Union of Saskatchewan Gaming Employees Local 40005 v. M.N.R.

Union of Saskatchewan Gaming Employees Local 40005 v. M.N.R. Court (s) Database Tax Court of Canada Judgments Date 2004-12-07 Neutral citation 2004 TCC 799 File numbers 2003-2345(EI) Judges and Taxing Officers Lucie Lamarre Subjects Employment Insurance Act Decision Content Docket: 2003-2345(EI) BETWEEN: UNION OF SASKATCHEWAN GAMING EMPLOYEES LOCAL 40005, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent, and SASKATCHEWAN GAMING CORPORATION, Intervener. ____________________________________________________________________ Appeal heard on April 28, 2004, at Ottawa, Ontario. Before: The Honourable Justice Lucie Lamarre Appearances: Counsel for the Appellant: James Cameron Counsel for the Respondent: Joanna Hill Counsel for the Intervener: Kurt Wintermute ____________________________________________________________________ JUDGMENT The appeal pursuant to subsection 103(1) of the Employment Insurance Act is dismissed and the March 26, 2003, decision of the Minister of National Revenue is confirmed. Signed at Ottawa, Canada, this 7th day of December 2004. "Lucie Lamarre" Lamarre, J. Citation:2004TCC799 Date: 20041207 Docket: 2003-2345(EI) BETWEEN: UNION OF SASKATCHEWAN GAMING EMPLOYEES LOCAL 40005, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent, and SASKATCHEWAN GAMING CORPORATION, Intervener. REASONS FOR JUDGMENT Lamarre, J. [1] This is an appeal from a decision made by the Minister of National Revenue ("Minister") on March 26, 2003, in which it was determined that tips paid to employees of the Saskatchewan Gaming Corporation ("SGC") (namely, to Shauna Predenchuk during the period from May 29, 1999, to December 10, 2000, to Ljilijana Dundjerovic during the period from August 23, 1999, to March 5, 2000, and to Viviana Floer during the period from December 11, 2000, to June 24, 2001) were insurable earnings and that the appellant was the deemed employer for the purposes of calculating those earnings and paying, deducting and remitting the employment insurance premiums payable on them during the above periods, as it was the appellant that paid the tips (Exhibit A-3). The Minister relied on subsections 2(1) and 10(1) of the Insurable Earnings and Collection of Premiums Regulations ("IECPR"), which read as follows: PART 1 INSURABLE EARNINGS Earnings from Insurable Employment 2. (1) 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 that 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, and (b) the amount of any gratuities that the insured person is required to declare to the person's employer under provincial legislation. . . . Other Deemed Employers 10. (1) Where, in any case not coming within any other provision of these Regulations, an insured person works (a) under the general control or direct supervision of, or is paid by, a person other than the insured person's actual employer, or (b) with the concurrence of a person other than the insured person's actual employer, on premises or property with respect to which that other person has any rights or privileges under a licence, permit or agreement, that other person shall, for the purposes of maintaining records, calculating the insurable earnings of the insured person and paying, deducting and remitting the premiums payable on those insurable earnings under the Act and these Regulations, be deemed to be the employer of the insured person in addition to the actual employer. [2] In its appeal the appellant does not question the fact that the tips are insurable earnings. It only challenges the determination that it is the deemed employer with respect to the payment of the tips and thus responsible for the deduction of the employment insurance premiums payable on those tips. [3] SGC, the intervener, takes issue with the insurability of the tips but says that if they are insurable, it is in agreement with the Minister's decision that the appellant is the deemed employer with respect to the deduction of the premiums payable on them. [4] The respondent, surprisingly and contrary to the decision by the Minister that is presently being appealed, took the position at the hearing that the tips paid to the employees of SGC by the appellant were not insurable earnings in this particular set of circumstances. [5] The appellant takes issue with this new position of the respondent and is also of the view that, as the insurability of the tips was not challenged in the notice of appeal, it is not now open to the intervener nor to the respondent to dispute it. In the appellant's view, the intervener should have appealed the decision of the Minister dated March 26, 2003, if it wanted to argue this point. The appellant contends that the intervener cannot raise an issue that was not raised in the Notice of Appeal. [6] Before dealing with this last point, and those raised by the parties, I will reproduce the facts as summarized, correctly in my view, by the intervener in paragraphs 3 to 20 of its memorandum of fact and law. III. Facts 3. The Intervener is a Treasury Board Crown Corporation established pursuant to The Saskatchewan Gaming Corporation Act, 1994, SS 1994, cS-18.2. 4. The SGC operates and manages Casino Regina in Regina, Saskatchewan. 5. Casino Regina opened to the public in January, 1996. 6. The Appellant is a Local of the Public Service Alliance of Canada union ("P.S.A.C."). P.S.A.C. is certified as the bargaining agent for a specified group of employees of the Intervener. 