Université Laval v.Canada (minister of National Revenue)

Université Laval v.Canada (minister of National Revenue) Court (s) Database Federal Court of Appeal Decisions Date 2002-05-03 Neutral citation 2002 FCA 171 File numbers A-207-00 Notes Digest Decision Content Date: 20020503 Docket: A-207-00 Ottawa, Ontario, May 3, 2002 CORAM: DESJARDINS J.A. DÉCARYJ.A. NOËLJ.A. BETWEEN: UNIVERSITÉ LAVAL, c/o vice-rectorat aux ressources humaines, Avantages sociaux, Bureau 5333, Pavillon Jean-Charles-Bonenfant, Université Laval, Québec, Quebec G1K 7P4 Applicant and THE MINISTER OF NATIONAL REVENUE, 165 de la Pointe-aux-Lièvres Sud, Québec, Quebec G1K 7L3 Respondent JUDGMENT The application for judicial review is dismissed with costs. "Alice Desjardins" J.A. Certified true translation S. Debbané, LLB Date: 20020503 Docket: A-207-00 Neutral citation: 2002 FCA 171 CORAM: DESJARDINS J.A. DÉCARYJ.A. NOËLJ.A. BETWEEN: UNIVERSITÉ LAVAL, c/o vice-rectorat aux ressources humaines, Avantages sociaux, Bureau 5333, Pavillon Jean-Charles-Bonenfant, Université Laval, Québec, Quebec G1K 7P4 Applicant and THE MINISTER OF NATIONAL REVENUE, 165 de la Pointe-aux-Lièvres Sud, Québec, Quebec G1K 7L3 Respondent Hearing held at Québec, Quebec, on February 28, 2002. Judgment delivered at Ottawa, Ontario, on May 3, 2002. REASONS FOR JUDGMENT BY: DÉCARY J.A. CONCURRED IN BY: DESJARDINS J.A. NOËL J.A. Date: 20020503 Docket: A-207-00 Neutral citation: 2002 FCA 171 CORAM: DESJARDINS J.A. DÉCARY J.A. NOËL J.A. BETWEEN: UNIVERSITÉ LAVAL, c/o vice-rectorat aux ressources humaines, Avantages sociaux, Bureau 5333, Pavillon Jean-Charles-Bonenfant Université Laval, Québec, Quebec G1K 7P4 Applicant and THE MINISTER OF NATIONAL REVENUE, 165 de la Pointe-aux-Lièvres Sud, Québec, Quebec G1K 7L3 Respondent REASONS FOR JUDGMENT DÉCARYJ.A. [1] The Court must determine whether the benefits received by an employee of Université Laval (Université or the employer) under a wage loss indemnity plan constitute insurable earnings within the meaning of section 3 of the Unemployment Insurance (Collection of Premiums) Regulations and section 2 of the Insurable Earnings and Collection of Premiums Regulations made when the Employment Insurance Act came into force in June 1996. Given that the years in issue are 1995, 1996 and 1997, the provisions of both of the aforementioned Regulations are relevant. [2] In a decision reported at [2000] T.C.J. No. 99 (QL), a deputy judge of the Tax Court of Canada held that those benefits did constitute insurable earnings and upheld the assessments made by the Minister of National Revenue. The amount at issue is over $300,000. [3] In the Tax Court of Canada, the parties admitted the following facts: [TRANSLATION] · under the collective agreement in effect at that time, (the "Collective Agreement") the applicant had agreed to maintain in effect a short-term wage loss insurance plan throughout 1995, 1996 and 1997, for its employees who were members of the Syndicat des employés de l'Université Laval (the "Laval Wage Loss Insurance Plan"); · article 31.01 of the Collective Agreement provided that the Laval Wage Loss Insurance Plan was entirely paid for by the applicant; · the Laval Wage Loss Insurance Plan provided for the payment of a weekly benefit equal to 85% of the employee's salary for the first 26 weeks and 80% of the employee's salary for the following 26 weeks; · the Laval Wage Loss Insurance Plan was registered under group insurance policy number 5320-IH (the "Insurance Policy") issued by Assurance-Vie Desjardins/La Sauvegarde (now Assurance-Vie Desjardins-Laurentienne) (the "Insurer"); · the Laval Wage Loss Insurance Plan was self-financed by the applicant; · under the agreement with the Insurer, the Insurer opened a bank account on which the applicant drew cheques; · the applicant was authorized to draw cheques on behalf of the Insurer; · an employee of the applicant signed the cheques; · the Insurer calculated the amounts to be paid into the account by the applicant; · interest was credited by the Insurer to the applicant on the amounts paid into the account up to the time the benefits were paid; · at the end of the year, if there was a surplus in the account, the applicant could keep the amount on deposit or be reimbursed; · at the end of the year, if