[1996] 2 F.C. 940
A-486-95
The Attorney General of Canada (Applicant)
v.
Peter M. King (Respondent)
Indexed as: Canada (Attorney General) v. King (C.A.)
Court of Appeal, Strayer, MacGuigan and Robertson JJ.A.—Toronto, March 28; Ottawa, April 10, 1996.
Unemployment insurance — Application for judicial review of Umpire’s decision payments made under provincial Employee Wage Protection Program “relief grants” within meaning of Unemployment Insurance Regulations, s. 57(2)(c) — Respondent laid off following plant closure — Receiving lump sum representing vacation, severance pay not paid by former employer — Payments made under Program earnings — Meaning of “relief grant” — Factors to be considered in determining whether payment relief grant — Payments lacking attributes of “relief grant” — Entitlement to payments arising at time of plant closure.
This was one of seven applications for judicial review of an Umpire’s decision holding that payments received by the respondent under the Ontario Employee Wage Protection Program were exempted from earnings as “relief grants” within the meaning of paragraph 57(3)(c) of the Unemployment Insurance Regulations. The Program was established following amendments to an Ontario statute, the Employment Standards Act, which came into effect on October 18, 1991, but were made retroactive to October 1, 1990. The respondent had been employed by Georgian Bay Kennedy Limited in Owen Sound, Ontario, until closure of its plant in 1991. By virtue of the Program, he received a maximum lump sum payment of $5,000 representing vacation and severance pay not paid by his former employer. In the interim, he had also received unemployment insurance benefits. The Unemployment Insurance Commission held that the monies received under the Program were earnings within the meaning of subsection 57(2) of the Regulations. The Board of Referees upheld that decision but the Umpire found that those monies were exempted from earnings as “relief grants”. This case raised two principal issues: 1) whether the Umpire erred in law in concluding that the payments received under the Program qualified as relief grants, and 2) if so, whether she erred in fixing the date of allocation.
Held, the application should be allowed.
1) For a payment to constitute earnings, the receipt must evince the character of consideration given in return for work done by the recipient and not merely as a consequence of one’s employment status. The phrase “relief grant” suggests financial assistance that is given to alleviate hardship. There are three closely related aspects which are helpful in determining whether a payment constitutes a relief grant: the circumstances giving rise to the loss, the type of loss for which the compensation is being paid, and the nature of the compensatory scheme. With respect to the first aspect, the payment need not be motivated by an emergency situation. However, a payment is more likely to be a relief grant if the circumstances giving rise to it are unusual or anomalous. In the case at bar, although the employer’s failure to meet its salary and benefits obligation was deplorable, there was nothing particularly unusual about it. As to the second aspect, the payments provided under the Program are compensation, to a maximum amount, for wages and benefits earned but not paid, and are therefore directly related to one of the most critical aspects of the employment relationship. This close connection militates against the payments in question being deemed relief grants. The third aspect helpful in assessing the payments is the nature of the compensatory scheme under which they are paid. The payments made herein were specifically based on amounts owing at law, up to the maximum coverage of $5,000. The scheme goes so far as to provide the Ontario government with a right of subrogation which can be exercised against a delinquent employer to recoup the monies paid to employees. The possibility of recovering the monies paid also militates against the payments being characterized as a “grant”. Accordingly, the payments received under the Program must be deemed to constitute non-exempt earnings.
2) The Board of Referees and the Umpire made no error in concluding that the date of the plant closure and the date the respondent permanently lost his employment was the end of March, 1991. But it remained to be decided whether the vacation and severance amounts paid under the Program were payable at the time of the respondent’s lay off in January of 1991, or at the time the plant closed at the end of March, 1991. Subsection 58(1) of the Employment Standards Act provides that the term “termination” means a lay-off which equals or exceeds 35 weeks in a period of 52 consecutive weeks. Since the lay-off in this case did not exceed 35 weeks before the plant closed, and the respondent’s employment was not terminated until the end of March, 1991, entitlement to payments under the Program did not arise until that date.
STATUTES AND REGULATIONS JUDICIALLY CONSIDERED
Employment Standards Act, R.S.O. 1990, c. E-14, ss. 58(1) “termination”, 58.14 (as enacted by S.O. 1991, c. 16, s. 5).
Employment Standards Amendment Act (Employee Wage Protection Program), 1991, S.O. 1991, c. 16, s. 17.
Unemployment Insurance Act, R.S.C., 1985, c. U-1.
