [at page 569] that “interpreted strictly and in isolation, the provision in s. 13(2) of the Act does not directly contradict the submissions of the Attorney-General.” Nevertheless, he considered that the umpire was right to decide as he did for three reasons.
First, there was no provision in the Act or Regulations which either directly or indirectly authorized cumulative treatment of concurrent employment. Second, and correlatively, Marceau J.A. failed to see how a weekly benefit rate could be established on the basis of employment which had never been lost and earnings of which the claimant had not been deprived without the Act making “clear provision” for such. This was held to be so irrespective of whether a claimant was in receipt of severance pay. Finally, Marceau J.A. pointed out that the Commission’s interpretation of subsection 13(2) of the Act defied the legal requirement that the claimant have suffered an interruption of earnings in order to be eligible for benefits: “The result is that in most cases where only one of two concurrent employments is lost, there could never be an interruption of earnings and accordingly no entitlement to benefits”; Fortin, supra, at page 571. In short, the claimant would suffer a reduction as opposed to an interruption of earnings. Marceau J.A. went on to opine that for a reduction of earnings to be treated as an interruption of earnings there would have to be an express provision to this effect as prescribed by section 2 of the Act which defines “interruption of earnings.” In the end, he concluded that the claimant’s last twenty weeks of insurable employment within the meaning of subsection 13(2) of the Act were the twenty weeks preceding her termination of full-time employment on January 23, 1987.
Hugessen J.A. began his analysis on the supposition that even if the Commission had been right to accept that subsection 13(2) of the Act required it to determine the claimant’s benefit rate based on the twenty weeks preceding May 7, 1987 (the date the claimant was deemed to have suffered an interruption of earnings) the result would have been the same. In his opinion, the claimant’s earnings from insurable employment in the qualifying period included not only her part-time work but also those amounts which were allocated weekly from her severance pay. However, as the claimant sought only benefits based on earnings from her full-time employment, there was no basis on which to intervene with the decision below and, accordingly, Hugessen J.A. was prepared to dismiss the application for judicial review.
For purposes of this application, it is important to appreciate the basis on which Hugessen J.A. was able to conclude that the severance pay ought to have been included in her earnings from insurable employment within the qualifying weeks. At the heart of his analysis is paragraph 57(2)(a) [as am. by SOR/84-32, s. 8] of the Regulations as it read at that time:
57. …
(2) Subject to this section, the earnings to be taken into account for the purpose of determining whether an interruption of earnings has occurred and the amount to be deducted from benefits payable under section 26 or subsection 29(4), 30(5) or 32(3) of the Act and for all other purposes related to the payment of benefit under Part II of the Act are
(a) the entire income of a claimant arising out of any employment. [Emphasis is mine.]
From the above provision, it is apparent that the entire income of a claimant arising out of his or her employment is to be taken into account, not only for the purpose of determining whether and when an insured person has suffered an interruption of earnings, but “for all other purposes” related to the payment of benefits. Thus, Hugessen J.A. reasoned that the severance pay could also be used for the purpose of calculating the claimant’s weekly benefit rate. In support of this conclusion, he turned to an earlier decision of this Court in Re Anderson and Umpire under Unemployment Insurance Act, 1971 (1985), 23 D.L.R. (4th) 292 (F.C.A.).
In Re Anderson, the Commission had argued that the value of accommodation provided by the claimant’s employer was not to be included as part of his insurable earnings for the purpose of calculating his weekly benefit rate. Pursuant to paragraph 57(2)(a), this Court held otherwise and notwithstanding the fact that the claimant would not necessarily have paid premiums on the value of the accommodation [ho]provided.
On the basis of Re Anderson, Hugessen J.A. reasoned that severance pay should be deemed part of the claimant’s insurable earnings for the purpose of calculating her weekly benefit rate. He also drew attention to the fact that amendments had been made to the Regulations which had the effect of reversing the holding in Re Anderson. Paragraph 57(2)(a) was amended [SOR/88-142, s. 3] by deleting the phrase “for all other purposes related to the payment of benefit under Part II of the Act.” As well, section 36.1 was added [idem, s. 2] to the Regulations. It currently provides as follows:
36.1 The earnings to be taken into account for the purpose of determining the average weekly insurable earnings in the qualifying weeks of a claimant are those earnings for which a premium was payable.
As Hugessen J.A. explained, it was through these amendments that the Commission was able to re-establish the understanding that claimants would be entitled only to benefits based on earnings for which he or she has paid insurance premiums. As well, the amendments had the effect of clarifying the Commission’s position that whether or not earnings are insurable is a question to be decided solely by the Minister under the Unemployment Insurance (Collection of Premiums) Regulations [C.R.C., c. 1575] and not by the Commission under the Unemployment Insurance Regulations. In Re Anderson, this Court effectively ruled that a weekly benefit rate could be calculated by reference to earnings irrespective of whether the Minister would have considered them insurable.
As fate would have it however, the amendments did not come into effect until February 25, 1988 and hence had no impact on the claimant’s claim in Fortin which dated from May, 1987. Thus, Hugessen J.A. was able to conclude that the weekly benefit rate could be calculated by reference to the severance pay; compare with Lépine-Desmarchais v. Canada (Umpire appointed under Unemployment Insurance Act, 1971), A-907-88, judgment dated October 24, 1989 not reported.
It is common ground that the amendments to the Unemployment Insurance Regulations are applicable to the case at hand. But I take it to be self-evident that those amendments do not detract from the reasoning of Marceau J.A. while rendering inapplicable the reasoning of Hugessen J.A. When viewed in this light, I do not think it can be said, as argued by the applicant, that Fortin is no longer good law or that it has been effectively overruled as a result of the amendments. Nor do I believe that the decision of this Court in Rose undermines this understanding.
Admittedly, in Rose, the Court did state that Fortin “is no longer applicable in view of the coming into force of section 36.1 of the Unemployment Insurance Regulations.” It is equally true, however, that the facts in Rose differ materially from those in Fortin and also those before us.
In Rose, the claimant was engaged in full-time insurable employment for forty-two weeks in her qualifying period, after which her full-time hours were reduced. She then worked eight weeks on a part-time basis for the same employer before being laid off. Applying section 13 of the Act, the Commission calculated the claimant’s benefit rate by reference to the last twenty weeks of insurable employment which necessarily included the reduced earnings during the period she was working part-time. Based on the clear wording of the statute, this Court was not prepared to conclude, as did the umpire, that only the claimant’s full-time earnings should have been taken into consideration for the purpose of calculating the weekly benefit rate. The Rose case concluded that the benefit rate was to be determined with reference to both the part-time and full-time wages on the basis of section 36.1 of the Regulations. In my opinion, the wisdom of Rose cannot be doubted as it applies to its facts. However, as noted, the facts and issue before us are materially different.
Rose was a case involving a claimant who experienced a reduction in earnings with her employer prior to being laid off. In effect, the claimant in that case argued that the weekly benefit rate should have been based on earnings received during her best twenty weeks of insurable employment and not on those earned during her last twenty weeks of insurable employment during the qualifying period. By contrast, we are being asked to decide whether “the last twenty weeks of insurable employment” prescribed by section 13 of the Act refers to the employment which had been lost or to that which had been retained.
Fortin and the present case deal with a claimant who, having received severance pay, is employed part-time during the period he or she was laid off. This case and Fortin differ only to the extent that, in Fortin, the claimant held the part-time employment prior to, as well as subsequent to, being laid off. This distinction, however, is in my view one without difference. In both cases, this Court was asked to decide whether employment held between the date the claimant was laid off and the date on which benefits could be claimed was to be used in calculating the weekly benefit rate.
Throughout the appeal and review process, the respondent in this case has advanced two principal arguments in support of his position. The first hinges on the acceptance of the reasoning of Marceau J.A. in Fortin. From those reasons I am able to extract two rules or principles of general application: (1) two employments held concurrently by a claimant should be dealt with separately; and (2) only the employment lost by the claimant should be considered in calculating benefits. Only the latter is of relevance to this application.
The respondent’s second argument seeks to establish that severance pay constitutes earnings from insurable employment. That is to say severance pay are “earnings for which a premium was payable” as required by section 36.1 of the Regulations. Consequently, it is submitted that the severance pay received from Dominion Bridge should be used in calculating the benefit rate; but see Lépine-Desmarchais v. Canada, supra. However, in light of the position that I adopt below with respect to the first argument, it becomes unnecessary to deal with the second.
In my opinion, the reasoning of Marceau J.A. is unassailable. The underlying purpose of the Act is to provide a claimant with financial support until such time as he or she is able to find comparable employment. It is my understanding that it is not the purpose of the Act to discourage claimants from seeking part-time employment which is precisely the case before us. As Hugessen J.A. adroitly noted in Fortin, at page 573, the Commission’s interpretation “would only seem to encourage laziness.”
By seeking and obtaining part-time employment, the respondent would be penalized by the Commission, not so much because he had obtained part-time employment with Burns Security, but because he was in receipt of severance pay which had the effect of deferring the date on which it could be said that he suffered an interruption of earnings. Had the respondent not received the lump sum payment, he would have been entitled to a weekly benefit rate based on his earnings with Dominion Bridge. Moreover, in accordance with the limitations set out in section 15 of the Act, any part-time insurable earnings received from Burns Security during a benefit week would be deducted from the respondent’s unemployment benefits if they exceeded the limits provided in that section. Section 15 of the Act, therefore, prevents claimants from over-supplementing benefits deriving from lost full-time employment. I fail to see, however, how the additional fact that the respondent received severance monies from his employer should deprive the claimant of the entitlement that would otherwise flow from the loss of his full-time position.
I have not been persuaded that there are any sound policy reasons for adopting a strict interpretation of section 13 of the Act. This is not a case in which the Court is being asked to impose a patently harsh result which is in accord with Parliament’s clear intent. The reality is that we are dealing with a legal issue within a factual context not contemplated by Parliament. Neither the Act nor the Regulations remotely touch on the issue before us. That being so, I am not prepared to embrace a restrictive interpretation which is effectively penal in nature and which has not been shown to further any legislative objective. Had the applicant been able to demonstrate, for example, that the interpretation placed on section 13 by Marceau J.A. created a window of opportunity for those intent on pursuing dubious claims or gaining a windfall at the expense of those who must bear the cost of this compensation scheme then it would be incumbent on this Court to reflect on such exigences. As there is no evidence of such, I am driven to the inescapable conclusion, as was Marceau J.A., that it is simply prima facie illogical that unemployment benefits be based on employment which has never been lost. This conclusion is reinforced by subsection 13(1) of the Act which refers to a weekly benefit payable “for a week of unemployment.” Accordingly, I would dismiss the application.
MacGuigan J.A.: I concur.
Létourneau J.A.: I concur.