there was a deficit in the account, the applicant had to repay it with interest; · the Insurer acted merely as the account administrator and assumed no financial risk; · the Insurer charged the applicant administrative fees for managing the account; · the applicant determined who was eligible to receive benefits, not the Insurer; · workers on sick leave were still employed by the applicant. (Applicant's Record, vol. 1, pp. 326 et seq.) [4] The collective agreement includes the following clauses: [TRANSLATION] ARTICLE 31 WAGE LOSS AND ILLNESS INSURANCE 31.01 The Employer shall maintain in effect a wage loss insurance plan for permanent employees. That plan shall be entirely paid for by the Employer. The wage loss insurance plan shall include the following benefits: A. Benefits A permanent employee who is unable to work as a result of an accident or illness shall be entitled to: (1) a weekly benefit equal to 85% of the employee's salary up to a maximum of 26 weeks... B. Adjustment (1) Increase If the date of the salary increase occurs during the periods specified under subparagraphs 31.01 A (1) and 2 ), the permanent employee shall still receive the wage increases to which he or she is entitled... C. Payment of Benefits Benefits payable as wage loss insurance for the first 52 weeks of disability shall be paid by the Employer, during the normal pay period on presentation of the required supporting documents by the employee. Payment of benefits payable as wage loss insurance after the first 52 weeks of disability shall be paid by the insurer in accordance with the contracts... (Applicant's Record, vol. 1, pp. 122 et seq.) [5] The insurance policy refers to the insurer as the "administrator" and to the Université as the "insured". It is common ground that in group insurance policies, the named insured in fact represents all of the beneficiary employees. We also know that this group insurance plan is financed by the "administrative services only" (ASO) method. The relevant clauses of the policy are as follows: [TRANSLATION] 5. BENEFITS (1) When an employee becomes totally disabled while the employee's insurance is in effect, he or she is entitled to a weekly benefit equal to 85% of the employee's salary (100% of weekly salary if the disability was the result of an automobile accident). However, that benefit shall be reduced by the amount of the disability benefits payable under the Act respecting industrial accidents, the Quebec Pension Plan, and the employer's pension plan. Disability benefits shall become payable on the first day of absence if the total disability results from an accident, or on the third day of absence if the total disability results from illness. The weekly benefit shall be payable to a totally disabled employee for a maximum of 26 weeks per period of total disability. (Applicant's Record, vol. 1, p. 305) 17. MANDATE The administrator is the mandatary of the Companies. It shall collect the premiums and pay benefits and refunds on their behalf. The insured is the mandatary of the insured employees, except in respect of their individual rights and obligations. (Applicant's Record, vol. 1, p. 290) [6] The statutory and regulatory provisions that applied during the three years in issue are the following: Unemployment Insurance Act 2. "insurable earnings" means, in relation to any period, the total amount of the earnings from insurable employment for that period of an insured person or the maximum insurable earnings for that period as prescribed by or under this Act, whichever is the lesser; 2. « rémunération assurable » Relativement à une période quelconque, soit le total de la rémunération d'un assuré provenant de tout emploi assurable pour cette période, soit le maximum de la rémunération assurable pour cette période tel que prescrit en vertu de la présente loi, si ce maximum est inférieur au total. Unemployment Insurance (Collection of Premiums) Regulations (C.R.C., c. 1575) am. by SOR/95-593 Interpretation 2. (2) For the purposes of Parts II and III of the Act and these Regulations, "employer" includes a person who pays or has paid remuneration or other earnings of an insured person for services performed in insurable employment. Part I insurable earnings Earnings for Insurable Employment 3. (1) For the purposes