A-18-82
Minister of National Revenue (Applicant)
v.
Alexander Visan (Respondent)
Court of Appeal, Urie J., Lalande and McQuaid
D.JJ.—Toronto, November 2, 1982; Ottawa,
January 5, 1983.
Judicial review — Applications to review — Unemployment
insurance — Minister seeks to have reviewed and, in part, set
aside decision of Umpire reversing determination that
respondent not in insurable employment during relevant period
— Respondent receiving long-term disability benefits from
insurer under employment contract — Questions whether
respondent in "excepted employment" under Regulations and
whether Regulations ultra vires or repugnant to regulation-
making power — Application allowed — Federal Court Act,
R.S.C. 1970 (2nd Supp.), c. 10, s. 28 — Unemployment
Insurance Act, 1971, S.C. 1970-71-72, c. 48, ss. 3(1),(2) (as
am. by S.C. 1974-75-76, c. 80, s. 1), 4(1),(3)(h) (as am. by S.C.
1978-79, c. 7, s. 2), 4(5), 31(2), 75(3), 94 — Unemployment
Insurance Regulations, SOR/55-392, s. 54 (as enacted by
SOR/78-809, s. 1 and SOR/79-168, s. 1).
This is a section 28 application to review and set aside part of
an Umpire's decision allowing an appeal from the Minister's
determination that respondent was not in insurable employment
for the period September 28, 1978 to January 31, 1980.
Due to prolonged illness, the respondent was unable to teach
and received long-term disability benefits from an insurance
company for the relevant period, pursuant to coverage provided
under his contract of employment. No premiums were paid to
the Unemployment Insurance Commission. Upon retirement,
the respondent was denied special severance benefits on the
basis that he was not in "insurable employment" during the
period he received disability payments. He appealed to an
Umpire who ruled that the employment contract provided for
those payments and that the administrative function of the
insurance company in making the payments did not result in
turning the money into other than income. The Minister argues
that the respondent is caught by the Regulation which excepts
employment when a person works less than 20 hours a week, or
is not in receipt of remuneration, or who receives remuneration
from other than an employer. The respondent argues that the
Regulation is ultra vires and repugnant and inconsistent with
the provisions granting the power to make regulations. It was
conceded by the Minister that the Regulation was not in force
for the period September 28, 1978 to December 31, 1978.
Held, the application is allowed. In determining whether
employment is insurable, one must first ascertain if it is except
ed employment as subsection 3(1) demands; subsection 3(2)
defines excepted employment and includes employment except
ed by regulation under section 4, notably paragraph 54(1)(a).
That Regulation is intra vires as it does not enlarge the class of
persons in excluded employment under subsections 3(2) and
4(3), but limits the ambit of class to which exception appli
cable; restrictions respecting remuneration and its source also
fall under the scope of regulation-making power when para
graph 4(3)(h) and subsection 4(5) are read together. The
respondent's payments are not remuneration for not made by
employer and are not in return for services rendered.
Per Lalande D.J. dissenting: The respondent's contract pro
vided that the employer would contribute the entire cost of a
disability plan. Regulation 54(1)(a) is ultra vires for in pur
porting to except from employment persons receiving earnings
from other than an employer, it goes beyond the authority of
the Commission to make regulations under paragraph 4(3)(h)
keeping in mind the definition of insurable employment in
subsection 3(1). Subsection 4(5) only gives the Commission
leeway in manner of exercising regulation-making power and
does not enlarge the scope or materia of the power.
CASE JUDICIALLY CONSIDERED
APPLIED:
The Queen v. The Postmaster General (1876), 1 Q.B.D.
658.
COUNSEL:
R. E. Taylor and I. S. MacGregor for
applicant.
M. Green for respondent.
SOLICITORS:
Deputy Attorney General of Canada for
applicant.
Golden, Levinson, Toronto, for respondent.
The following are the reasons for judgment
rendered in English by
URIE J.: This is an application under section 28
of the Federal Court Act, R.S.C. 1970 (2nd
Supp.), c. 10, to review and, in part, to set aside
the decision of the Umpire appointed pursuant to
the Unemployment Insurance Act, 1971, S.C.
1970-71-72, c. 48, ("the Act"), whereby he
allowed the appeal of the respondent from a deter
mination of the Minister made under subsection
75(3) of the Act that the respondent was not in
insurable employment within the meaning of the
Act during the period commencing September 28,
1978 and terminating January 31, 1980. The facts,
which are not in dispute, follow.
