A-864-83
Attorney General of Canada (Applicant)
v.
Canadian Pacific Ltd. (Respondent)
Court of Appeal, Pratte, Ryan and Hugessen JJ.—
Montreal, January 18 and 20, 1984.
Unemployment insurance — Application to review and set'
aside Umpire's decision allowing appeal from decision of
Minister of National Revenue confirming respondent owed
premiums claimed — Respondent paying employees unsolicit
ed amounts received from customers for distribution as tips in
accordance with collective agreement — Umpire holding
amounts should not be included in caclulating premiums
payable by respondent under Unemployment Insurance Act,
1971 — S. 66 imposing on employer obligation to pay premi
ums and determining amount — Premiums fixed at percentage
of insurable earnings — `Insurable earnings" defined in s.
2(1)(k) as total amount of earnings from insurable employ
ment — Generally tips constituting earnings from employment
— Tips forming part of insurable earnings because earned as
result of work and paid because employees — 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. 2(1)(k), 62(1) (as am. by S.C. 1976-77, c. 54, s. 50),
(2), 66(1),(2), 68(1), 84.
CASES JUDICIALLY CONSIDERED
APPLIED:
Penn v. Spiers & Pond, Limited, [1908] 1 K.B. 766 (Eng.
C.A.); Great Western Railway Company v. Helps, [1918]
A.C. 141 (H.L.).
REFERRED TO:
Skailes v. Blue Anchor Line, Limited, [1911] 1 K.B. 360
(C.A.).
COUNSEL:
D. Verdon for applicant.
D. Courcy for respondent.
SOLICITORS:
Deputy Attorney General of Canada for
applicant.
Wendlandt, Bennett & Paré, Montreal, for
respondent.
The following is the English version of the
reasons for judgment delivered orally by
PRATTE J.: This application made pursuant to
section 28 of the Federal Court Act [R.S.C. 1970
(2nd Supp.), c. 10] is from a decision of an
Umpire which allowed an appeal, pursuant to sec
tion 84 of the Unemployment Insurance Act, 1971
[S.C. 1970-71-72, c. 48], from a decision of the
Minister of National Revenue confirming that
respondent owed the premiums claimed from it.
The problem raised by the case at bar concerns
the calculation of premiums payable under the
Unemployment Insurance Act, 1971. In particular,
it is as follows: in calculating these premiums, is it
necessary to take into consideration amounts
which an employer paid its employees after receiv
ing them from its customers, who had paid them to
the employer of their own accord, to be distributed
to the employees as tips?
Respondent operates several hotels, including
the Château Frontenac in Quebec City.' The col
lective agreement which governed the working
conditions of Château Frontenac employees at the
time in question contained the following clauses:
The parties hereby agree that when the person responsible
for a function such as a convention or banquet leaves tips with
the hotel for distribution, 80 per cent of these tips will be
distributed by the hotel to employees covered by the collective
agreement who have worked at such functions.
These conditions shall not apply when the person responsible
for the function himself specifies the manner in which the hotel
shall make the distribution.
In accordance with these stipulations, respond
ent distributed certain amounts to its employees. It
was established that these amounts came from
customers of respondent who, without being
required to do so, had paid them to it for distribu
tion to its employees as tips.
In the decision a quo, the Umpire held that
these amounts should not be taken into consider
' These hotels are in fact operated by Canadian Pacific
Hotels Limited. Accordingly, the premiums in question should
have been claimed from this company rather than from
respondent. However, respondent did not wish to take advan
tage of this discrepancy, and I will assume in these reasons that
the Château Frontenac is operated by respondent.
ation in calculating the amount of the premiums
payable by respondent under the Unemployment
Insurance Act, 1971.
The Unemployment Insurance Act, 1971 [as
am. by S.C. 1976-77, c. 54, s. 50] provides for the
payment of employer and employee premiums. In
this regard, it contains several provisions of which
the following should be cited:
62. (1) In respect of each year, the Commission shall, subject
to approval by the Governor in Council, fix the rates of
premium that persons employed in insurable employment and
the employers of such persons will be required to pay in that
year to raise an amount equal to the adjusted basic cost of
benefit under this Act in that year as that cost is determined
under section 63.
(2) The rates of premium for a year shall be calculated in
terms of a percentage of the insurable earnings in that year and
the employees' premiums for that year shall be a like percent
age for all insured persons.
66. (1) Every person shall, for every week during which he is
employed in insurable employment, pay, by deduction as pro
vided in Part IV, an amount equal to such percentage of his
insurable earnings as is fixed by the Commission as the
employee's premium for the year in which that week occurs.