of this Part, a person's earnings from insurable employment means any remuneration, whether wholly or partly pecuniary, received or enjoyed by him, paid to him by his employer in respect of insurable employment except ... (b) the value of board, lodging and all other benefits received or enjoyed in a pay period in respect of the employment if no cash remuneration is paid by the employer in respect of the pay period; (c) in the case of a clergyman, the value of lodging received or enjoyed by him in respect of his employment as a clergyman and provided by his diocese, parish or congregation; and (d) any amount excluded as income pursuant to paragraph 6(1)(a) or (b) or subsection 6(6) or (16) of the Income Tax Act. (2) For the purposes of subsection (1), where a person receives vocational training while in insurable employment, the remuneration of that person includes any allowance paid through his employer, in addition to the person's remuneration, under a government training plan or by the Department of Veterans Affairs. Interprétation 2. (2) Pour l'application des parties II et III de la Loi et du présent règlement, « employeur » s'entend notamment d'une personne qui paie ou a payé une rétribution ou autre rémunération d'un assuré pour des services fournis dans le cadre d'un emploi assurable. Partie i rémunération assurable Rémunération provenant d'un emploi assurable 3. (1) Aux fins de la présente partie, la rémunération d'une personne provenant d'un emploi assurable correspond à toute rétribution, entièrement ou partiellement en espèces, qu'elle reçoit ou dont elle bénéficie et qui lui est versée par son employeur relativement à cet emploi, à l'exception : ... b) de la valeur de la pension, du logement et de tout autre avantage dont la personne bénéficie ou qu'elle reçoit relativement à cet emploi durant une période de paie pour laquelle l'employeur ne lui verse aucune rétribution en espèces; c) dans le cas d'un ministre du culte, de la valeur du logement qui lui est fourni, relativement à son emploi à ce titre, par le diocèse, la paroisse ou la congrégation; d) de tout montant qui est exclu du revenu en vertu des alinéas 6(1)a) ou b) ou des paragraphes 6(6) ou (16) de la Loi de l'impôt sur le revenu. (2) Aux fins du paragraphe (1), lorsqu'une personne reçoit une formation professionnelle dans le cadre d'un emploi assurable, sa rétribution comprend les allocations prévues par un programme gouvernemental de formation ou émanant du ministère des Affaires des anciens combattants qui lui sont versées en sus de sa rétribution par l'intermédiaire de l'employeur. Employment Insurance Act 2. "insurable earnings" means the total amount of the earnings, as determined in accordance with Part IV, that an insured person has from insurable employment; 5. (1) Subject to subsection (2), insurable employment is (a) employment in Canada by one or more employers, under any express or implied contract of service or apprenticeship, written or oral, whether the earnings of the employed person are received from the employer or some other person and whether the earnings are calculated by time or by the piece, or partly by time and partly by the piece, or otherwise; ... 2. « rémunération assurable » Le total de la rémunération d'un assuré, déterminé conformément à la partie IV, provenant de tout emploi assurable. 5. (1) Sous réserve du paragraphe (2), est un emploi assurable : a) l'emploi exercé au Canada pour un ou plusieurs employeurs, aux termes d'un contrat de louage de services ou d'apprentissage exprès ou tacite, écrit ou verbal, que l'employé reçoive sa rémunération de l'employeur ou d'une autre personne et que la rémunération soit calculée soit au temps ou aux pièces, soit en partie au temps et en partie aux pièces, soit de toute autre manière; ... Insurable Earnings and Collection of Premiums Regulations (SOR/97-33) Interpretation 1. (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. Part I 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 the total of all amounts, whether wholly or partly pecuniary, received or enjoyed by the person that are paid to the person by the person's employer in respect of such employment. ... (3) For the purposes of subsections (1) and (2), "earnings" does not include (a) any benefit in kind, except an