The respondent, during the relevant period of
time had been employed by the Niagara South
Board of Education ("the Board") under a con
tract of employment signed with the then Thorold
and District High School Board of Education in
September of 1968. The respondent became ill in
1977 but continued to receive his regular salary
until February 3, 1978 which was the expiry date
for his entitlement to sick leave with pay. As at
that date his annual salary was $25,973 but, there
after, he received no further monies from the
Board.
The respondent qualified for long-term disabili
ty benefits effective September 28, 1978 pursuant
to coverage provided to employees of the Board by
the Continental Life Insurance Company. The
benefit to which he became entitled on and after
September 28, 1978 amounted to $1,229.65 per
month and he continued to receive monthly pay
ments of that amount until January 31, 1980. No
unemployment insurance premiums were deducted
from the above disability payments.
The respondent attained his retirement age of
65 years on January 6, 1980 and submitted a letter
of resignation to the Board, which resignation was
accepted by it by letter dated January 8, 1980.
Subsequently he applied to the Unemployment
Insurance Commission for special severance ben
efits pursuant to subsection 31(2) of the Act. The
Commission, by letter dated February 15, 1980,
refused the respondent's application, whereupon he
appealed to the Board of Referees pursuant to
section 94 of the Act on March 7, 1980. By a
majority decision dated April 2, 1980, the Board
of Referees returned the case to the Insurance
Officer for "further clarification of the insurability
of employment in question".
On April 18, 1980 the respondent was informed
that, based on the information which he had pro
vided, his claim had not been established. How
ever, a request for determination of insurability
was stated to have been submitted to Revenue
Canada, Taxation, for a ruling on the insurability
for the long-term disability benefits received by
the respondent from the Continental Life Insur
ance Company from September 28, 1978 to Janu-
ary 31, 1980. It was stated in a letter to the
respondent that Revenue Canada, Taxation, had
ruled that the monies were paid by a private
carrier effective September 28, 1978 and were not
insurable earnings so that there was no change in
the initial refusal to pay benefits. The respondent
then, within the time limited by paragraph
75(3)(b) of the Act, applied to the Minister of
National Revenue for determination of the ques
tion as to whether he was in insurable employment
with the Niagara South Board of Education
during the period that he was in receipt of disabili
ty benefits from the Continental Life Insurance
Company during the period September 28, 1978 to
January 31, 1980. By letter dated October 21,
1980 he was informed by the Minister that:
It has been determined that you were not in insurable
employment with the Niagara South Board of Education
during the period under review because you had no insurable
earnings from the Board on which premiums were to be paid.
The disability benefits paid to you by Continental Life were not
insurable earnings and no premiums were required to be paid
thereon.
On November 10, 1980 the respondent appealed
to the Umpire from the foregoing determination of
the Minister which appeal was heard by the
Umpire on August 25, 1981 and the decision in
respect thereof was rendered on November 3,
1981. It is this decision that the applicant herein
seeks to have, in part, set aside.
The reasons for judgment of the learned Umpire
contained the following passage which sets forth
the gist of his reasons:
I am of the opinion that this appeal must be allowed. Sick
pay allowances to teachers from the Board's [sic] employing
them during periods of illness have been a usual term of their
contract of service. There could be no argument that such
monies are income of the teacher and as such earnings as that
term is used in the Unemployment Insurance Act and that Mr.
Visan would be entitled to his Special Severance Benefits.
Some Boards in cases of long illnesses in order to avoid the
headaches of administering such payments under such condi
tions have decided to transfer this burden to insurance compa
nies under what are known as long term disability policies. I am
at a loss to appreciate why this unilateral action of a Board
from [sic] its own convenience can turn the monies received by
the teacher under the policy into something other than income
and earnings and thus deprive him of Special Severance
Benefits.
It was the contention of the applicant that, with
respect to the period commencing January 1, 1979
and terminating January 31, 1980, the learned
Umpire erred at law in holding that the respond
ent's employment during that period was "insur-
able employment" within the meaning of subsec
tion 3(1) of the Act. In his submission, by virtue of
paragraph 54(1) (a) of the Unemployment Insur
ance Regulations, SOR/55-392, as am. by
SOR/78-809, s. 1 and SOR/79-168, s. 1, the
respondent's employment was excepted from
"insurable employment" as that term is defined by
subsection 3(1) of the Act. Counsel for the appli
cant conceded that for the period commencing
September 28, 1978 and terminating December
31, 1978, the respondent was in "insurable
employment" within the meaning of the Act. The
difference in the entitlement to benefits between
the two periods is due, it was said, to the fact that
paragraph 54(1)(a) of the Regulations, in the
form applicable during the period January 1, 1979
to January 31, 1980, did not become effective until
January 1, 1979.