7. The Appellant and the Intervener entered into a collective bargaining agreement dated September 19, 1997 for the effective period from June 1, 1997 to May 31, 2000 (the "First Collective Agreement"). The Appellant and the Intervener entered into a second collective bargaining agreement dated January 25, 2001 for the effective period from June 1, 2000 to May 31, 2003 (the "Second Collective Agreement"). Pre-Collective Agreements - Collection and Distribution of Gratuities 8. Prior to the First Collective Agreement, the Intervener was responsible for the collection, counting and distribution of tips to its employees working in various designated areas of the Casino. The Intervener placed tip boxes in the various designated areas of the Casino where employees of the Casino were required to place any tips that they received from customers and patrons of the Casino. The tip boxes were collected by security personnel at various intervals and taken to the Count Room located in the internal bank of the Casino. The frequency that the tip boxes were collected varied depending on the area of the Casino where the tip boxes were located, with the tip boxes for areas such as Table Games being collected more frequently than other areas such as Customer Service. 9. Each time the tip boxes were collected by security and taken to the internal bank, they would be counted by members of the soft count team and recorded separately on a Tip Record Form for each designated area of the casino including: Security, Slots, Tables, Cashiers and Customer Service. The Bank Shift Manager would then verify the tip count for each area and record the tip amount in the Casino's computer system which would generate a receipt. The tip funds would then be deposited into the Casino bank and the Tip Record forms would be forwarded to the Finance and Administration division of the Intervener. 10. The tips collected from each department were then distributed by the Intervener to the employees working in those department [sic] based on the number of hours that the employee had worked in each department over the two week pay period. The tip amounts were included by the Intervener on the pay cheques issued to the employees. The Intervener deducted Canada Pension Plan contributions and Unemployment Insurance premiums from the tip amounts paid to each worker and also deducted income tax from the tips amount at each employee's rate. The net amounts of the tips paid to employees were itemized on each pay cheque. First Collective Agreement dated September 19, 1997 (effective June 1, 1997 to May 31, 2000) 11. In the First Collective Agreement, Article 42 was included to address the issue concerning the collection and payment of gratuities to Casino employees. Article 42 of the First Collective Agreement read as follows: 42.01 For the purpose of this agreement "gratuities" includes tips (which includes cash and Casino Regina value chips). 42.02 The employer will continue to provide facilities for the collection of gratuities. Effective the date of signing of this agreement the employer will provide a secure location, that is monitored by camera surveillance, for the counting of gratuities, twice a week. The employer will also provide the Union, on a bi-weekly basis, the hours worked by employees during each two week period. 42.03 Effective the date of signing this collective agreement the Union shall have sole responsibility for the distribution of all gratuities subject to 42.04. 42.04 The Union will remit, bi-weekly, to the employer the amount of tips payable to Pit Bosses, Slot Shift and Bank Shift Managers, together with the figures representing the total amount of tips collected by each department. This amount will include these employees [sic] share of the administration fee currently retained by the employer. The current calculations used for tip distribution will not change for these employees during the life of this agreement. 42.05 The Union will provide the employer, bi-weekly, with the total tip collection amount for each two week period. 42.06 A management representative may attend the count at any time. 42.07 If the union engages the services of an Auditor to provide a report on the process, accounting procedures, etc., the employer may purchase a copy of the report by paying half of the auditor's billings. 12. Following the First Collective Agreement, the Intervener continued to provide tip boxes in the designated areas of the Casino for the collection of gratuities. The tip boxes were taken by security personnel to the Casino bank at various intervals agreed upon by the Intervener and the Appellant. Rather than being counted immediately by members of the soft count team, the tip boxes were emptied by the soft count team and placed into numbered, sealable plastic bags. The soft count supervisor would record the date and sealed bag number and initial the Casino Regina Tip form. The Bank Shift Manager would verify the sealed bag numbers and initial the Tip form and place the sealed, numbered bags in the vault. 13. A count team appointed by the [Appellant] (the "Union Count Team") would then attend at the count room of the internal bank of the Casino on a weekly or bi-weekly basis and verify the sealed plastic bag number and initial the Casino Regina Tip forms. The Union Count Team would then count and record the amount of the tips separately for each designated area on separate Tip Record forms. The tips, in the form of cash and chips, would then be turned over by the Union Count Team to the Bank Shift Manager along with a completed Tip Record form for each designated area. In the presence of the Union Count Team, the Bank Shift Manager would then verify the total amount of the tips for each area and sign for receipt of the money on the Tip Record form. 14. A designate from the Union Count Team would then sign for the money turned over to the Bank Shift Manager, and a copy of the signed Tip Record form would be provided to a designated member of the Union Count Team. The Bank Shift Manager would then enter and record the tip amount on the Main Bank Transfers form, which would generate a receipt, and send the Tip Record forms up to the Finance and Administration department. 