Citation: 2011 TCC 381
Date: 20110808
Docket: 2010-3092(EI)
BETWEEN:
COREEN GEDDES,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
D'Auray J.
[1] The question to be determined
in this appeal is whether the appellant had sufficient insurable hours in order
to qualify for unemployment benefits.
[2] In order to make this
determination, I have to answer the following two questions. The first one is
whether the amounts paid to the appellant by the employer as maternity leave
top-up constitute insurable earnings. The second one is whether the lump sum
received by the appellant for the loss of her employment constitutes a retiring
allowance.
FACTS
[3] The appellant started her
employment with Lyons Gate Hospital Foundation (the Foundation) in February
1999.
[4] The appellant was the Director
of Annual Giving for the Foundation and reported to the President of the
Foundation, Ms. Savage.
[5] On October 10, 2007, the
appellant went on maternity leave following the birth of her daughter that day.
[6] During her maternity leave the
appellant received maternity leave top up from the Foundation.
[7] On July 31, 2008, Ms. Savage
sent an email to the appellant asking when she would return to work. Ms. Savage
also stated in her e-mail:
We can then arrange to meet to discuss the
changes that have taken place in the office over the last year, and your role.
[8] The same day, the appellant responded
that she was due to return to work on October 9, 2008.
[9] On August 1, 2008,
Ms. Savage responded that there would be no problem for the appellant to
return to work on October 9, 2008.
[10] On September 5, 2008,
Ms. Savage sent an email to the appellant asking her to attend a meeting
on September 9, 2008 to discuss some of the changes to Foundation’s organisational
structure.
[11] On September 9, 2008,
the appellant attended the meeting as requested. However, the meeting took an
unexpected turn for the appellant, rather than discussing her return to work and
some of the changes made to the Foundation’s organisational structure. She was informed
by Ms. Savage that her employment was being terminated effective October 9, 2008.
[12] Ms. Savage told the
appellant that there had been a reclassification of her position, and as a
result, the appellant’s position had been eliminated and replaced with a
reclassified position.
[13] After the meeting of September 9, 2008
the appellant did not return to work.
[14] As a severance package, the
Foundation offered the appellant a continuation of her salary for a period of 5
months (from October 9, 2008 to March 9, 2009) as compensation in lieu of
notice: see Exhibit A-1.
[15] The appellant did not accept
the initial offer of the Foundation. After negotiations she reached a settlement
whereby she would receive a lump sum equivalent to four months of salary, and
additionally 20% of four months’ salary in lieu of benefits. Upon the
appellant’s request, the cheque was to be dated January 1, 2009.
[16] The appellant executed a release
in favour of the Foundation, whereby she released the Foundation from any
claims arising out of or relating to her employment, the termination of her
employment and the loss of any pension.
[17] During the negotiations the
Foundation continued to pay the salary of the appellant, namely from October 9,
2008 until December 31, 2008.
[18] On March 9, 2008 the appellant
applied for unemployment benefits.
[19] By letter dated May 13, 2009, Human
Resources and Skills Development Canada (HRSDC) informed the appellant
that she did not qualify since she had 345 hours of insurable employment
between March 2, 2008 and February 28, 2009 whereas she needed 700 hours to
qualify.
[20] On September 16, 2009 following
a ruling request by HRDC, the appellant was informed by the Canada Revenue Agency (CRA),
That she did not qualify for insurance
employment benefits for the period of October 9, 2008 to December 12, 2008 since
you were in receipt of salary continuance and the total insurable hours are 345
as calculated by your employer.”[…] “We have also determined that for the
period from December 13, 2008 to April 9, 2009 you were in receipt of a lump
sum payment. This payment is considered to be a payment in lieu of notice, and
is subject to EI premiums, however it does not have any insurable hours
attached to it.
Appellant’s position
[21] On the question of the treatment
of the maternity leave top up, the appellant argues the maternity leave top up
and vacation pay are considered to be insurable earnings.