Counsel for the respondent contended that sec
tion 54 of the Unemployment Insurance Regula
tions enacted by SOR/79-168 was not validly
passed pursuant to paragraph 4(3)(h) of the Act
and is consequently ultra vires. He also argued
that section 54 is repugnant to and inconsistent
with paragraph 3(1)(a) of the Act.
The relevant subsections of the Act are subsec
tions 3(1) and 3(2) which read as follows:
3. (1) Insurable- employment is employment that is not
included in excepted employment and 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;
(b) employment in Canada as described in paragraph (a)
under Her Majesty in right of Canada;
(c) service in the Canadian Forces or in any police force;
(d) employment included in insurable employment by regula
tion under section 4; and
(e) employment in Canada of an individual as sponsor of a
project under programs designed primarily to create employ
ment and conducted by the government of Canada pursuant
to any Act of Parliament.
(2) Excepted employment is
(a) employment of a person who is sixty-five years of age or
over;
(b) employment of a casual nature other than for the purpose
of the employer's trade or business;
(c) employment of a person by his spouse;
(d) employment where the employee is a dependant of the
employer;
(e) employment in Canada under Her Majesty in right of a
province;
(J) employment in Canada by the government of a country
other than Canada or of any political subdivision thereof;
(g) employment in Canada by an international organization;
(h) employment that constitutes an exchange of work or
services; and
(i) employment included in excepted employment by regula
tion under section 4.
Subsection 4(1) empowers the Commission,
with the approval of the Governor in Council, to
make regulations for including in insurable
employment various kinds of employment. Subsec
tion 4(3) empowers the Commission, with the
approval of the Governor in Council, to make
regulations excepting from insurable employment
various types of employment. Paragraph (h) is the
clause relied upon by the applicant as his authority
for claiming that section 54 of the Regulations is
intra vires. Paragraph 4(3)(h) reads as follows:
4....
(3) The Commission may, with the approval of the Governor
in Council, make regulations for excepting from insurable
employment
(h) any employment with an employer in which persons are
employed for less than twenty hours in a week or in which
the earnings of persons are less than thirty per cent of the
maximum weekly insurable earnings.
It is common ground that the history of the
enactment of subsection 54(1) of the Regulations,
as set out in the applicant's memorandum of argu
ment, is as follows:
By SOR/78-809, Section 54 of the Unemployment Insurance
Regulations, P.C. 1955-1491, as amended was revoked and an
amended Section 54 substituted therefor, pursuant to para
graph 4(3)(f) of the Unemployment Insurance Act, 1971,
which became effective January 1, 1979, subsection (1) of
which read as follows:
54. (1) Subject to subsections (2) and (3) the employment
with an employer in any week of a person,
(a) whose earnings are calculated in whole or in part on a
time-worked or fixed-salary basis and who is employed and
remunerated for less than twenty hours by his employer, or
(b) whose earnings are calculated on a basis other than
that described in paragraph (a) and whose cash earnings
from that employer are less than thirty per cent of the
maximum weekly insurable earnings,
is excepted from insurable employment.
By SOR/79-168, the said amended Section 54 was revoked
and an amended Section 54 substituted therefor, pursuant to
paragraph 4(3)(h) of the Unemployment Insurance Act, 1971,
effective February 19, 1979, identical to Section 54 of the said
Regulations passed pursuant to the said SOR/78-809.
Section 54 of the Unemployment Insurance Regulations is
renumbered Section 13 of the said Regulations in the Con
solidated Regulations of Canada, 1978, Chapter 1576, as
amended, which consolidation came into force August 15, 1979
by virtue of SI/79-13 [sic] passed pursuant to the Statute
Revision Act, 1974-75-76, c. 20.
It is also common ground that subsection 54(1)
as quoted above, was the applicable provision
during the period January 1, 1979 to January 31,
1980 although it has since been amended effective
January 1, 1981.