15. The Finance and Administration department of the Intervener would then prepare a spreadsheet for the tip count for the week itemized by each designated area and a cheque would be requisitioned for the tip amount which would then be provided to the Appellant. No deductions were taken off the total tip amount by the Intervener and the cheque provided to the Appellant would be for the full tip amount collected during the week. 16. This process would be repeated for the second week of the two week pay period. An updated spreadsheet would be prepared by the Intervener showing the total amount of tips collected in each designated area over the two week period and recording the number of hours worked by both in scope and out-of-scope employees in each designated area. Adjustments would be made for any overtime hours or hours not worked by employees in each specific area. The total amount of tips payable to out-of-scope employees (Pit Bosses, Slot Shift and Bank Shift Managers) would be determined and deducted from the total tips for the two week period together with the previous tip amount provided to the Appellant. A cheque requisition would be prepared and a cheque for the balance of the tip amount owing would be provided to the Appellant, together with a copy of the hours worked by each employee in each designated area over the two week period and a statement of adjustment for overtime hours and hours not worked by employees in each area. No deductions from the tips were made by the Intervener for CPP, EI or income taxes. 17. Once the balance of the tip amounts was forwarded to the Appellant, together with the list of hours and adjustments for employees working in each designated area, the Intervener had no further involvement in the calculation of the amount of the tips payable to each employee or the payment of the tips to each employee. Second Collective Agreement dated January 26, 2001 (effective date: June 1, 2000 to May 31, 2003) 18. In the Second Collective Agreement, the Appellant and the Intervener agreed to certain revisions to Article 42 dealing with the issue of gratuities. The revised Article 42 read as follows: 42.01 For the purpose of this agreement "gratuities" includes tips (which includes cash and Casino Regina value chips). 42.02 The employer will continue to provide facilities for the collection of gratuities. Effective the date of signing of this agreement the employer will provide a secure location, that is monitored by cameral [sic] surveillance, for the counting of gratuities, twice a week. The employer will also provide the union, on a bi-weekly basis, the hours worked by employees during each two week period. 42.03 Effective the date of signing this collective agreement the union shall have sole responsibility for the distribution of all gratuities. 42.04 The union will distribute tips, formerly payable to pit managers, slot and bank shift managers, to all employees on a hour per [sic] worked basis excluding those employed in Table Games, Slots and Customer Service departments. 42.05 Upon request, the union will provide the employer with the total tip collection amount for each calendar year. 42.06 A management representative may attend the count at any time. 19. The primary change made to Article 42 concerned the tips payable to out-of-scope employees (Pit Bosses, Slot Shift and Bank Shift Managers). Under the Second Collective Agreement, no tips were payable to the Pit Managers, Slot Shift and Bank Shift Managers. Rather, Article 42.04 provided that the Appellant would distribute the tips formerly payable to the out-of-scope employees to all employees on a per hour worked basis excluding those employed in Table Games, Slots and Customer Service departments. In addition, pursuant to Article 42.05, the Appellant was only required to provide the Intervener with total tip collection amount for each calendar year, as opposed to each two week period. The former Article 42.07 which allowed the union to engage the services of an auditor to provide a report on the process of tip collection, with the employer being entitled to purchase a copy of the report by paying half of the auditor's billings, was deleted. 20. The tip collection process under the Second Collective Agreement continued in much the same manner, with the exception that no amount was deducted from the cheque issued by the Intervener to the Appellant for the second week of the two week pay period for tips payable to out-of-scope employees. [7] Mr. Blaine Pilatzke, a regional representative for the Public Service Alliance of Canada ("PSAC"), said that after the signature of the first collective agreement, the appellant inquired of the Canada Customs and Revenue Agency ("CCRA") about the need for a payroll service to distribute the gratuities. The response was that the appellant needed an employer number to remit taxes. It was therefore determined that the appellant would use SGC's employer number for the purposes of withholding tax at source from the gratuities paid to the employees. At that time, the appellant considered the gratuities not to be insurable earnings and therefore no amount was withheld at source for employment insurance premiums or for Canada Pension Plan ("CPP") contributions. The payment of tips, the deduction of income tax and the issuance of T4 slips were all done through the appellant's own payroll service and not through SGC's. It was the appellant that determined, in accordance with its own calculations, based on a listing of hours for each employee, provided by SGC to the appellant, how the tips would be distributed to the employees. As soon as SGC had remitted a cheque to the appellant for the amount of tips that SGC had collected and as soon as SGC had provided the appellant with the number of hours worked by the employees in a pay period, there was no further involvement by SGC in the