[22] On the question of the
treatment of the lump sum payment, she submits that there is no distinction
between the payment of salary continuance and the lump sum payment. In the
appellant’s view, having accepted one form of payment as insurable, CRA must
accept the remainder.
Analysis
[23] In Mulvenna v. M.N.R. my
colleague Justice Campbell Miller decided that maternity leave top up qualified
as insurable earnings.
[24] In light of this decision, I
allowed the appeal orally during a conference call held on April 15, 2011. I
noticed after that following the decision of Mulvenna an amendment was made
to the Insurable Earnings and Collection of Premiums Regulations (IECPR),
excluding from insurable earnings the maternity leave top up pursuant to
subsection 10.11 of the Employment Insurance Regulations (EIR)
and subparagraph 2(3)(f)(ii) of the IECPR.
[25] Since my judgment was not
signed, I asked the Tax Court coordinator on April 19, 2011 to schedule a new
conference call so that I could amend my judgment and reasons. The second
conference call was held on May 17, 2011.
[26] During the conference call, I
advised the appellant that in light of the amendment, I could not consider the
maternity leave top up as insurable earnings. I asked her if she wanted to
make other submissions. On June 21, 2011, I received written submissions from
the Appellant.
[27] In her written submissions, the
appellant argues that she qualifies without the maternity leave top up as CRA
should have taken in addition to her 345 hours as salary continuation, 241.29
hours for vacation pay and 45 hours for accrued salary. This would amount to
631.29 hours. However, even if I were to accept this submission, she would not
qualify since pursuant to section 7 of the Employment Insurance Act (EIA),
she needed 700 hours.
[28] She also submits that the hours
associated with the lump sum payment should qualify as insurable hours. She
argues that the lump sum payment should be treated by CRA in the same manner as
the salary continuation payment from October 9, 2008 until December
31, 2008.
[29] I do not agree with the
appellant. In my view, the lump sum given by the Foundation for the loss of her
employment qualifies as a retiring allowance. Retiring allowances are excluded
from insurable earnings by virtue of section 10.11 of the EIR and paragraph 2(3)(b)
of the IECPR. The relevant provisions read as follow:
Section 10.11 of the EIR
For the purpose of section 10.1, the amounts that are
excluded from an insured person’s earnings from insurable employment by
subsection 2(3) of the Insurable Earnings and Collection of Premiums Regulations
shall not be taken into account in determining the person’s hours of insurable
employment.
Paragraph 2(3)(b) IECPR
Earnings from Insurable
Employment
(3) For the purposes of
subsections (1) and (2), “earnings” does not include
(b) a
retiring allowance;
Under section 1 of the IECPR, retiring allowance
means:
-an amount
received by a person
(a) on
or after retirement of the person from an office or employment in recognition
of the person’s long service, or
(b) in
respect of a loss of an office or employment of the person, whether or not
received as, on account or in lieu
of payment of, damages or pursuant to an order or judgment of a competent
tribunal.
[30] The wording of the release signed by the
appellant is quite telling as to why the lump sum amount was paid by the
Foundation. It reads:
Forever discharge the Foundation of any action […]
arising out of or relating to: the termination of employment of the Releasor by
the Releasees […] this is a compromise settlement of a disputed claim […] that
this Release is executed and the aforesaid consideration accepted by the
Releasor for the purpose of making a full, final and irrevocable settlement of
any claims whatsoever […] see Exhibit A-10.
[31] In my view, this demonstrates
that the amount received by the appellant as a lump sum is a retiring allowance.
The lump sum paid by the Foundation was for the termination of the appellant’s employment,
it was clearly not paid as a salary continuation payment. By
signing the release, the appellant ceased to be an employee of the Foundation.
[32] It is unfortunate that a woman who
loses her employment following a maternity leave cannot receive unemployment
benefits, but I do not have a choice other than to apply the law.
[33] The appeal is therefore
dismissed.
Signed at Ottawa, Canada, this 8th
day of August 2011.
“Johanne D’Auray”
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