Counsel for the applicant submitted that, on the
facts of this case, the respondent fell squarely
within the purview of paragraph 54(1)(a) of the
Regulations in that, although he was under con
tract with the Niagara South Board of Education
during the period in issue herein, he was a person
whose earnings were calculated on a fixed-salary
basis and who was employed and remunerated for
less than 20 hours per week by his employer. As a
result, it was said, his employment was excepted
from insurable employment and he was not, there
fore, entitled to the special severance benefits
which he claimed.
While it was not disputed that he could not and
did not work for 20 hours per week during the
period in question because he was physically dis
abled, it was also said that, in any event, the
payments which he received did not constitute
remuneration for this employment within the
meaning of Regulation 54(1)(a) but were, rather,
long-term disability benefits. Furthermore, even if
it were considered that he was remunerated for 20
hours per week, he was not remunerated by his
employer as required by the Regulation but
received the disability benefits from a third party,
the Continental Life Insurance Company.
With regard to those submissions, counsel for
the respondent argued that paragraph 3(1)(a),
supra, defines "insurable employment" as
"employment that is not included in excepted
employment" and is, inter alia, where "the earn
ings of the employed person are received from the
employer or some other person ...". Therefore, in
so far as paragraph 54(1)(a) supra, is concerned,
by referring only to a person "... who is employed
and remunerated for less than twenty hours by his
employer" (emphasis added) it purports to except
from insurable employment, employment where
the earnings are received from a person other than
his employer. As a result, counsel argued, it is
ultra vires because it is repugnant to and inconsist
ent with paragraph 3(1)(a) of the Act in that it
excludes earnings received from "some other
person".
In my opinion the short answer to the contention
of the respondent is that in determining whether or
not a particular employment is "insurable" it must
first be ascertained whether or not it is "excepted
employment". That this is the correct approach
flows from the opening words of subsection 3(1),
namely, "Insurable employment is employment
that is [a] not included in excepted employment
and [b] is ..." (emphasis and identification letters
added for clarity). Reference then must be made
to subsection (2) which defines "Excepted employ
ment". Paragraphs (a) to (h) except specific forms
of employment while (i) excepts "employment
included in excepted employment by regulation
under section 4". Regulation 54(1)(a) having been
enacted pursuant to section 4, it cannot, as I see it,
be said to be repugnant to or inconsistent with
paragraph 3(1)(a) because resort cannot be had to
that paragraph until the "excepted employment" is
ascertained. In other words, the Regulation is
determinative of the characterization of a particu
lar type of employment. It is only when that has
been ascertained that one turns to paragraph
3(1)(a). Regulation 54(1)(a), thus, is not ultra
vires, in my opinion, on the ground of the alleged
repugnancy and inconsistency with paragraph
3(1)(a).
In the alternative, counsel for the respondent
argued that since Regulation 54(1)(a) purports to
except from insurable employment "the employ-
ment with an employer in any week of a person,
whose earnings are calculated in whole or in part
on a time-worked or fixed-salary basis and who is
employed and remunerated for less than twenty
hours [per week] by his employer ...", it is ultra
vires because it imposes additional conditions on
what employment is excepted from insurable
employment, namely, that the person be remuner
ated for less than twenty hours by his employer.
Such conditions, he argued, were not contemplated
in the regulation-making power granted by para
graph 4(3)(h) which makes no reference to remu
neration or its source.
The purpose of Regulation 54 is to define those
persons who, in addition to those specifically
referred to in subsections 3(2) and 4(3) as being
excepted from insurable employment, shall be
excluded from entitlement to unemployment insur
ance benefits. One of the classes of persons is set
out in paragraph 54(1)(a) of the Regulation,
namely, all those persons who are employed for
less than 20 hours per week. That class, of course,
was entitled to be specifically excepted by regula
tion on the authority of paragraph 4(3)(h). What
Regulation 54(1)(a) has done is to further restrict
the class of persons not entitled to unemployment
insurance benefits to those persons, not only who
are employed for less than 20 hours, but who are
remunerated for less than 20 hours. In other
words, it does not enlarge the class of persons in
excepted employment but limits the ambit of the
class to which the exception is applicable. The
authority for the Governor in Council to so restrict
the application of paragraph 4(3)(h) arises, as I
see it, from subsection 4(5) of the Act. It reads:
4....
(5) A regulation made under this section may be conditional
or unconditional, qualified or unqualified, and may be general
or restricted to a specified area, a person or a group or class of
persons.