distribution of the tips to the employees. The appellant paid the tips directly to the employees. Mr. Ron Adams, SGC's director, Support Services, at the Casino Regina said that SGC first became aware that its employer number was being used by the appellant upon receiving the Minister's first decision, dated August 16, 2002 (Exhibit A-1), establishing that the tips were insurable earnings. Preliminary issue [8] The appellant began by raising the question whether the intervener could bring up an issue that was not raised in the Notice of Appeal, that is, whether the tips are insurable earnings or not. The intervener submitted that it had an interest in that particular issue, depending on the outcome of the proceedings before this Court. Indeed, to the extent that a ruling is made that the appellant is not the deemed employer, the intervener will be directly affected in that it will be responsible, if the tips are considered insurable earnings, for the remittance of employment insurance premiums payable on the tips paid to the employees. The intervener has therefore an interest in arguing that the gratuities are not, as regards the intervener, insurable earnings. [9] The respondent agrees that the intervener has a vested interest in this question. Counsel for the respondent argued that there is nothing in the Tax Court of Canada Rules of Procedure respecting the Employment Insurance Act ("TCC Rules (EI)") to suggest that the intervener is restricted to replying to arguments raised by either the appellant or the respondent. In her view, there is no requirement for any such restriction of the issues in an appeal. [10] Under the Employment Insurance Act ("EI Act"), a person affected by a decision rendered under subsection 93(3) of the EI Act on an appeal to the Minister under sections 91 or 92 may appeal from the decision to this Court, in accordance with the Tax Court of Canada Act and the applicable rules, within a specified time (subsection 103(1) of the EI Act). Sections 91, 92 and 93 and subsection 103(1) of the EI Act read as follows: 91. An appeal to the Minister from a ruling may be made by the Commission at any time and by any other person concerned within 90 days after the person is notified of the ruling. 92. An employer who has been assessed under section 85 may appeal to the Minister for a reconsideration of the assessment, either as to whether an amount should be assessed as payable or as to the amount assessed, within 90 days after being notified of the assessment. 93. (1) The Minister shall notify any person who may be affected by an appeal of the Minister's intention to decide the appeal, including the Commission in the case of an appeal of a ruling, and shall give them an opportunity to provide information and to make representations to protect their interests, as the circumstances require. (2) An appeal shall be addressed to the Assistant Director of Appeals in a Tax Services Office of the Canada Customs and Revenue Agency and delivered or mailed to that office. (3) The Minister shall decide the appeal within a reasonable time after receiving it and shall notify the affected persons of the decision. (4) If the Minister is required to notify a person who may be or is affected by an appeal, the Minister may have the person notified in such manner as the Minister considers adequate. 103. (1) The Commission or a person affected by a decision on an appeal to the Minister under section 91 or 92 may appeal from the decision to the Tax Court of Canada in accordance with the Tax Court of Canada Act and the applicable rules of court made thereunder within 90 days after the decision is communicated to the Commission or the person, or within such longer time as the Court allows on application made to it within 90 days after the expiration of those 90 days. [11] Section 9 of the TCC Rules (EI) states: 9. (1) A person who wishes to intervene shall intervene in an appeal by filing in or mailing to the Registry in which the notice of appeal was filed, or to which it was mailed, a notice of intervention that may be in the form set out in Schedule 9. (2) The notice of intervention shall be filed or mailed within 45 days from the date that the notice of appeal was served on the intervener under section 8. (3) An intervener may state in the notice of intervention that the intervener intends to rely on the reasons set out in the notice of appeal received by the intervener or the reasons set out in the notice of intervention of another intervener. (4) The Registrar shall serve the Minister and the appellant with a copy of any notice of intervention received by the Registrar. (5) The notice of intervention may be served personally, and personal service on the Commissioner of Customs and Revenue is deemed to be personal service on the Minister, or by mail addressed to the Minister, and if served by mail, the date of service is the date it is mailed and, in the absence of evidence to the contrary, the date of mailing is that date appearing on the communication from the Registrar accompanying the notice of intervention. [12] Schedule 9 attached to the TCC Rules (EI) gives an example of an acceptable form for a notice of intervention. Under the item "Statement of Facts", the intervener is directed to admit or deny the facts alleged in the notice of appeal and to set out a statement of any further facts upon which the intervener intends to rely. Under the item "The Reasons which the Intervener Intends to Submit", the intervener is directed to set out the reasons on which he or she intends to rely. A note appended to Schedule 9 states that the intervener may, instead of setting forth a statement of facts and reasons, rely on the statement of facts and reasons provided in the notice of appeal or in any other intervention. [13] Here it is not disputed that the intervener is directly affected by the