Unemployment Insurance Regulations, C.R.C., c. 1576, ss. 57(1),(2) (as am. by SOR/90-756, s. 17), (3)(c), 58(9) (as am. by SOR/89-550, s. 1).
CASES JUDICIALLY CONSIDERED
APPLIED:
Canada (Attorney General) v. Vernon, [1995] F.C.J. No. 1394 (C.A.) (QL) (as to the meaning and scope of “relief grant”); Tallon, Trudy (1986), CUB 12994.
DISTINGUISHED:
Canada (Attorney General) v. Vernon, [1995] F.C.J. No. 1394 (C.A.) (QL) (as to the facts of the case).
REFERRED TO:
Canada (Attorney General) v. Morrison, [1996] F.C.J. No. 482 (C.A.) (QL); Canada (Attorney General) v. Camsell, [1996] F.C.J. No. 484 (C.A.) (QL); Canada (Attorney General) v. Flarity, [1996] F.C.J. No. 485 (C.A.) (QL); Canada (Attorney General) v. Armstrong, [1996] F.C.J. No. 486 (C.A.) (QL); Canada (Attorney General) v. Swannell, [1996] F.C.J. No. 487 (C.A.) (QL); Canada (Attorney General) v. Oliver, [1996] F.C.J. No. 488 (C.A.) (QL); Cairns, Rosemary (1987), CUB 11083; Tonna, Mary (1988), CUB 14854.
APPLICATION for judicial review of an Umpire’s decision holding that payments made under the Employee Wage Protection Program of Ontario were exempted from earnings as “relief grants”. Application allowed.
COUNSEL:
Robert H. Jaworski for applicant.
Marie G. Kelly for respondent.
SOLICITORS:
Deputy Attorney General of Canada for applicant.
Legal Services, United Steelworkers of America, Toronto, for respondent.
The following are the reasons for judgment rendered in English by
Robertson J.A.: This is one of seven judicial review applications brought by the Attorney General, on behalf of the Unemployment Insurance Commission (the Commission), and heard together. Though all of the applications are rooted in the same fact situation, there are differences in the findings of the various Boards of Referees which I will identify below. At the outset it was agreed that the memorandum of fact and law in this case would apply to applications A-485-95 to A-488-95 [Canada (Attorney General) v. Morrison, [1996] F.C.J. No. 482 (QL); Canada (Attorney General) v. Camsell, [1996] F.C.J. No. 484 (QL); Canada (Attorney General) v. Flarity, [1996] F.C.J. No. 485 (QL)] (the King group) and that the memorandum in A-500-95 would apply to applications A-499-95 to A-501-95 [Canada (Attorney General) v. Armstrong, [1996] F.C.J. No. 486 (QL); Canada (Attorney General) v. Swannell, [1996] F.C.J. No. 487 (QL); Canada (Attorney General) v. Oliver, [1996] F.C.J. No. 488 (QL)] (the Swannell group). As all of the applications raise common issues of law, these reasons will be filed in the other applications and thereupon become reasons for judgment in those files.
The respondent is one of a number of unemployment insurance claimants who had been employed by Georgian Bay Kennedy Limited in Owen Sound, Ontario, until closure of its plant in 1991. There is an outstanding disagreement over whether their employment was permanently severed in January of 1991 or at the end of March, 1991. The Commission maintains that a permanent loss of employment occurred on January 2, 1991 for the claimants in the King group, and on January 18, 1991 for Swannell. The respective claimants maintain that they were temporarily laid off on those dates and that closure of the plant and permanent severance of their employment did not occur until the end of March of that year. The significance of this factual dispute and its relevance are matters dealt with more fully below.
Following closure of the plant the employer did not pay its employees the vacation and severance pay required by law. In the months that followed, the Ontario government adopted amendments to the Employment Standards Act, R.S.O. 1990, c. E-14 which had the effect of establishing the Employee Wage Protection Program (the Program). The amendments came into effect on October 18, 1991 (S.O. 1991, c. 16), but were made retroactive to October 1, 1990. Consequently, the claimants were entitled to apply for, and received, a maximum lump sum payment of $5,000 representing vacation and severance pay not paid by their former employer. In the interim, however, the claimants had been in receipt of unemployment insurance benefits. In the process of administering their claims, the Commission held that the monies received under the Program were earnings within the meaning of subsection 57(2) of the Unemployment Insurance Regulations [C.R.C., c. 1576 (as am. by SOR/90-756, s. 17)] (the Regulations) and therefore to be allocated in accordance with subsection 58(9) [as am. by SOR/89-550, s. 1] of the Regulations. With respect to the King group, the Commission allocated payments made under the Program to the week commencing December 30, 1990 on the basis that the claimants lost their employment on January 2, 1991. With respect to Swannell, payments were allocated to the week commencing January 20, 1991 on the basis that he lost his employment on January 18, 1991. Typically, the receipt of severance pay has the effect of deferring the date on which a claimant is eligible to receive benefits until such time as the severance and vacation pay is deemed to be exhausted. In cases where a claimant has been in receipt of unemployment benefits before severance and vacation pay becomes payable, there is often a resulting overpayment which can be recovered by the Commission under the Unemployment Insurance Act [R.S.C., 1985, c. U-1] (the Act).
