Citation:2007TCC97
Date: 20070219
Docket: 2006-2082(EI)
BETWEEN:
RAYMOND EDWARD LINSEMAN,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Webb, J.
[1] The Appellant has appealed to this Court pursuant to section
103 of the Employment Insurance Act from a ruling by the Minister of
National Revenue (“the Minister”) that certain amounts received by the Appellant
were retiring allowances and not insurable earnings for the purposes of the Employment
Insurance Act. The Appellant also raised the issue of when his benefit
period should commence under the Employment Insurance Act. Section 103
of the Employment Insurance Act provides, in part, as follows:
103. (1)
. . . a person affected by a decision on an appeal to the Minister under
section 91 . . . may appeal from the decision to the Tax Court of Canada in
accordance with the Tax Court of Canada Act and the applicable
rules of court made thereunder . . .
[2] Section 91 of the Employment Insurance Act provides that:
91. An
appeal to the Minister from a ruling may be made by the Commission at any time
and by any other person concerned within 90 days after the person is notified
of the ruling.
[3] Section 90 of
the Employment Insurance Act provides that:
90. (1)
An employer, an employee, a person claiming to be an employer or an employee or
the Commission may request an officer of the Canada Revenue Agency authorized
by the Minister to make a ruling on any of the following
questions:
(a) whether an
employment is insurable;
(b) how long
an insurable employment lasts, including the dates on which it begins and ends;
(c) what is
the amount of any insurable earnings;
(d) how many
hours an insured person has had in insurable employment;
(e) whether a
premium is payable;
(f) what is the amount of a
premium payable;
(g) who is the employer of an
insured person;
(h) whether employers are
associated employers; and
(i) what amount shall be refunded
under subsections 96(4) to (10).
[4] Subsection (1)
of section 90 limits the matters that can be the subject of a ruling to those
matters that are listed therein and as a result the matters that can be
appealed to the Minister under section 91 and then to the Tax Court of Canada
under section 103 will be limited to the same matters.
[5] The issue of
whether certain amounts received by the Appellant are included in insurable
earnings is a matter that can be the subject of a ruling under section 90 and
then appealed to the Minister and to this Court. The determination of the
benefit period under Part I of the Employment Insurance Act is not,
however, one of the matters listed in subsection 90(1) of the Employment
Insurance Act and hence is not one of the matters that can be the subject
of a ruling under section 90 of the Employment Insurance Act and
therefore is not a matter that can be the subject of an appeal to the Minister
under section 91 of the Employment Insurance Act nor to this Court under
section 103 of the Employment Insurance Act.
[6] Therefore the
only issue that is applicable in this case is whether the amounts in question
are included in insurable earnings for the purposes of the Employment
Insurance Act.
[7] The Appellant
was employed by SCI Brockville Corp. and its predecessor companies for
approximately 30 years prior to 2002. By letter dated January 25, 2002 the
Appellant received notice that the plant where he was working would be closing
permanently and his employment would be terminated no later than October 18,
2002. By letter dated May 24, 2002, the Appellant was informed that his
employment would be terminated effective August 16, 2002. His employment was
terminated effective August 16, 2002.
[8] A class action
was commenced against SCI Brockville Corp. and this action was settled and as a
result of this settlement the Appellant was entitled to various amounts. The
amount related to his loss of salary was determined as:
(3
weeks per year of service minus 15 weeks) x his salary at termination.
[9] In the
Appellant’s case, since he had been employed for 30.5 years, he was entitled to
91.5 weeks minus 15 weeks or 76.5 weeks x his salary. The reduction for 15
weeks represented the 15 weeks during which he was working and being paid and
for which notice of the termination of his employment had been provided (12
weeks from May 24, 2002 to August 16, 2002 and a three week credit for the
letter dated January 25, 2002) (the “working notice”). There were also
adjustments for overtime loss, benefits loss, and loss in pension growth, all
calculated based on the same formula. The total amount payable was $134,532. The
amount payable was paid in two installments - $31,356 was paid on the
termination of employment and identified as the “statutory severance paid” and
the balance of $103,176 was paid in 2004. Any amount deducted from this payment
and remitted as a source deduction in relation to the Appellant’s income tax
liability, or any other liability of the Appellant, would still be considered
to be an amount paid to the Appellant (Morin v. R. (FCTD) [1975]
C.T.C. 106, 75 DTC 5061).
[10] The issue is
whether the amounts paid for the period following the termination of the
employment of the Appellant pursuant to the settlement, including the amount
paid for the loss of salary, were insurable earnings for the purposes of the Employment
Insurance Act. The amounts paid represented compensation for the amounts
that the Appellant would have received if he would have continued working for
the additional notice period specified in the settlement documents but were not
paid as consideration for services rendered or work performed by the Appellant.
[11] Insurable earnings are defined in subsection 2(1) of the Employment
Insurance Act as follows:
“insurable earnings” means the total amount of the earnings, as
determined in accordance with Part IV, that an insured person has from
insurable employment;
[12] Paragraph 108(1)(g)
of the Employment Insurance Act (which is in Part IV of this Act)
provides that:
108. (1)
The Minister may, with the approval of the Governor in Council, make regulations
(g) for
defining and determining earnings, pay periods and the amount of insurable
earnings of insured persons and for allocating their earnings to any period of
insurable employment;
[13] Subsections 2(1)
and (3) of the Insurable Earnings and Collection of Premiums Regulations
provide, in part, that:
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
(a) the
total of all amounts, whether wholly or partly pecuniary, received or enjoyed
by the insured person that are paid to the person by the person’s employer in
respect of that employment, and
. . .