decision of the Minister which is under appeal. The appellant only questions the intervener's right to raise a new argument. I will dispose of this preliminary issue simply by saying that it is clear enough from the TCC Rules (EI) that an intervener is not barred from raising an issue that was not raised in the notice of appeal. The EI Act does not preclude this either. An intervener may, if he or she wishes, rely on reasons set out in the notice of appeal. But, clearly, an intervener is not forbidden to rely on other reasons that are not stated in the notice of appeal. [14] I will therefore analyze the two issues now before me. First, are the tips insurable earnings in this particular case, and second, if so, who is the deemed employer for the purpose of calculating the insurable earnings with respect to the tips and paying, deducting and remitting the premiums payable on those insurable earnings under the EI Act? 1st issue: Do the gratuities or tips paid to the employees constitute insurable earnings under the EI Act and the IECPR? [15] The appellant relies simply on Canadian Pacific Ltd. v. A. G. (Can.), [1986] 1 S.C.R. 678 (LexUM), and S & F Philip Holdings Ltd. (c.o.b. SookeHarbour) v. Canada(Minister of National Revenue - M.N.R.), [2003] T.C.J. No. 344 (Q.L.), in contending that gratuities are insurable earnings. In Canadian Pacific Ltd. ("CP"), a majority of the Supreme Court of Canada decided that tips paid to the employer for distribution to its employees constituted insurable earnings. In S & F Philip Holdings Ltd., the employer integrated the payment of the tips into the regular payroll mechanism to facilitate their distribution to employees. Deputy Judge Rowe of this court held that in those circumstances the tips were insurable earnings. [16] The intervener relies on subsection 2(1) of the IECPR to argue that, as regards the appellant, the amounts paid by the appellant to the employees in respect of the gratuities may very well constitute insurable earnings pursuant to paragraph 2(1)(a) of the IECPR. However, it submits that, as regards the intervener, those gratuities were not paid to the employees "by the . . . employer" (the intervener) and therefore do not fall within the definition of "insurable earnings" with respect to the intervener. The intervener distinguished the two above-cited cases relied upon by the appellant from the facts in the present appeal, as in those cases the tips were paid by the employer directly to the workers, which is not the case here since the tips were paid by the union (the appellant) during the period at issue. Finally, the intervener submitted that the gratuities received by the employees do not constitute insurable earnings within the meaning of paragraph 2(1)(b) of the IECPR as there is no provincial legislation in Saskatchewan that requires employees to declare the amount of gratuities to their employer. [17] The respondent argued that, in order for tips to be considered insurable earnings under paragraph 2(1)(a) of the IECPR, the employer has to assume control over the tips, which is not the case here. In her view, facilitation of distribution of the tips is not meaningful control. She argued that before the existence of the collective agreement the tips were intermingled with wages and other remuneration, and the total amount was paid out to employees. One could say that, in those days, the employer had control over the total remuneration, including tips. Since the existence of the collective agreement, the tips are collected by the employer but the employer no longer has control over their distribution to the employees. Therefore, it cannot be said, according to counsel for the respondent, that the tips being distributed in the present case constitute insurable earnings at all. Counsel does not rely on any case law in support of that proposition. [18] The definitive statement of the law on whether tips form part of insurable earnings is the majority decision written by La Forest J. in the CP case, supra. The issue in that case was similar to the issue raised here. It was reproduced as follows by La Forest J. in paragraph 2 (LexUM): . . . "in calculating these premiums, is it necessary to take into consideration amounts which an employer paid its employees after receiving them from its customers, who had paid them to the employer of their own accord, to be distributed to the employees as tips?" [19] In that case, CP collected tips from attendees at conventions and banquets held at one of its hotels. CP distributed those tips to its employees pursuant to a collective agreement. The Minister treated the amounts thereof as insurable earnings for the purpose of calculating the unemployment insurance premiums that CP was required to remit. The Supreme Court of Canada had to determine the meaning to be given the expression "insurable earnings". La Forest J. concluded that "insurable earnings" was to be interpreted broadly to include tips paid to employees by their employers. That interpretation is in line with English cases that accept the word "earnings" as including more than just wages or salary paid by an employer. La Forest J. pointed to the fact that Parliament had also chosen to use the word "earnings" in the Unemployment Insurance Act, 1971 ("UI Act"), which was the applicable legislation at the time. A broad interpretation of the word "earnings" was also reflected in the definition of "insurable earnings" in subsection 3(1) of the Unemployment Insurance (Collection of Premiums) Regulations ("UICPR"), which at the time read in part as follows: 3. (1) The amount from which an insured person's insurable earnings shall be determined is the amount of his remuneration, whether wholly or partly pecuniary, paid by his employer in respect of a pay period, and includes (a) any amount paid to him by his employer as, on account or in