All of the claimants appealed the Commission’s decision. The Board of Referees hearing the Swannell group of appeals simply confirmed the Commission’s decision in toto. The Board of Referees hearing the King group accepted the Commission’s argument that payments made under the Program were earnings, but held that as the plant closed at the end of March, 1991 the proper date of allocation was April 1, 1991. The claimants in the Swannell group appealed their decisions. The Commission did likewise with respect to the King group. All the appeals were heard by the same umpire and on the same date.
Claimants in the Swannell group argued that the payments made pursuant to the Program were not earnings; that if they were earnings they were exempted as “relief grants” as provided for under paragraph 57(3)(c) of the Regulations. Alternatively, the claimants argued that if the payments did not qualify as relief grants, the proper allocation date was April 1, 1991 and not December 30, 1990 or January 20, 1991, the supposed weeks of the temporary lay-offs.
In considering the Swannell group of appeals the Umpire found that the payments made under the Program were prima facie earnings, but that they were exempted as “relief grants”. With respect to the King group, the Umpire concluded that the proper date of allocation commenced with the closure of the plant at the end of March, 1991. However, in light of her holding in the Swannell appeals the Umpire held the payments to be exempted from earnings as relief grants.
It was common ground before the Court that payments made under the Program constitute earnings within the meaning of the Regulations and must be allocated in accordance with the provisions of the Act and Regulations unless those payments are deemed to be relief grants within the meaning of paragraph 57(3)(c). The view that the payments constitute earnings is supported on the following basis. Subsection 58(9) of the Regulations dictates that all earnings paid or payable by reason of a lay-off or separation from employment shall be allocated to a number of weeks that begins with the week of the lay-off or separation. The earnings to be taken into account when applying that provision are referred to in paragraph 57(2)(a) of the Regulations as “the entire income of a claimant arising out of any employment”. In turn, subsection 57(1) of the Regulations defines income to mean “any pecuniary or non-pecuniary income that is or will be received by a claimant from an employer or any other person” (emphasis added). This is a convenient place to reproduce the relevant provisions of the Regulations.
57. (1) In this section,
“income” means any pecuniary or non-pecuniary income that is or will be received by a claimant from an employer or any other person;
…
(2) Subject to this section, the earnings to be taken into account for the purpose of determining whether an interruption of earnings has occurred and the amount to be deducted from benefits payable under subsection 15(1) or (2), 17(4), 18(5), or 20(3) of the Act and for the purposes of sections 37 and 38 of the Act are
(a) the entire income of a claimant arising out of any employment;
…
(3) That portion of the income of a claimant that is derived from any of the following sources is not earnings for the purposes mentioned in subsection (2):
…
(c) relief grants in cash or in kind;
…
58….
(9) Subject to subsections (9.1) and (10), all earnings paid or payable to a claimant by reason of a lay-off or separation from an employment shall, regardless of the nature of the earnings or the period in respect of which the earnings are purported to be paid or payable, be allocated to a number of weeks that begins with the week of the lay-off or separation from employment in such a manner that the total earnings of the claimant from that employment are, in each consecutive week except the last, equal to the claimant’s normal weekly earnings from that employment.
Against this background two principal issues remain for our consideration: (1) did the Umpire err in law in concluding that the payments received under the Program qualified as relief grants; and (2) if so, did the Umpire err in fixing the date of allocation? I shall deal with each of these issues in turn. With respect to the first issue both parties focused on the recent decision of this Court in Canada (Attorney General) v. Vernon, [1995] F.C.J. No. 1394 (C.A.) (QL). It is to that case I now turn.