amount that is the value of board and lodging enjoyed by a person in a pay period in respect of the employment if cash remuneration is paid to the person by the person's employer in respect of the pay period; (b) a retiring allowance; (c) a supplement paid to a person by the person's employer to increase worker's compensation paid to the person by a provincial authority; (d) a supplement paid to a person by the person's employer to increase a wage loss indemnity payment made to the person by a party other than the employer under a wage loss indemnity plan; (e) a supplemental unemployment benefit payment made under a supplemental unemployment benefit plan as described in subsection 37(2) of the Employment Insurance Regulations; and (f) a payment made to a person by the person's employer to cover the waiting period referred to in section 13 of the Act, or to increase the pregnancy or parental benefits payable to the person under section 22 or 23 of the Act if the payment meets the criteria set out in section 38 of the Employment Insurance Regulations. Définitions et interprétation 1. (2) Pour l'application de la partie IV de la Loi et pour l'application du présent règlement, « employeur » s'entend notamment d'une personne qui verse ou a versé la rémunération d'un assuré pour des services rendus dans l'exercice d'un emploi assurable. Partie i rémunération assurable Rémunération provenant d'un emploi assurable 2. (1) Pour l'application de la définition « rémunération assurable » au paragraphe 2(1) de la Loi et pour l'application du présent règlement, le total de la rémunération d'un assuré provenant de tout emploi assurable correspond au montant total, entièrement ou partiellement en espèces, que l'assuré reçoit ou dont il bénéficie et qui lui est versé par l'employeur à l'égard de cet emploi. ... (3) Pour l'application des paragraphes (1) et (2), sont exclus de la rémunération : a) les avantages en nature, à l'exception du montant qui représente la valeur des frais supportés pour la pension et le logement dont une personne bénéficie relativement à son emploi au cours d'une période de paie, si une rétribution en espèces lui est versée par l'employeur pour cette période, b) les allocations de retraite; c) tout montant supplémentaire versé par l'employeur à une personne afin d'augmenter les indemnités d'accident du travail versées à celle-ci par un organisme provincial; d) tout montant supplémentaire versé par l'employeur à une personne afin d'augmenter les indemnités d'assurance-salaire versées à celle-ci par une tierce-partie; e) les prestations supplémentaires de chômage versées à une personne dans le cadre d'un régime de prestations supplémentaires de chômage visé au paragraphe 37(2) du Règlement sur l'assurance-emploi; f) tout montant versé par l'employeur à une personne, soit à titre d'indemnité durant le délai de carence visé à l'article 13 de la Loi, soit pour augmenter les prestations de maternité payables en vertu de l'article 22 de la Loi ou les prestations parentales payables en vertu de l'article 23 de la Loi, si les conditions énoncées à l'article 38 du Règlement sur l'assurance-emploi sont respectées. [7] Given that the parties did not argue, either in their memorandums or in the additional submissions that they were invited to file, that the outcome of this case depended on the scheme that was in effect at the relevant times-employment insurance or unemployment insurance- this Court will dispose of this case by reference to the provisions of the employment insurance scheme. [8] The applicant essentially argued that the amounts it paid to its employees under the wage loss insurance plan are not insurable earnings since the employees involved did not perform any services during their disability period. [9] The Minister essentially argued that when disability benefits are paid by the usual employer rather than by the insurer, as long as an employment relationship is maintained, those benefits constitute insurable earnings even though services have not been performed during the disability period. [10] I would first note that the Minister acknowledges that in traditional insurance plans in which the insurer ultimately determines what payments to make and makes them, the benefits received do not constitute insurable earnings, whereas