lieu of payment of, or in satisfaction of (i) a bonus, gratuity, retroactive pay increase, share of profits, accumulative overtime settlement or an award. [20] La Forest J. stated at paragraph 21 (LexUM): 21 However that may be, the meaning of the word earnings is not restricted to the situations falling squarely within the opening words of s. 3(1). The various paragraphs of the provision enumerate a whole series of benefits that accrue to the employee by reason of his employment. These paragraphs serve to clarify or to add to what is comprised in the opening words. [21] At the time, "gratuity" was among the types of earnings listed and La Forest J. found that this term included tips. He then concluded at paragraphs 25, 26 and 27 (LexUM) as follows: 25 The interpretation I have given to "insurable earnings" is consistent with the purpose of the Act, which is to pay, to persons who have lost their employment, benefits calculated in terms of a percentage of their insurable earnings. Otherwise, an employee who received a good part of his earnings as tips would not benefit to the same degree as his colleagues who receive the whole of their earnings directly from the pocket of their employer. By adding to the definition of remuneration a whole series of benefits an employee receives by reason of his employment, the regulations clearly indicate that the expression should be given a broad interpretation. Moreover, as noted, a law dealing with social security should be interpreted in a manner consistent with its purpose. We are not concerned with a taxation statute. The cases of Penn v. Spiers & Pond Ltd. [[1908] 1 K.B. 766] and Great Western Railway Co. v. Helps [[1918] A.C. 141] are merely examples of the principle that I have just stated. 26 I would add that if the appellant is obliged to pay premiums solely in relation to the part of the earnings of his employee that comes out of his pocket, then it is in a better situation than other employers who pay these premiums in relation to all the earnings accruing to the employee from his work. The employer obviously benefits from the fact that some of his employees are in a position where they can obtain tips. He is able to retain their services at a better price. It, therefore, appears unjust that he should also be able to divest himself of a part of the obligation that all other employers must carry, or to restrict the amount of benefits of his employees whose earnings come in good part from tips. 27 It is true that these arguments are in a measure applicable equally to employees who personally receive tips, even though s. 3(1) of the Regulations does not mention these. However, those who drafted the Regulations no doubt concluded that it was necessary to proceed in this way for administrative reasons. See on this issue the case of Association des employés civils v. Minister of National Revenue [NR 1168, March 29, 1983]. It is almost impossible to levy premiums on tips obtained in this manner and it is for that reason that the Regulation does not take them into account. It goes without saying that insurable earnings include many tips collected in ways other than the ones collected in this case. For example, those added when paying a bill by credit card. [22] In the recent decision of this Court referred to by the appellant, namely, S & F Philip Holdings, supra, Deputy Judge Rowe followed the CP case and held that tips paid by an employer to an employee were insurable earnings within the meaning of subsection 2(1) of the IECPR, which corresponds to the former subsection 3(1) of the UICPR. The Court noted that while the UICPR referred to in the CP case explicitly included a gratuity, the current legislation does not. In the Court's view, however, the current definition continues to include tips received from employers. Deputy Judge Rowe explained his reasoning as follows in paragraph 24 of his reasons: ¶ 24 I am aware the relevant Regulation under the former Unemployment Insurance Act - defining insurable earnings - specifically included a "gratuity". In my view, the current definition found in subsection 2(1) of the EI Regulations under the current Act is even broader in that it refers to "the total of all amounts" paid "in respect of" that employment. [23] Two other cases where tips were found not to form part of insurable earnings (Guimond v. Canada(Minister of National Revenue - M.N.R.), [2000] T.C.J. No. 143 (Q.L.) and Sauvé v. Canada (Minister of National Revenue - M.N.R.), [1995] F.C.J. No. 1378 (F.C.A.) (Q.L.)) reinforce the requirement that tips must be distributed to the employees by the employer in order to fall within the definition of "insurable earnings". [24] In conclusion, it would appear from the case law that tips are part of insurable earnings so long as they are paid by an employer to an employee. In the present case, the intervener collects the tips and then issues a cheque for them to the appellant which, in turn, distributes the tips to the employees. The intervener does not pay those amounts directly to the employees. Therefore, as the appellant is the distributor of the tips, it is necessary to determine whether it falls into the category of "deemed employer" such that it can be concluded that a deemed employer is paying the tips to the employees. If so, the tips will be part of the employees' insurable earnings. 