In Vernon the claimants had been employed with a mining company which had ceased operations. As part of the employees’ severance package the union negotiated for a housing and rental subsidy to offset the loss in property values arising from the closure of the mine. The subsidy was payable as a fixed, one-time cash disbursement, the precise amount being determined by the estimated loss in value of the employee’s home. The Commission took the position that such housing subsidies were earnings and therefore to be allocated under the provisions of the Act and Regulations. Both the Board of Referees and the Umpire disagreed. The Commission sought judicial review of these decisions, but once again was unsuccessful.
Writing for a unanimous Court, Linden J.A. concluded on the basis of earlier jurisprudence that for a payment to constitute earnings the “receipt must evince the character of consideration given in return for work done by the recipient” and “not merely as a consequence of one’s employment status” (at pages 14-15). On the facts in Vernon it was clear that “[t]he subsidy here was not paid for work done, but to indemnify eligible employees for the diminution in value of their principal residence resulting from the closure of the mine” (at pages 15-16).
In light of the above conclusion, Linden J.A. recognized that it was unnecessary to decide whether the housing subsidy constituted a relief grant and was, therefore, exempted. He did so, however, to clarify the law in this area. Specifically, he referred to two CUB decisions (at page 16). In (1987), CUB 11083 [Cairns, Rosemary] “relief grant” had been defined in terms of “freely given assistance for the destitute who are markedly more needy than the general population or workforce”. In (1977), CUB 4199 that term had been defined as “a one-time (and probably rare) payment made by an employer in a special situation [such as] a family emergency or disaster”. Linden J.A. concluded that both definitions, albeit helpful, were somewhat narrow. At pages 17-18 of his reasons a broader definition is offered:
The phrase “relief grant”, therefore, suggests financial assistance that is given to alleviate hardship. Hardship certainly includes, but is not confined to, circumstances of personal destitution, emergency, or disaster. Hardship may also comprise the broader circumstances of financial or other adversity, not necessarily amounting to destitution, emergency or disaster.
In this case, the employer made a humane gesture of alleviating the obvious financial hardship that all employees were expected to suffer from the closure. In the present circumstances, therefore, I have no question that the financial adversity suffered by the employees, being the loss in value of their primary residence as a result of the closing of the mine, falls squarely within the situations meant to be covered by the language “relief grant” as used in subsection 57(3).
Having regard to the above passage, the claimants maintain “that the key component of the definition of a relief grant is the fact that it is financial assistance the objective of which is the alleviation of hardship”. In my opinion, that position is not supported by the Court’s reasoning in Vernon. The flaw in the claimant’s argument can be traced initially to the mistaken belief that financial hardship is a sufficient, rather than a necessary, basis on which to conclude that certain payments qualify as relief grants. To accept the claimants’ position would be to permit the judicial pendulum to swing to the other extreme. I dare say that it is not difficult to argue persuasively that any payment directed at compensation for a loss suffered is likely to have the effect of relieving financial hardship. The extent of such relief is, of course, largely a matter of individual circumstances.
While it is difficult to lay down a definitive, analytical framework which will serve as a ready guide for deciding whether certain types of compensation qualify as relief grants, there are, in my view three closely related aspects which are helpful in determining whether a payment constitutes a relief grant: the circumstances giving rise to the loss, the type of loss for which the compensation is being paid, and the nature of the compensatory scheme.
With respect to the first aspect, in accordance with the reasoning in Vernon, the payment need not be motivated by an emergency situation. However, a payment is more likely to be a relief grant if the circumstances giving rise to it are unusual or anomalous as was the situation in Vernon, where the payments were made in order to offset the losses suffered by the employees in the value of their homes. The employer recognized that the closure of plants in resource based communities can have a dramatic effect on resale housing prices. This type of loss is unique to a certain type of employment, and is not ordinarily experienced by the general workforce. In contrast, in the case at bar, although the employer’s failure to meet its salary and benefits obligation is deplorable, there is nothing particularly unusual about it.
The second aspect that is useful in the characterization of a payment is the type of loss suffered and for which compensation has been made available. In Vernon, the value of the employees’ homes was diminished as a result of the effects of the mine closure. Clearly, the value of one’s home has no direct connection to one’s employment relationship. This is in large part why the payments made by the employer in Vernon were found not to be earnings. In contrast, in the case at bar, the payments provided under the Program are compensation, to a maximum amount, for wages or benefits earned but not paid, and are therefore directly related to one of the most critical aspects of the employment relationship. This close connection militates against the payments in question being deemed relief grants. I note that similar reasoning was first employed by Joyal J. (acting as umpire) in (1986), CUB 12994 [Tallon, Trudy]. In that case it had to be determined whether an additional six weeks salary paid to a claimant by his former employer, to assist him in retraining, was a relief grant. Joyal J. reasoned that as the employer had paid the monies in consideration of the claimant’s years of service the payment could not be considered a “relief grant”.