3. For the
purposes of subsections (1) and (2), “earnings” does not include
(b) a retiring allowance
[14] Subsection 1(1) of these Regulations provides that a retiring allowance
means:
“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.
[15] The term
“retiring allowance” is also a defined term for the purposes of the Income
Tax Act. In that Act, “retiring allowance” is defined in subsection
248(1) as follows:
“retiring
allowance” means an amount (other than a superannuation or pension benefit, an
amount received as a consequence of the death of an employee or a benefit described
in subparagraph 6(1)(a)(iv)) received
(a) on or
after retirement of a taxpayer from an office or employment in recognition of
the taxpayer's long service, or
(b) in respect
of a loss of an office or employment of a taxpayer, 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,
by the
taxpayer or, after the taxpayer's death, by a dependant or a relation of the
taxpayer or by the legal representative of the taxpayer;
[16] The definition of
“retiring allowance” in subsection 248(1) of the Income Tax Act is not
materially different from the definition of “retiring allowance” in subsection
1(1) of the Insurable Earnings and Collection of Premiums Regulations
for the purposes of this case since the amounts in issue are not a
superannuation or pension benefit, an amount received as a consequence of the
death of an employee or a benefit described in subparagraph 6(1)(a)(iv) of the Income
Tax Act.
[17] In the case of Overin
v. The Queen, 98 DTC 1299, Rip, J. made the following comments in
relation to whether an amount received should be included as a retiring
allowance:
[16] The use
of the words “in respect of” in the definition of retiring allowance has been
recognized as conveying a connection between a taxpayer's loss of employment
and the subsequent receipt. In order for the retiring allowance provision to
have real meaning, however, some limit must be placed on the ambit or scope of
the required connection between a receipt and a loss of employment. In this
regard two decisions may be of some assistance. First, in Merrins, supra,
Pinard, J. observed at 6670:
There is no
doubt that the amount was received by the plaintiff in respect of the loss of
his employment with AECL. Had there been no loss of employment, there would
have been no grievance, no settlement, no award and, therefore, no payment of
the sum to the plaintiff.
What is
implied from Pinard, J.'s analysis is that in determining the limit to be
placed on the connection between a payment and a loss of employment, the
appropriate test is to ask “but for the loss of employment would the amount
have been received?” If the answer to that question is in the negative, then a
sufficient nexus exists between the receipt and the loss of employment for the
payment to be considered a retiring allowance.
. . .
[18] It is
quite clear then that in addition to the “but/for” test, where the purpose of a
payment is to compensate a loss of employment it may be considered as having been
received “with respect to” that loss.
[18] In this case it
is clear that the amounts that the Appellant received under the settlement for
the 76.5 week period following the termination of the employment of the
Appellant, including the amount received for the loss of salary for this
period, were in respect of the loss of the employment of the Appellant and not
for services rendered or work performed by the Appellant. If the employment of
the Appellant had not been terminated he would not have received this
compensation since he did not provide any services to SCI Brockville Corp.
during these 76.5 weeks. As well it is clear that he received these amounts
with respect to that loss since the settlement was in relation to the class
action lawsuit that was commenced. The Statement of Claim for this action
provided, in part, that:
1. The
Plaintiff claims on his own behalf and on behalf of all members of
the Plaintiff class against the Defendant:
(a) damages
arising from the failure to provide reasonable notice of termination of
their employment or payment in lieu thereof, including:
i. loss
of salary and other monetary compensation during the reasonable notice
period;
ii. loss
of benefits during the reasonable notice period; and
iii. pension
loss;
[19] The compensation
that the Appellant received for the 15 weeks “working notice” was, however,
received as compensation for services rendered and hence would have been
received regardless of whether his employment had been terminated and therefore
would not be a retiring allowance.
[20] As a result, the
amounts received by the Appellant under the settlement for the 76.5 week period
following the termination of the employment of the Appellant, including the
amount received for the loss of salary for this period, were retiring
allowances of the Appellant and hence not insurable earnings for the purposes
of the Employment Insurance Act. Any amount deducted from the total of
$134,532 that was payable to the Appellant and remitted on account of the
Appellant’s income tax liability (or any other liability of the Appellant)
would still be considered to have been received by the Appellant for the
purposes of the definitions of “retiring allowance”, “earnings” and “insurable
earnings” as these amounts were paid for the benefit of the Appellant (Morin
v. R. (FCTD) [1975] C.T.C. 106, 75 DTC 5061).
[21] It should also be
noted that subsection 14(3) of the Employment Insurance Act provides as
follows:
(3) Insurable
earnings in the rate calculation period shall be established and calculated in
accordance with the regulations and include earnings from any insurable
employment, regardless of whether the employment has ended.
[22] While the closing
words of this subsection might suggest that insurable earnings for the purposes
of subsection 14(3) would include a retiring allowance, in my opinion, if
“insurable earnings” for the purposes of subsection 14(3) of the Act
were to include a retiring allowance, clearer language would be required in
subsection 14(3) because of the specific exclusion of such amounts in the Insurable
Earnings and Collection of Premiums Regulations. The reference to
“regardless of whether the employment has ended” would require the inclusion of
such amounts as retroactive increases in earnings for the period prior to the
termination that are not determined and paid until after the employment has
terminated. In any event, section 14 of the Employment Insurance Act
provides for the determination of the rate of weekly benefits and the rate of
weekly benefits is not one of the matters that can be the subject of a ruling
request under section 90 and then appealed to the Minister and then this Court.
As a result this Court has no jurisdiction to deal with the rate of benefits
payable.
[23] The Appellant’s appeal
is dismissed.
"Wyman W. Webb"
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