2nd issue: Deemed employer [25] The appellant submitted that it was acting as an agent for the employer in distributing tips. Indeed, as the union was prevented from collecting the tips directly because of security concerns, the appellant's role was limited, through the employer's security policies, to counting and distributing the funds collected by the employer. Therefore, the appellant argued that it cannot be said that it is the deemed employer pursuant to subsection 10(1) of the IECPR, as it was only acting as a conduit to remit to the employees the tips that were in fact paid by the intervener. [26] It is the intervener's position that, as the appellant was solely responsible for the distribution and payment of tips to the employees during the relevant periods, the appellant is deemed, pursuant to subsection 10(1) of the IECPR, to be the employer of the employees for the purpose of paying, deducting and remitting the employment insurance premiums payable on those amounts with respect to the employees. The intervener does not dispute that it is the actual employer of the employees or that the employees were at all relevant times under the general control or direct supervision of the intervener. However, the intervener states that it was the appellant, and not the intervener, that paid the gratuities or tips to the employees and therefore the appellant is deemed to be the employer of the employees for the purpose of the deduction and remittance of premiums payable with respect to those tips and gratuities. [27] The intervener relies on the Federal Court of Appeal decision in Insurance Corp. of British Columbia v. Canada (Minister of National Revenue - M.N.R.), [2002] F.C.J. No. 380 (Q.L.), in arguing that the term "paid" as used in paragraph 10(1)(a) of the IECPR is to be given a broad and liberal interpretation. Strayer J.A., speaking for the Federal Court of Appeal stated at paragraph 8: ¶ 8 The purpose of the Regulations and the statute which authorizes them is in part to facilitate collection of employment insurance premiums, an activity which is essential to the scheme as it now exists. The Act clearly authorizes the kind of provision which has been adopted by the Governor in Council in section 10 of the Regulations. In examining section 10 one sees that it is to apply inter alia where an employed insured person is being "paid by a person other than [his or her] actual employer". In such case that "other person" must maintain records of employment and calculate, deduct, and remit the appropriate premiums. The proposition is simple enough and its purpose clear: premiums are to be deducted at the source where salary or wages are calculated and administered, and where checks or pay-packets are issued. The term "paid" ought to be interpreted in context, and it is not necessary to examine technical sources in order to attribute to it a meaning that would defeat the clear purpose of the section. It would be equally possible, if one were to dwell on abstract legal concepts, to hold that a person can be an "actual employer" only if that person is paying the "employee" from his or her own resources and not at the expense of another. But that would also defeat the purpose of the section by precluding its application to any situation where a third party was actually providing and administering the wages or salary. [28] Strayer J.A. also concluded that the "other person" can be considered to have "paid" someone else's employee without having a legal obligation to that employee to do so (see Insurance Corp. of British Columbia, supra, at paragraph 9). [29] In the intervener's view, it is to be inferred from that case that employment insurance premiums must be deducted at the source where the gratuities are paid to each worker. The intervener submits that in the present case it is clear that the calculation of the portion of the tips payable to each of the employees was performed by the appellant, which then issued the cheques to the workers. The appellant was therefore providing and administering the tips and was thus responsible for the deduction at source of the premiums. [30] The intervener argues lastly that the case law clearly establishes that even though the intervener had general control and direct supervision of the employees and was their actual employer, it is the payment of the gratuities which causes the appellant to fall within paragraph 10(1)(a) of the IECPR. The intervener argues that in paragraph 10(1)(a), the phrase "or is paid by" is used in the alternative and therefore does not require a finding that the person other than the insured person's actual employer had "general control or direct supervision" of the employees and had also "paid" the employees. Rather, it is sufficient, in order for the "other person" to fall within paragraph 10(1)(a), that this "other person" make payment to the employees (see Gateway Building & Supply Ltd. v. Canada(Minister of National Revenue - M.N.R.), [1991] T.C.J. No. 521 (Q.L.)). [31] Counsel for the respondent adopts the position taken by the intervener. She pointed to Strayer J.A.'s statement in Insurance Corp. of British Columbia, supra, at paragraph 8, that the purpose of the IECPR is in part to facilitate collection of employment insurance premiums. She noted that the appellant was already deducting the tax on the tips paid to the employees. In her view, it is the appellant who should also be making the deductions of employment insurance premiums, in conformity with paragraph 10(1)(a) of the IECPR. [32] In my view, the appellant's argument that it was only acting as an agent for the employer when it distributed the tips to the employees, put forward in an attempt to escape the application of subsection 10(1) of the IECPR, does not stand up. Although this argument was raised in the case of Canada (Attorney General) v. Théorêt (1988), 61 D.L.R. (4th) 289, [1988] F.C.J. No. 1115 (F.C.A.) (Q.L.), which deals with section 18 of the UICPR, the predecessor to section 10 of the IECPR, the decision reached by the majority of the Federal Court of Appeal focussed on different issues. The argument was definitely rejected by Marceau J., the dissenting judge in that case, who said at page 298 (D.L.R.): It is incorrect, first, in terms of the interpretation of the applicable law, because it presupposes that section 18 of the Regulation