(2) Every employer shall, for every week during which a
person is employed by him in insurable employment, pay, in
respect of that person and in the manner provided in Part IV,
an amount equal to such percentage of that person's insurable
earnings as is fixed by the Commission as the employer's
premium payable by employers or a class of employers of which
the employer is a member, as the case may be, for the year in
which that week occurs.
68. (1) Every employer paying remuneration to a person
employed by him in insurable employment shall deduct from
such remuneration an amount equal to the employee's premium
payable by that insured person under section 66 for any week
or weeks in respect of which such remuneration is paid and
remit it together with the employer's premium payable by the
employer under section 66 for such week or weeks to the
Receiver General at such time and in such manner as is
prescribed by the regulations.
It is clear from reading these provisions that it is
section 66 which imposes the obligation to pay
premiums and determines their amount. These
premiums, on either side, must be paid by the
employer, and on either side they are fixed, as
provided by section 66, at a percentage of the
insurable earnings of the employees in question. In
calculating the amount of the premiums, therefore,
it is necessary to take into account all insurable
earnings of the employees. If the amounts which
respondent paid its employees in accordance with
the aforementioned provisions of the collective
agreement constituted a part of the employees'
insurable earnings, they ought to have been taken
into account in calculating the premiums; if not,
they should not have been.
The expression "rémunération assurable" is a
translation of the English expression "insurable
earnings". These expressions are defined as follows
in paragraph 2(1)(k):
2. (1) Dans la présente loi,
k) «rémunération assurable,' désigne, 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;
2. (1) In this Act,
(k) "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;
Reading the English and French versions of this
definition together with the other provisions of the
Act, it seems clear that the French word "rému-
nération" is used in the sense of the English word
"earnings": 2 it accordingly follows that all the
earnings of an insured deriving from insurable
employment constitute a part of the insurable
earnings. There does not appear to be any doubt
that, as a general matter, the amounts received by
an employee as tips are indeed earnings from his
employment. In 1908 the British Court of Appeal,
in Penn v. Spiers & Pond, Limited, [1908] 1 K.B.
766, held that, in calculating compensation pay
able under the Workmen's Compensation Act then
in effect in Britain, it was necessary to take into
account tips received by the employee because
such tips constituted "earnings in the employ
ment". Delivering the judgment of the Court in
that case, Lord Cozens-Hardy M.R. said [at page
769]:
2 See: Skailes v. Blue Anchor Line, Limited, [1911] 1 K.B.
360 (C.A.).
It has often been pointed out in this Court that the measure
of compensation under the Act is not wages, but earnings. This
is conceded by the respondents, who admit that the value of the
board must be taken into account. It is not every kind of
earnings which can be taken into account. They must be
earnings in the employment. If the workman by the exercise of
his talents during his leisure hours, as, say, a conjurer or a
musician, gains money, the money thus gained will increase his
income, but not his "earnings," within the Act. "Earnings in
the employment" do not always come from the employer. It is
common knowledge that there are many classes of employees
whose remuneration is derived largely from strangers. A hall
porter at an hotel and a driver of a postchaise are sufficient
illustrations. It would be absurd to say that the money received
from the hotel-keeper or the post-master alone represents the
rate per week at which the workman was being remunerated.
Some years later, the same point was dealt with in
the same way by the House of Lords in Great
Western Railway Company v. Helps, [1918] A.C.
141. The following passage from the opinion of
Lord Dunedin [at page 145] should be cited:
The whole point, therefore, is, do these tips fall within the
statutory expression of "earnings"? If you were to ask a person
in ordinary common parlance what this porter earned, the
answer would be: "Well, I will tell you what he gets; he gets so
much wages from his employers, and he gets on an average so
much in tips."
My Lords, it has been sought in the argument addressed for
the appellants to limit the meaning of "earnings" to what the
workman gets by what I may call direct contract from his
employers. The simple answer is that the statute does not say
so; it uses the general term "earnings" instead of the term
"wages" or the expression "what he gets from his employer,"
and as a matter of fact the employer, in a case where there is a
known practice of giving tips, obviously gets the man for rather
less direct wages than he would if there was not that other
source of remuneration to the man when he is in his post.
In the case at bar, I think it is clear that the
amounts in question constitute for the employees
earnings from their employment: they earned these
amounts as a result of their work, and the amounts
were paid to them because they were employees.
These amounts were accordingly a part of their
insurable earnings and, on that account, should be
taken into consideration in calculating the premi
ums payable under section 66 of the Act.
For these reasons, I would allow the application,
set aside the decision a quo and refer the case back
to the Umpire to be decided by him on the
assumption that the amounts which respondent
received from its customers as tips and distributed
to its employees constituted part of the insurable
earnings of those employees, and on that account
should be taken into consideration in calculating
the premiums payable under section 66 of the
Unemployment Insurance Act, 1971.
RYAN J. concurred.
HUGESSEN J. concurred.
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.