The restrictions imposed by Regulation 54(1)(a)
fall within the scope of the regulation-making
power when paragraph 4(3)(h) and subsection
4(5) are read together, in my opinion, and this
ground of attack on the validity of the Regulation
therefore fails.
Responding to applicant counsel's contention
that the payments received by the respondent did
not constitute remuneration but were long-term
disability benefits, counsel for the respondent
argued that, assuming the validity of the Regula
tion, the payments by the Continental Life Insur
ance Company were in fact remuneration paid by
the respondent's employer because they flowed
from the employment relationship which required
services to have been rendered before liability for
payment occurred.
In testing the validity of this submission, the
words "by his employer" ought not to be ignored
or severed from the paragraph as urged by counsel
for the applicant. Even if it were proper to do so, it
is not, in my view, necessary. What is required is
to determine the meaning of the word
"remunerated" in the context in which it is used in
the Regulation. The Shorter Oxford English Dic
tionary, 3rd edition, defines "remunerate" and
"remuneration" as follows:
... 1. trans. To repay, requite, make some return for (services,
etc.). 2. To reward (a person); to pay (a person) for services
rendered or work done .... Hence Remuneration, reward,
recompense, repayment; payment, pay.
From the definition it can be seen, I think, that
the character of the payment is determined by its
nature. Applying that test to the payments made
to the respondent, it is clear that they were not
made for services rendered but, in a sense, were
the opposite of payments of that kind, viz., to
compensate the respondent, in part, for the loss of
payments for services which he would have ren
dered had he not been prevented from doing so by
his disability. As was said in The Queen v. The
Postmaster General,' "remuneration ... means a
quid pro quo. If a man gives his services, whatever
consideration he gets for giving his services seems
to me a remuneration for them." The disability
payments made to the respondent in this case, as I
view them, cannot be characterized as remunera
tion within the meaning of the Regulation.
' (1876), 1 Q.B.D. 658 at p. 663.
Support for this conclusion is derived from the
record. It discloses that the employer assumed no
responsibility for further payments to the respond
ent after his sick leave had run out. The Board's
insurer (Continental) did not view the payments as
remuneration as evidenced by the fact that it made
no deductions from the monthly disability pay
ments for unemployment insurance premiums. It
would appear, then, that neither the Board nor the
insurer viewed the payments as insurable earnings.
I do not regard the fact that the respondent's
employment contract appeared to have remained
in force as determinative of the character of the
payments by the Continental Life Insurance Com
pany. The insurance contract does not form part of
the record so that the characterization of the
payments has to be derived from the other facts
which do appear as part thereof. From these I
conclude that they do not constitute remuneration
within the meaning of the Regulation for the
reasons which I have given. The respondent's
endeavour to support the decision of the Umpire
must, therefore, fail.
From the foregoing it is apparent that the
learned Umpire erred in his decision so that the
section 28 application must be allowed. The deci
sion of the Umpire should be set aside and the
matter should be referred back to the Umpire for
disposition consistent with these reasons.
MCQUAID D.J. concurred.
* * *
The following are the reasons for judgment
rendered in English by
LALANDE D.J. (dissenting): Mr. Justice Urie
has reviewed the record, statutory provisions and
submissions in this application under section 28. I
need add only that it was a term of respondent's
contract of employment that the employer con
tributed the entire cost of the Long-Term Disabili
ty Plan.
In my view, subsection 54(1) of the Unemploy
ment Insurance Regulations, in so far as it pur-
ports to except from insurable employment the
employment of a person whose earnings are
received from some person other than his employ
er, goes beyond the authority of the Commission to
make regulations concerning excepted employ
ment.
That authority must come from paragraph
4(3)(h) of the Unemployment Insurance Act,
1971, and I do not see it there bearing in mind the
meaning of insurable employment set out in sub
section 3(1).
With respect I do not agree that subsection 4(5)
of the Act cures this ultra vires operation of
Regulation 54(1) and allows it to clash with para
graph 3(1)(a) of the Act. Subsection 4(5) gives
leeway to the Commission in the manner it may
exercise its power to make regulations (by impos
ing conditions, qualifications, restrictions as to
area or persons), but the scope or materia of the
power itself is not enlarged.
Respondent's employment, not having been val
idly excepted, fell within the meaning of insurable
employment.
The fact that no premiums were paid in respect
of what respondent received has no consequence
upon his claim to the special severance benefit
under subsection 31(2) of the Act.
I would therefore dismiss the application.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.