in what we might call more modern insurance plans in which the insurer is, for all practical purposes, merely a financial and administrative intermediary and the employer is the one in charge of the plan, the benefits received constitute insurable earnings. [11] The issue is complicated by the fact that in employment insurance cases, we must avoid introducing the provisions of the Act and Regulations concerning eligibility, which come under the Commission's authority, into the parts of the Act and Regulations that involve insurability and the collection of premiums, which come under the Minister's authority. In Attorney General of Canada v. Rousseau (1996), 208 N.R. 309 (F.C.A.), this Court pointed out that anomalies can result "from the two-pronged system established by Parliament in respect of unemployment insurance." Unfortunately, Parliament did not deem it advisable to standardize the system when it established the employment insurance scheme. [12] We must therefore rely on the particular provisions in the Insurable Earnings and Collection of Premiums Regulations (SOR/97-33) (the Regulations) and the Employment Insurance Act that are said to apply to the entire Act or to the parts of the Act that come under the Minister's authority. [13] Subsection 2(1) of the Act defines "insurable earnings" as "the total amount of the earnings, as determined in accordance with Part IV, that an insured person has from insurable employment." Part IV, which takes in sections 81 to 108, deals with "insurable earnings and collection of premiums." "Insurable employment" "has the meaning assigned by section 5," which was set out earlier. By virtue of section 97, the Minister shall administer section 5 and any regulations made under section 5. [14] Subsection 1(2) of the Regulations provides: "employer" includes a person who pays or has paid earnings of an insured person for services performed in insurable employment. (Emphasis added) The word "includes" is underscored to indicate that this definition, which refers to "services performed," is not exhaustive and can, for example, include situations in which a person other than the person for whom the worker performs the services pays the earnings. [15] Subsection 2(1) of the Regulations provides: the total amount of earnings that an insured person has from insurable employment is the total of all amounts, whether wholly or partly pecuniary, received or enjoyed by the person that are paid to the person by the person's employer in respect of such employment. (Emphasis added) The words "in respect of such employment" are underscored to point out that the courts have consistently held that the expression "in respect of", "à l'égard de", is particularly broad. [16] Subsection 2(3) of the Regulations excludes amounts that presumably would have been included had they not been excluded. Most of those items relate to amounts paid to a person who, by definition, is no longer performing any services: the "retiring allowance" in paragraph (b), "a supplement paid to a person by the person's employer to increase a wage loss indemnity payment made to the person by a party other than the employer under a wage loss indemnity plan" in paragraph (d), "a supplemental unemployment benefit payment made under a supplemental unemployment benefit plan as described in subsection 37(2) of the Employment Insurance Regulations" in paragraph (e) and "a payment made to a person by the person's employer to cover the waiting period referred to in section 13 of the Act, or to increase the pregnancy...benefits..." in paragraph (f). [17] The mere fact that subsection 2(3) of the Regulations, which deals with situations in which the insured person does not perform any services contains all of these items, is sufficient to reject the employer's legal argument that there can be no insurable earnings within the meaning of the Regulations where no services are performed. [18] In addition, this case can, in my view, be disposed of on the basis of paragraph 2(3)(d), which refers to "a wage loss indemnity payment made...by a party other than the employer...". By using the words "by a party other than the employer", this paragraph provides for a distinction between wage loss indemnity payments made by the employer, which would be