Lussier v. M.N.R.

Lussier v. M.N.R. Court (s) Database Tax Court of Canada Judgments Date 2003-09-04 Neutral citation 2003 TCC 591 File numbers 2001-1852(EI) Judges and Taxing Officers Joe E. Hershfield Subjects Employment Insurance Act Decision Content Docket: 2001-1852(EI) BETWEEN: DOUGLAS LUSSIER, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. ____________________________________________________________________ Appeal heard on August 7, 2003 at Prince Rupert, British Columbia Before: The Honourable Justice J.E. Hershfield Appearances: For the Appellant: The Appellant himself Counsel for the Respondent: Bruce Senkpiel ____________________________________________________________________ JUDGMENT The appeal is dismissed and the decision of the Minister is confirmed in accordance with the attached Reasons for Judgment delivered orally from the Bench. Signed at Ottawa, Canada, this 4th day of September 2003. "J.E. Hershfield" Hershfield, J. Citation: 2003TCC591 Date: 20030904 Docket: 2001-1852(EI) BETWEEN: DOUGLAS LUSSIER, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. REASONS FOR JUDGMENT (Edited from transcript of Reasons for Judgment delivered orally from the bench at Prince Rupert, British Columbia on August 7, 2003.) Hershfield, J. [1] The Appellant was employed by Jasper Labour Services as a qualified licensed carpenter to work on the construction of a water treatment plant. He was a member of the Christian Labour Association of Canada, which is affiliated with the Construction and Allied Workers Union, Local 68. [2] Jasper and the Union had entered into a collective agreement governing the project and the employment of union member workers. The Appellant worked on the project from March 20, 2000 to April 19, 2000 and had insurable earnings during this period. After April 19 to the end of the project in August of 2000 he was paid $12,000 under the terms of a settlement agreement entered into among Jasper, the Union and the Appellant. The issue in this appeal is whether the Appellant had insurable earnings during this latter period. [3] The Appellant provided no services under the employment contract after April 19. He had been told by the supervisor of the project that he would be called back. He was not called back. He did check in again and was told again he would be called back. He still was not called back. He promptly filed a grievance with the Union. It is clear that he was improperly replaced and that the employer never intended to call him back. There was a conflict between the Appellant and the supervisor, which was acknowledged by the Appellant. It seems clear from the testimony of the Appellant, from the terms of the collective agreement and from the general framework of the settlement agreement that the employment was to continue for the duration of the construction period. Replacing the Appellant was in breach of the employer's obligations. However, no notice of termination was given as required by the collective agreement. That is, the supervisor did not do what was required under the collective agreement to effect the termination and in other respects it would seem that he did not comply with the agreement as well. For example, the Appellant testified that the supervisor did not advise the Union in accordance with the collective agreement when the project started. [4] In any event, the grievance was resolved under the terms of the settlement agreement. The agreement does not suggest that the employee was terminated. There is reference to termination but it is a defined term under the agreement. Paragraph (b) of the preamble to the settlement agreement says simply that the Appellant Lussier "was sent home" and "not recalled to work" and then refers to that state of affairs as "the Termination". That to me is not an acknowledgement of termination but rather is an acknowledgement of the circumstances exactly as described by the Appellant in his testimony. The agreement goes on and stipulates that the employer will pay $12,000 "for lost wages" less income tax deductions and EI and CPP. The EI portion for which the employee was responsible was also to be covered by the employer under the terms of the agreement. The agreement is expressly acknowledged at paragraph 5 as a compromise not intended as an admission of any wrongdoing. [5] The Appellant applied for E.I. benefits in respect of the period after April 19, 2000. The Canada Employment Insurance Commission ruled that the $12,000 paid was not insurable employment but a Board of Referees ruled that it was. The Commission appealed the Board of Referees' decision to an Umpire and, as well, requested and received a ruling under section 90 of the Employment Insurance Act from the CCRA. The ruling received from the CCRA was that the $12,000 paid was not from insurable employment. The Appellant appealed that ruling of the CCRA to the Minister under section 91 of the Employment Insurance Act and the Minister confirmed the ruling. The Umpire in the meantime rescinded the Board of Referees' decision, which had overruled the Commission's finding. The Umpire confirmed that the jurisdiction to determine the question of insurable employment was with the Tax Court as per section 103 of the Employment Insurance Act. [6] I note that the Board of Referees is the only prior body with or without