Finally, the third aspect helpful in assessing the payments is the nature of the compensatory scheme under which they are paid. In Vernon, the employer voluntarily agreed to provide a non-refundable housing and rental subsidy to its employees, payable as a fixed, one-time disbursement based on the estimated loss in value of the housing. In the case at bar, however, the Program is essentially an unfunded insurance scheme intended to compensate all employees in Ontario to a maximum of $5,000, in the event that their employer does not meet its obligations under provincial law in respect of unpaid wages, vacation pay, severance pay, etc. The payments made are specifically based on amounts owing at law, up to the maximum coverage of $5,000. The scheme goes so far as to provide the Ontario government with a right of subrogation which can be exercised against a delinquent employer to recoup the monies paid to the employees (Employment Standards Act, Part XIV.1, section 58.14 [as enacted by S.O. 1991, c. 16, s. 5]). In my view, the possibility of recovering the monies paid also militates against the payments being characterized as a “grant”.
Having regard to the foregoing factors, although none is individually determinative, their cumulative effect leads me to conclude that payments made under the Program lack the attributes of what one could reasonably describe as a “relief grant”. Accordingly, the payments received under the Program must be deemed to constitute non-exempt earnings. I turn now to the issue regarding the proper date of allocation. The immediate question is whether the claimants were temporarily laid off in January, 1991 or whether that is the time of the plant closure as argued by the Commission. As stated earlier, the claimants maintain that closure did not occur until the end of March, 1991.
I note that with respect to the Swannell group, there is no discussion or specific finding by the Board of Referees as to the actual date of the plant closure and the proper date of allocation. With respect to the King group, the Board of Referees concluded on the basis of the evidence that the closure of the plant occurred at the end of March, 1991. That finding of fact was confirmed by the Umpire. As no error on her part has been established, the date of the plant closure and the date the claimants permanently lost their employment is the end of March, 1991.
During oral argument it became evident that a further issue had to be addressed. For purposes of allocation under subsection 58(9) of the Regulations it is necessary to allocate earnings paid or payable to a claimant by reason of a lay-off from employment beginning with the week of the lay-off. Earnings paid or payable by reason of separation are to be allocated, however, beginning with the week of separation: see the reasons of Reed J. (acting as umpire) in (1988), CUB 14854 [Tonna, Mary]. Thus, it remains to be decided whether the vacation and severance amounts paid under the Program were payable at the time of the claimants’ lay-off in January of 1991, or at the time the plant closed at the end of March, 1991. The answer to that question is found in the provisions of the Employment Standards Act.
Section 17, a transitional provision of the amending Act ([Employment Standards Amendment Act (Employee Wage Protection Program), 1991] S.O. 1991, c. 16) that added the Program to the Employment Standards Act, establishes that a person is ineligible to receive compensation unless and until he or she has been “terminated” or is deemed to be “terminated”. Subsection 58(1) of the Employment Standards Act provides that the term “termination” means a “lay-off that is effected because of a permanent discontinuance of all of the employer’s business” or a lay-off which equals or exceeds thirty-five weeks in a period of 52 consecutive weeks. On the facts of this case the lay-off did not exceed 35 weeks before the plant closed and, as the claimants’ employment was not terminated until the end of March, 1991, entitlement to payments under the Program did not arise until that date. In conclusion the monies received by the claimants were not payable under the meaning of the Act until that time, and cannot be allocated to the earlier lay-off dates in January, 1991.
Before closing, I wish to note that, strictly speaking, the claimants did not become entitled to compensation under the Program until October 18, 1991, the date the amendments to the Employment Standards Act were brought into effect. It is difficult to accept that compensation, which is to become available under a statutory scheme, is payable prior to the legislation actually coming into force, even in cases where the legislation is made retroactive. For some undisclosed reason this reality was not pursued by the parties. Accordingly, I must presume that it was avoided for good reason.
In conclusion, the application for judicial review must be allowed, the decision of the Umpire set aside and the matter referred back to the Chief Umpire or his designate for redetermination on the basis that: (1) the amounts paid to the respondent under the Ontario Employee Wage Protection Program are non-exempt earnings to be allocated under section 58 of the Regulations by reason of separation from employment; and (2) the earnings are to be allocated on the basis that separation from employment occurred at the end of March, 1991.
Strayer J.A.: I agree.
MacGuigan J.A.: I agree.