on collection of premiums must be construed as not covering a mandatary. This is a gratuitous presupposition, in my opinion. The relevant words of the section are the following: "where...an insured person...is paid by a person other than his actual employer...that other person shall...be deemed to be the employer of the insured person in addition to the actual employer...". There is nothing in the text that permits the inference that a mandatary is not included and, to my way of thinking, it is precisely the contrary that is suggested. The mandatary acts himself, even if he is there as a mandatary, and he answers for his deeds and actions. The principle undoubtedly is that the mandatary who discloses his mandate "is not personally liable to third persons with whom he contracts" (article 1715 of the Civil Code of Lower Canada), but this obviously does not prevent him from being the one who made the contract. If the notary paid, whether or not he did so as a mandatary, he paid, he proceeded with the payment, and it seems to me that on its very face this is all that the text requires for its application. [33] In Insurance Corp. of British Columbia, supra, the Federal Court of Appeal manifestly ignored the majority decision in Théorêt, supra, on the basis, among others, that there was no decision on the crucial issue, which was the same as that involved here, and also on the basis that the majority decision did not focus on the meaning of the Regulations as such. [34] Strayer J.A. clearly stated in Insurance Corp. of British Columbia, supra, that the purpose of section 10 of the IECPR and the purpose of the statute authorizing those regulations is in part to facilitate collection of employment insurance premiums. He noted that "in examining section 10 one sees that it is to apply inter alia where an employed insured person is being 'paid by a person other than [his or her] actual employer'. In such case that 'other person' must maintain records of employment and calculate, deduct, and remit the appropriate premiums" (Insurance Corp. of British Columbia, supra, paragraph 8). Section 10 of the IECPR is certainly drafted in such a way as to include "any situation where a third party [is] actually providing and administering the wages or salary" (ibid.). [35] In the Insurance Corp. of British Columbia case, Strayer J.A. refers to salary and wages as being the kinds of things that are "paid" under subsection 10(1); he does so likely because it was salary and wages that were in fact paid to the employee in that case (as opposed to tips in the present case). [36] In light of the broad definition of "insurable earnings" in the CP case and their current definition in the IECPR, which do not restrict that term's meaning to salary and wages, it is to be understood that "paid" refers generally to the payment of "insurable earnings" and thus includes payment of salary, wages and tips. This is consistent with the intent that premiums be based on all earnings. Similarly, in the CP case, the majority of the Supreme Court of Canada gave a broad meaning to the word "paid" and concluded that it could equally well mean mere distribution by the employer (CP, supra, paragraph 20 (LexUM)); this is in line with the approach taken by the Federal Court of Appeal in Insurance Corp. of British Columbia. [37] Here, the collective agreements clearly provide that the appellant is to have sole responsibility for the distribution of all gratuities. The calculation of the gratuities payable to each employee is performed by the appellant, which, after receiving a cheque from the intervener, distributes the tips to the employees through its own payroll service. As a matter of fact, the appellant already withholds at source the income tax payable by the employees on those earnings. [38] Accordingly, as the intervener (the actual employer) collects the tips and passes them on to the appellant, the appellant is the "other person" and thus the "deemed employer" because it is distributing and therefore "paying" the tips to the casino employees. Conclusion [39] Subsection 1(2) of the IECPR reads as follows: (2) For the purposes of Part IV of the Act and for the purposes of these Regulations, "employer" includes a person who pays or has paid earnings of an insured person for services performed in insurable employment. [40] Under subsection 2(1) of the IECPR, the total of all amounts received by an insured person that are paid to that person by the person's employer constitutes insurable earnings. [41] A reading of subsections 1(2) and 10(1) suggests that the term "employer" includes a "deemed employer" as defined in the IECPR. Accordingly, for the above reasons, I conclude that the tips paid by the appellant to the intervener's employees are insurable earnings within the meaning of the EI Act and the IECPR, and that the appellant, as the deemed employer, is responsible pursuant to subsection 10(1) of the IECPR for paying, deducting and remitting the premiums payable on those insurable earnings under the EI Act and the IECPR. [42] The decision of the Minister is therefore confirmed and the appeal is dismissed. Signed at Ottawa, Canada, this 7th day of December 2004. "Lucie Lamarre" Lamarre, J. CITATION: 2004TCC799 COURT FILE NO.: 2003-2345(EI) STYLE OF CAUSE: Union of Saskatchewan Gaming Employees Local 40005 v. M.N.R. and Saskatchewan Gaming Corporation PLACE OF HEARING: Ottawa, Ontario DATE OF HEARING: April 28, 2004 REASONS FOR JUDGMENT BY: The Honourable Justice Lucie Lamarre DATE OF JUDGMENT: December 7, 2004 APPEARANCES: Counsel for the Appellant: James Cameron Counsel for the Respondent: Joanna Hill Counsel for the Intervener: Kurt Wintermute COUNSEL OF RECORD: For the Appellant: Name: James Cameron Firm: Raven, Allen, Cameron & Ballantyne For the Respondent: Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada