Lacombe Morency c. La Reine

Lacombe Morency c. La Reine Court (s) Database Tax Court of Canada Judgments Date 2003-10-15 Neutral citation 2003 TCC 633 File numbers 2002-457(IT)I Judges and Taxing Officers François M. Angers Subjects Income Tax Act Decision Content Docket: 2002-457(IT)I BETWEEN: CLAIRE LACOMBE MORENCY, Appellant, and HER MAJESTY THE QUEEN, Respondent. [OFFICIAL ENGLISH TRANSLATION] ____________________________________________________________________ Appeal heard on May 14, 2003, at Québec, Quebec Before: The Honourable Judge François Angers Appearances: Counsel for the Appellant: Daniel Bourgeois Counsel for the Respondent: Julie David ____________________________________________________________________ JUDGMENT The appeal from the assessment made under the Income Tax Act in respect of the 1998 taxation year is dismissed in accordance with the attached Reasons for Judgment. Signed at Ottawa, Canada, this 15th day of October 2003. "François Angers" Angers, J. Translation certified true on this 25th day of March 2004. Maria Fernandes, Translator Citation: 2003CCI633 Date: 20031015 Docket: 2002-457(IT)I BETWEEN: CLAIRE LACOMBE MORENCY, Appellant, and HER MAJESTY THE QUEEN, Respondent. [OFFICIAL ENGLISH TRANSLATION] REASONS FOR JUDGEMENT Angers, J. [1] This is an appeal from the Appellant's assessment for the 1998 taxation year. The latter did not report as part of her income the sum of $5,284 entered on a T4A slip of the Government of Quebec. Accordingly, the Minister of National Revenue (the "Minister") made an assessment for the Appellant that added that amount to her income. Therefore, it must be determined if the Minister was justified in including that amount in computing the Appellant's net income. Was that money awarded to the Appellant as compensation on grounds for discrimination or is it income from an office or employment, which must be included in her income? [2] The Appellant currently works as a language consultant. She has been an employee of the Government of Quebec since 1974 but has held various positions within different ministries over the years. In the taxation year at issue, she worked for both the Régie des rentes du Québec and the ministère de la Sécurité publique, for which she received separate T4 slips. [3] During the years in question, the Appellant was member of the Syndicat de Professionnels du Gouvernement du Québec (SPGQ). On April 9, 1981, the SPGQ lodged a formal complaint with the Commission des droits de la personne on behalf of professional women in six groups of the Quebec public service. The ground for complaint was sexual discrimination: the women were not receiving a salary equal to that of comparable employment groups for work of equal value. [4] On June 19, 1997, the Commission des droits de la personne et des droits de la jeunesse ruled that the complaint relative to the group of which the Appellant was member was substantiated, since the evidence had shown that group to be predominantly female and subject to pay discrimination until 1990, the effective date of a new collective agreement for 1990-1991. The Commission invited the parties to settle their dispute amicably and on March 23, 1998, they agreed on a "settlement and final release". I will return to the wording in the settlement later in my reasons. [5] For a sound understanding of the outcome leading up to the complaint settlement, I will summarize below the events made by the Commission in its resolution: [translation] THE COMPLAINT The Syndicat des professionnelles et professionnels du Gouvernement du Québec (SPGQ) lodged a complaint for and on behalf of women in the following six professional groups: Information Officer (104), Cultural Officer (107), Librarian (112), Translator (125), Social Worker (126), Dietitian (127). The Syndicat alleged that the women in these groups-grouped together in the two lowest professional pay scales and performing work equal to that of other higher-paid professional groups-were victims of gender-related pay discrimination, contrary to articles 10 and 19 of the Charter of Human Rights and Freedoms (R.S.Q. chapter C-12). One hundred fifty-six complainants from the various groups gave their Syndicat written authorization to lodge the complaint. On March 25, 1991, the Syndicat des professionnelles et professionnels du Gouvernement du Québec (SPGQ) withdrew its complaint following the signing of a collective agreement that included corrective measures to pay arising from the "results of joint employment evaluations and [in consideration of] of the evidence filed before the Commission" (letter dated March 25, 1991, from the SPGQ chair). Complainants who had signed individual complaints in support of the SPGQ's application for enquiry in 1981, however, asked for a continuation of the enquiry. They were followed by other women belonging to the groups under enquiry. The Commission finds that the application of the Syndicat initiated in 1981, following extensive addition of information, materialized in June 1985 with a ruling on the admissibility of [the] complaint. After informing the third party and requesting the records pertinent to the complaint, the Commission appointed an investigator in January 1987, which the grieving party challenged. The subsequent appointment of investigator Trudeau-Bérard made it possible to begin the enquiry in June 1987. The Commission took note of the agreement reached between the SPGQ and the Conseil du trésor on the new pay structure, implemented under the collective agreement passed in January 1991, retroactive to January 1st, 1990. That agreement made it possible to resolve part of the enquiry case, yet not resolving all claims of those women who had asked for the continuation of the enquiry. Technical and procedural issues, often independent of the Commission's wish, drew out an already demanding enquiry. PURPOSE OF THE ENQUIRY The Commission looked into the six groups mentioned in the complaint. It looked into the facts alleged in the application or disclosed in the course of the enquiry concerning the application of articles 10 (sex), 16 (job classification) and 19 (pay equivalence) of the Charter of Human Rights and Freedoms. For these purposes, it reviewed the following issues, in particular: female predominance in the six groups subject to the complaint: the possible existence of a wage gap between so-called female-dominated groups and other male-dominated groups: the value of various groups and also the possible existence of systemic discrimination in the pay structure under enquiry. The Conseil du trésor, which is responsible for human resources management, pay and collective agreement negotiation in all government sectors, acted on behalf of the Government of Quebec, the third party in this enquiry. [6] The position of the Appellant's counsel is that the compensation received by his client was paid following a violation of rights guaranteed under the Charter of Human Rights and Freedoms, R.S.Q., chapter C-12, (the "Charter") and was related to gender-related pay discrimination. He asked the Court to look at the nature of the compensation and the fact that it was the result of sexual discrimination whose existence was established by the Commission des droits de la personne et des droits de la jeunesse du Québec. The Appellant received the amount in question not because of her contract of employment but because she was the victim of discrimination. [7] To those arguments, he added that article 49 of the Charter provides for recourse for prejudice caused by discrimination by entitling the victim to obtain the cessation of interference and compensation for the moral or material prejudice resulting therefrom. In that respect, counsel insisted on the moral prejudice. Based on the documentation filed, the Commission paid out the compensation; therefore, this is basically not a pay-related problem but rather a case of discrimination giving way to compensation. In the view of the Appellant's counsel, the amount received by the Appellant does not replace the employment income that she should have received. The computation used in the documentation submitted served to evaluate the prejudice. The money in question is, therefore, not taxable because initially, the purpose of payment was to compensate the Appellant. This is no case of a retirement allowance either. [8] For her part, counsel for the Respondent argued that that the sum received by the Appellant was computed based on days worked and not on the basis of an assessed moral prejudice resulting from any disadvantages, anxiety or humiliation that she could have suffered. This is neither a case of lost employment nor of general damages, as there is no evidence establishing that it is either. Therefore, this cannot be a case of lost income subject to readjustment made under an agreement between the parties concerned, following a conclusion by the Commission that the Appellant was a victim of gender-related pay discrimination. Therefore, it involves income that is taxable under subsection 5(1) of the Income Tax Act ("the Act"). [9] Therefore, the question at issue is to determine if the Minister is justified in including, in the Appellant's net income for the 1998 taxation year, the amount of $5,284 that the latter received following the complaint settlement and which is indicated on the T4A for 1998 (Exhibit A-7) established by the Government of Quebec. [10] I reproduce here subsections 5(1) and (2) of the Act as well as paragraph 6(1)(a): 5(1) Income from office or employment - Subject to this Part, a taxpayer's income for a taxation year from an office or employment is the salary, wages and other remuneration, including gratuities, received by the taxpayer in the year. 5(2) Loss from office or employment - A taxpayer's loss for a taxation year from an office or employment is the amount of the taxpayer's loss, if any, for the taxation year from that source computed by applying, with such modifications as the circumstances require, the provisions of this Act respecting the computation of income from that source. 6(1) Amounts to be included as income from office or employment -There shall be included in computing the income of a taxpayer for a taxation year as income from an office or employment such of the following amounts as are applicable (a) Value of benefits - the value of board, lodging and other benefits of any kind whatever received or enjoyed by the taxpayer in the year in respect of, in the course of, or by virtue of an office or employment, except any benefit . . . [11] The Appellant and the other complainants obtained a declaration from the Commission that their complaint alleging that they were victims of gender-related pay discrimination was substantiated for the period up to January 1990. The documentation filed in evidence shows that the complaint, which covered the years prior to January 1990 dating back to April 9, 1981, was withdrawn by the Syndicat because a new collective agreement entered into between the Syndicat and the Government of Quebec included corrective measures to pay. The complaint was based on the provisions of articles 10 and 19 of the Charter of Human Rights and Freedoms, which read as follows: 10 Every person has a right to full and equal recognition and exercise of his human rights and freedoms, without distinction, exclusion or preference based on race, colour, sex, pregnancy, sexual orientation, civil status, age except as provided by law, religion, political convictions, language, ethnic or national origin, social condition, a handicap or the use of any means to palliate a handicap. Discrimination exists where such a distinction, exclusion or preference has the effect of nullifying or impairing such right. 19 Every employer must, without discrimination, grant equal salary or wages to the members of his personnel who perform equivalent work at the same place. A difference in salary or wages based on experience, seniority, years of service, merit, productivity or overtime is not considered discriminatory if such criteria are common to all members of the personnel. Adjustments in compensation and a pay equity plan are deemed not to discriminate on the basis of gender if they are established in accordance with the Pay Equity Act R.S.Q., chapter E-12.001). [12] Once it is recognized that such a complaint is substantiated, article 49 of the Charter stipulates that the victim may obtain compensation for the moral or material prejudice resulting from the discrimination. 49 Any unlawful interference with any right or freedom recognized by this Charter entitles the victim to obtain the cessation of such interference and compensation for the moral or material prejudice resulting therefrom. [13] In its resolution, the Commission appointed Louise Caron-Hardy to lead the parties to settle their dispute, and an amicable settlement was signed on March 23, 1998 (Exhibit A-6). The parties to this settlement are the Collectif de la plainte, represented by its Board of Directors, the Conseil du Trésor, which represents the Government of Quebec, or the employer, and the Commission. [14] Without reproducing this document, I believe it is important to note that the employer undertook to pay the Commission a sum of $1,300,000 for distribution to all persons, including the Appellant, who had been affected during the period between April 9, 1981 and December 31, 1989, based on the duration of the women within the relevant groups, i.e. specifically, based on the number of working days. Accordingly, this amount was divided among those affected (including the Appellant) on a pro rata basis, that is, on the number of working days worked in the relevant groups. It should be noted that the Collectif de la plainte, which represented the Appellant, and the Conseil du Trésor agreed that the sums paid should be reported to the appropriate tax authorities as income. [15] On this issue, it must be noted that tax liability is set out by the provisions of the Act and not by what parties to an agreement may agree to. (See Smerchanski v. M.N.R., [1974] 1 F.C. 554, 74 DTC 6197.) [16] This case involves a decision made in a dispute between an employer and its employees. The employer's responsibility was recognized by the Commission and a final settlement was negotiated between the parties involved. This is, therefore, not a case of termination of employment where an employee takes action against his or her employer for wrongful dismissal or where an employee receives retirement allowances after leaving his or her job. Caselaw on the taxation of amounts received as settlement for a dispute of this kind is nonetheless relevant in this case (see Mendes-Roux v. Canada, [1997] T.C.J. No. 1287 (Q.L.). The distinction between so-called special damages and so-called general damages is covered in that case, as well as the question of taxing such sums. As a general rule, special damages are tangible and monetary in nature, such as lost benefits or wages, and are taxable, while general damages are related to pain, physical and psychological suffering and are not taxable. This means then that taxable damages are related to an employee's work, that is, sums paid for loss of wages or benefits, while non-taxable damages are sums to which the employee was not entitled because of his or her employment. [17] The question in this case, then, is whether the amount received by the Appellant is related to her employment. The Appellant must establish the true nature of the payment received. Was she compensated for a moral prejudice or a material loss? [18] The evidence submitted at the proceedings, particularly the settlement of March 23, 1998, reveals that the Conseil du Trésor, representing the Government of Quebec, is the complainants' employer, including the Appellant. The funds used in the settlement originated in the employer and were paid to the Commission in accordance with the agreement for distribution among the complainants through the Commission and based on a specific pro rata basis, that is, based on the number of working days for every person targeted. Therefore, the Commission paid them for and on behalf of the employer. The compensation received was made possible because the Commission had recognized that the complainants were victims of pay discrimination contrary to articles 10 and 19 of the Charter. In my view, the sum therefore awarded in compensation for pay discrimination, as minimal as that sum may appear relative to the recourse established by the 1990 collective agreement, served to compensate the loss of wages sustained by the persons affected. There is no evidence in this case that the compensation was paid as remedy for a moral prejudice. [19] For these reasons, I conclude that the amount in question was awarded in relation to the Appellant's employment for the purpose of compensating for a prejudice resulting from pay discrimination. This sum was taken from her employment and is, therefore, taxable under subsection 5(1) of the Act. Signed at Ottawa, Canada, this 15th day of October 2003. "François Angers" Angers, J. Translation certified true on this 25th day of March 2004. Maria Fernandes, Translator