included in insurable earnings, and wage loss indemnity payments made by an insurer, which would be excluded from insurable earnings, in the same way that a supplement paid by the employer is excluded under that paragraph. [19] Given that the Regulations themselves distinguish between wage loss indemnity payments made by the employer and those made by a person other than the employer, the employer's criticism in this case that it would be contrary to the Act to make distinctions between traditional and modern insurance schemes cannot be accepted. The distinction might be artificial in some respects but it is made nonetheless, and I do not see any incongruity in the fact that the Regulations emphasize the existence of an employer-employee relationship, irrespective of the performance of any services, rather than on the performance of services alone. I would note that it is common ground in this case that the employment relationship between Université Laval and its insured employees continued to exist during sick leave periods. [20] In a sense, paragraph 2(3)(d) of the Regulations codifies the decisions of this Court. On the question of payments made by the employer under a contract of employment, see A.G. Canada v. Quinlan, 1994 F.C.J. 276 (F.C.A.) (QL); Heinricks v. M.N.R., 1997 F.C.J. 1706 (F.C.A.) (QL), leave to appeal denied, S.C.C. 26463; A.G. Canada v. Rousseau, supra; A.G. Canada v. Sirois (1999), 243 N.R. 212 (F.C.A.); on the question of payments made by the insurer, seeGagné v. M.N.R. (1998), 247 N.R. 189 (F.C.A.); M.N.R. v. Visan, [1983] 1 F.C. 820 (C.A.); on the question of payments made by the employer otherwise than under a contract of employment, see Wong v. M.N.R., 1995 F.C.J. 984 (QL). [21] The issue is therefore whether the payments in this case were made by the employer or by the third party insurer. [22] Under the collective agreement, the wage loss insurance plan is entirely paid for by the employer; the employment relationship continues to exist during the disability; the benefits payable are increased if there is a salary increase during the disability period; and the benefits are paid by the employer during normal pay periods for the first 52 weeks of disability and thereafter by the insurer. [23] It is also common ground that the employer is determining eligibility for benefits and signs the cheques. These indications all lead to one conclusion: the wage loss insurance benefits were paid by the employer under the contract of employment. They are insurable earnings. [24] I would make one final comment concerning the employer's argument that it did not "pay" the disability benefits since the cheques were drawn on the insurer's bank account. Insofar as that argument is an attempt to distinguish between the French word "verser", which is the expression used by the Regulations made in respect of employment insurance, and the French word "payer", which was the expression used by the Regulations made in respect of unemployment insurance, the argument seems to me to be of no avail, particularly since the English word "pay" is used in both schemes. That being said, the French word "verser" is even more general than the word "payer", to which the Supreme Court of Canada gave a "broad meaning" in Canadian Pacific Limited v. A.G. Canada, [1986] 1 S.C.R. 678, at p. 687. [25] I would dismiss the application for judicial review with costs. "Robert Décary" J.A. "I concur in these reasons Alice Desjardins J.A." "I concur. Marc Noël J.A." Certified true translation S. Debbané, LLB FEDERAL COURT OF APPEAL SOLICITORS OF RECORD DOCKET: A-207-00 STYLE OF CAUSE: L'UNIVERSITÉ LAVAL v. MINISTER OF NATIONAL REVENUE PLACE OF HEARING: QUÉBEC, QUEBEC DATE OF HEARING: FEBRUARY 28, 2002 REASONS FOR JUDGMENT: DÉCARY J.A. CONCURRED IN BY: DESJARDINS J.A. NOËL J.A. DATE OF REASONS: MAY 3, 2002 APPEARANCES: Jacques Côté FOR THE APPLICANT Martin Rochette Valérie Lessard FOR THE RESPONDENT SOLICITORS OF RECORD: Ogilvy Renault, S.E.N.C. FOR THE APPLICANT Québec, Quebec Morris A. Rosenberg FOR THE RESPONDENT Deputy Attorney General of Canada Ottawa, Ontario Translator's Note: 1. Paragraph 4 - Art. 31, B, l - a number is missing right after "et" and before the closing parentheses. 2. Paragraph 24 - the date of the SCC reference is 1986, not 1996.