jurisdiction that indicated that there was insurable employment in respect of the period in question. The basis for the Board of Referee's decision, as referred to by the Umpire, was that the Appellant, Mr. Lussier, was still employed after April 19th, 2000 and was paid for over 600 hours of employment and that the settlement of $12,000 was payment for 600 hours of work according to the collective agreement. The Appellant argues that this is the right approach. He was employed to work and was paid as an employee for the hours he was to have worked under his employment contract. The Appellant argues that this is the normal approach taken by the Commission and that the ruling of the CCRA is inconsistent with such approach. [7] The Board of Referees' acceptance of this approach does lend some support to the likelihood of inconsistencies in the application of the provisions of the Act as administered by the Commission. I will refer to those inconsistencies later in these Reasons. While I make note at this point of the approach taken by the Board of Referees, I note as well that I agree with the Umpire in respect of his finding that the Board had no jurisdiction to determine the question now properly before me. [8] However, I agree with the Board in its finding that Mr. Lussier was still employed after April 19 up until the date of the settlement agreement wherein it was agreed that the Appellant would not return to work. That is, I accept that the Appellant's employment was only effectively terminated at that subsequent time. [9] The issue then is whether the funds received while employed during this period, when he did no work, is insurable employment. [10] The Respondent asserts the payment is damages for breach of the collective agreement and that damages are not earnings from insurable employment. There is clearly case law supporting this position and to bolster its argument the Respondent relies on section 9.1 of the Regulations which reads: Where a person's earnings are paid on an hourly basis the person is considered to have worked in insurable employment for the number of hours that the person actually worked and for which the person was remunerated. [11] The collective agreement at paragraph 24.07 provides as follows: An employee found to be wrongfully discharged or suspended will be reinstated without loss of seniority and with back-pay calculated at an hourly rate . . . times normal hours, less any monies earned, or by any other arrangement which is just and equitable in the opinion of the Arbitration Board. The Appellant argues that the settlement agreement was, accordingly, "back-pay", not damages. [12] The Appellant urges that this section of the collective agreement was the operative provision of his employment that properly describes his situation in terms of his union's framing of the grievance and its seeking enforcement of the agreement. I have said, and I repeat, I do not think that the circumstances as described by the Appellant constitute termination or discharge but it strikes me that the word suspension from his duties would be applicable. He was effectively suspended from his duties and replaced with a less qualified worker when he was already on the job which is something that the employer cannot do. The remedy is reinstatement and back-pay calculated at the normal hours of work and that, it seems, is the formula that was ultimately used in the settlement agreement, although without prejudice. So the Appellant was employed; he was suspended but not terminated; and, he received back-pay based on the hours he would have worked had he not been suspended. Is that earnings from insurable employment? [13] As I said, the Board of Referees found that this was insurable employment. They found that the Appellant was still employed after April 19 and was paid for 600 hours in accordance with the collective agreement. One might restate that position by saying that the Appellant was paid his employment income in accordance with his employment contract which specified his remuneration in the circumstances. [14] Still, this particular form of "back-pay" is not for work actually performed. We do have a breach of the contract and we do have, in fact, notwithstanding the context or the language used in the collective agreement or the settlement agreement, a failure of the employer to perform the terms of the agreement and there is a rectification of that and that rectification is the calculation of lost wages based on lost time. The Respondent asserts then that the payment is damages for the breach of the collective agreement and that damages are not, again, earnings from insurable employment. [15] While I agree that there was a breach of the employment contract here and that the settlement award, even if paid pursuant to paragraph 24.07 of the collective agreement which I accept that it was, was in the nature of damages, I must still recognize that the payment to the Appellant was in respect of his employment and in accordance with the terms of his employment contract. [16] The Regulations to the Employment Insurance Act make reference to this (see the Respondent's book of authorities, tab 3, which cites Regulations and under Part 1, Insurable Earnings, paragraph 2(1)). That regulation provides as follows: For the purposes of the definition "insurable earnings" in subsection 2(1) of the Act and for the purposes of these Regulations, the total amount of earnings an insured person has from insurable employment is (a) the total of all amounts, whether wholly or partly pecuniary, received or enjoyed by the insured person that are paid to the person by the person's employer in respect of that employment; . . . (emphasis added) This is very encompassing language and certainly the amounts paid here were paid in respect of employment, if, as I have found, the contract of service continued during the period in question. There is a contract of service, an element of which was breached, but that does not mean that the contract of service did not exist. [17] During the course of argument I also referred Respondent's counsel to an annotation in a Carswell edition of the Employment Insurance Act which said that insurable employment requires a contract of service and earnings attributable to that contract. Cited as authority for this was the case of Sprague v. Canada, [1989] F.C.J. No. 268 (F.C.A.). Counsel for the Respondent found that case and provided a copy. Interestingly, the Federal Court of Appeal in its brief judgment only found that insurable employment requires a contract of service. There is nothing in that judgment that goes further to suggest that the earnings will be covered as long as they are attributable to that contract. Authority for this aspect of defining "insurable employment" can still best be found in the Regulation cited. [18] This leads me to say that the Appellant has a sound argument and a fertile position to pursue. But, on the other hand, I am faced with precedents of this Court and the Federal Court of Appeal and somewhat by the inferences of Regulation 9.1 and its implications on the question. [19] For the record, I will refer quickly to the cases to which I have been referred by the Respondent, which the Appellant does not believe are on all fours, but nonetheless are, in my view, sufficiently close to be regarded as valuable. The first decision is Granger v. Canada, [1999] T.C.J. No. 400 (T.C.C.) a judgment of now Justice Mogan. That was a case where there was a reinstatement of an employee and compensation for loss of earnings. There was a question in Justice Mogan's mind as to whether or not there was a contract of service still in existence at the time when these earnings were to have been paid. He concluded that there was not a contract of service at the time. He found that the reinstatement was of a former employee, someone whose services had been terminated. He found that payments were "for compensation for loss of earnings" and as compensatory payments were not insurable. He went on to say however: If I should be wrong, and if a contract of service did exist during the relevant periods, there were no services performed by the Appellant during those periods and no wages earned. The amount received as compensatory payments for loss of earnings is not earnings from insurable employment. He referred to Élément v. Canada, [1996] F.C.J. No. 718 (F.C.A.), Forrestall v. Canada, [1996] F.C.J. No. 1638 (F.C.A.), Berns v. Canada, [1987] T.C.J. No. 1010 (T.C.C.) and Falconbridge v. Canada, [1989] T.C.J. No. 229 (T.C.C.). [20] In Forrestall, a decision of the Federal Court of Appeal in 1996, it was held that, again, as a result of a grievance by an employee (concerning a purported discharge which on settlement was agreed to have been a suspension), compensation paid for the loss of earnings and benefits incurred during the suspension was "damages" not "wages". The worker was not taken back but was paid for the amount that he otherwise would have earned. The Tax Court judge had held that there was insurable earnings during that period. The Federal Court of Appeal overruled the Tax Court judge and said, following the decision in Élément, that a person who does not perform any work and receives no wages does not hold insurable employment. [21] In the Élément case, the Federal Court of Appeal upheld the Tax Court judge who found that settlement in a grievance procedure constituted damages, notwithstanding workers were paid an amount equal to the wages that would have been earned in the period if they had been worked on a normal basis. It was found, again, that a person who does not perform any work or receive any "wages" does not hold insurable employment. [22] It is very difficult for me to distinguish the case at bar from the cases considered by the Federal Court of Appeal and I am thereby not able to apply a law at variance with that applied by it. Further, as I have said, judges of this Court have come to similar conclusions. In addition to Granger, I have been referred to the Moreau case decided by Tardif, J., [2000] T.C.J. No. 280 (T.C.C.). That case dealt with a severance, which I think is distinguishable from the case at bar, but, nonetheless, I note strong reliance was placed by Justice Tardif on section 9.1 of the Employment Insurance Regulations, which states that where a person's earnings are paid on an hourly basis then you only have insurable employment for the number of hours actually worked. [23] I appreciate that in a non-severance case it is arguable (where there is a formula to compute compensation where no work is provided) that earnings are not on an hourly basis so that section 9.1 of the Regulations has no application. The Appellant argues that the amount he received, the $12,000, was wages; that the contract subsists; a calculation of an amount due under the contract was made and was paid as wages. The argument that the Appellant wants to employ is, in effect, that there were two types of compensation provided for in his employment contract: one was an hourly rate for hours worked and the other was an amount to be paid for a period of time in respect of which no work was done where work should have been done and that the latter basis of employment and compensation is not compensation on an hourly basis even though one ultimately calculates it as if work had been performed on an hourly basis. Such a distinction is subtle, but, nonetheless, it is one that can be argued. Unfortunately, it seems to fly in the face of the decisions of the Federal Court of Appeal which recite a contrary view. [24] The Appellant has also argued that to require actual work for each hour of remuneration would disqualify any number of categories of persons who have insurable employment notwithstanding that they did not work. I can think of a good example for the Appellant, namely, employees that are paid for standby time. They might even be paid for standby time on an hourly basis although they perform no work. Their "work" is their availability. In the case at bar it is not at issue that the Appellant was available to work. He was waiting to be called. He thought he was going to get a call. He did not go out and look for other work. The analogy strikes me as strong and the argument strikes me as strong as well but it ultimately begs the question in these cases which is what is the compensation for? If it is compensation to do that which the employer requires the worker to do the amount is "wages". If it is compensatory for a breach or for a loss incurred due to a breach it is not "wages". [25] I note that the Appellant is frustrated, indeed angry, that he has been picked out for scrutiny under a legal microscope when the general administration of employment insurance, in his experience at least, is that payments made pursuant to the terms of an employment contract, which he asserts include back-pay received in his circumstances, are generally treated as insurable wages as underlined by the Board of Referees' determination. It is his view, then, that he is being inconsistently treated and discriminated against by virtue of the way his employer filled out the employment record. He might well be right. If the employer had not filled out the employment record in the way it did, this matter might never have arisen and he would not have been put under this legal microscope. [26] I cannot, however, make findings on the appropriateness of how other cases have been treated. I can only do my part in helping to achieve consistency. If I were to disregard the Federal Court of Appeal decisions and decisions of this Court, I would only be adding more confusion to an area where there has been judicial consistency. It is only through consistency in the courts that consistency in the administration of the provision of the Employment Insurance Act can be achieved. [27] The question before me is whether the payments are compensatory for things which the employer asks of the employee or compensatory for a breach and a loss incurred due to such breach. The operative provision of the collective agreement that gave rise to the subject $12,000 payment is there to remedy a breach. The Appellant was wrongfully precluded from earning that which he was entitled to have earned under the employment agreement and what he was entitled to receive under the terms of that agreement. What he received under the settlement agreement was, in my view, nothing less than damages for a breach by the employer in improperly excluding the Appellant from the work that the collective agreement required to be performed by him. [28] In that regard I can find no distinction in this case from the cases that the Federal Court of Appeal considered when finding that compensatory payments for breaches of employment contracts are not payments covered by the Employment Insurance Act. [29] While I acknowledge that the Appellant has put forward some cogent arguments and while I am troubled by the fact that the payments in question might, but for the binding decisions of the Federal Court of Appeal, have been found to be insurable under the definition in paragraph 2(1) of the Regulations, I am compelled to follow the decisions of the Federal Court of Appeal. I am bound by them and accordingly I find that the appeal must be dismissed. The $12,000 in question was not paid in respect of insurable employment. Signed at Ottawa, Canada, this 4th day of September 2003. "J.E. Hershfield" Hershfield, J. CITATION: 2003TCC591 COURT FILE NO.: 2001-1852(EI) STYLE OF CAUSE: Douglas Lussier and The Minister of National Revenue PLACE OF HEARING: Prince Rupert, British Columbia DATE OF HEARING: August 7, 2003 REASONS FOR JUDGMENT BY: The Honourable Justice J.E. Hershfield DATE OF JUDGMENT: September 4, 2003 APPEARANCES: For the Appellant: The Appellant himself Counsel for the Respondent: Bruce Senkpiel COUNSEL OF RECORD: For the Appellant: Name: Firm: For the Respondent: Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada