Desender v. M.N.R., docket 1999-978-EI

Date : 19991221

Dockets: 1999-978-EI; 1999-988-CPP

BETWEEN:

LOUISE DESENDER, UNIVERSITY OF SASKATCHEWAN,

Appellants,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Reasons for Judgment

Beaubier, J.T.C.C.

[1] These appeals were heard together on common evidence at Saskatoon, Saskatchewan on December 1, 1999. The parties filed an Agreed Statement as to Facts which reads:

1. Louise DeSender was employed by the University of Saskatchewan (the "University") as a clerk typist, and was a member of Canadian Union of Public Employees, Local 1975 ("C.U.P.E. Local 1975").

2. The University and C.U.P.E. Local 1975 entered into a collective bargaining agreement that provides, inter alia, for a Short Term Disability Plan and a Long Term Disability Plan in accordance with Articles 19.11.3 and 19.11.4 thereof. A copy of the Collective Agreement between the University and C.U.P.E. Local 1975 in force at all material times is attached hereto and marked as Appendix "A" (the "Collective Agreement").

3. Ms. DeSender worked for the University under a contract of service for many years until at least May 29, 1996 and from May 29, 1996 to September 22, 1996 a disability prevented her from performing any services for the University.

4. Ms. DeSender began collecting full-time benefits under the University's Short Term Benefit Plan for members of C.U.P.E. Local 1975 (the "Short Term Disability Plan") on May 29, 1996 and continued to collect full-time benefits thereunder until September 22, 1996. A copy of the Terms of Reference for the Short Term Disability Plan are attached hereto as Appendix "B" (the "Terms of Reference").

5. From September 23, 1996 to May 14, 1997 Ms. DeSender returned to work on a half-time basis and continued to collect benefits under the Short Term Disability Plan for the hours she was not able to work. Correspondingly, the benefits paid to Ms. DeSender under the Short Term Disability Plan during this time were reduced to one-half of the full-time benefits she had previously been receiving.

6. The University issued one cheque to Ms. DeSender for each pay period from May 29, 1996 through May 14, 1997, in payment of both wages for any services she provided when working half-time, and benefits under the Short Term Disability Plan. In accordance with the University's accounting procedures, the amounts paid for benefits under the Short Term Disability Plan were reimbursed directly from the fund referred to in paragraph 11 infra.

7. Ms. DeSender's contract of service with the University was not terminated when she began receiving benefits from the Short Term Disability Plan and at no time during the period May 26, 1996 to May 14, 1997 did the University issue a Record of Employment to Ms. DeSender in respect of a termination of her employment.

8. During the time Ms. DeSender had been collecting benefits under the Short Term Disability Plan she continued to be covered by the University's group insurance and dental plan. Ms. DeSender also continued to accrue years of service under her defined benefit pension plan with the University, but no contributions were made to such pension plan on her behalf in respect of the benefits received under the Short Term Disability Plan.

9. On May 15, 1997 Ms. DeSender began collecting benefits under the University's long term disability plan which is currently administered by an independent insurance company. A copy of this policy is attached hereto as Appendix "C".

10. The Short Term Disability Plan is administered by the University and contributions to fund the Short Term Disability Plan are paid entirely by the University based on a fixed percentage of the members' salaries in accordance with Article 19.11.3 of the Collective Agreement. To date, these contributions have been sufficient to fund all benefits paid under the Short Term Disability Plan and attached hereto as Appendix "D" is a Statement of Financial Experience for the Short Term Disability Plan for the years 1990/91 through 1997/98.

11. The contributions used to fund the Short Term Disability Plan are paid by the University into a trust fund (the "Fund") which is held by the University's Financial Services Division (Research and Trust Advisory Services) (formerly known as the University's Controller's Office (Trusts and Endowments)), as trustee, and in a fiduciary capacity. The Financial Services Division has established control systems for administering and holding the Fund, including the keeping of separate records and accounting systems.

12. The Fund is available only for the provision of benefits under the Short Term Disability Plan and to pay for the costs of administering the Short Term Disability Plan. The University does not have access to the Fund, other than in accordance with the terms of the Short Term Disability Plan and any changes or amendments to the terms of the Short Term Disability Plan would require the prior consent of C.U.P.E. Local 1975.

13. The cheques for disability benefits paid under the Short Term Disability Plan are issued to recipients through the University's normal payroll system and an accounting is done each month to reimburse the University directly from the Fund any amounts paid by the University for the short term disability pursuant to the Short Term Disability Plan.

14. Benefits paid under the Short Term Disability Plan are subject to the same reductions and exclusions as are benefits under the long term disability plan (paragraph 11 of the Terms of Reference). Reasons for such reductions and exclusions of benefits under the long term disability plan include the payment of disability benefits to the member under the Canada Pension Plan or the Workers' Compensation Act, as well as certain other disability income or retirement income paid to the member from other sources.

15. During the time Ms. DeSender was receiving benefits under the Short Term Disability Plan, the University deducted and remitted contributions under the Canada Pension Plan and premiums under the Employment Insurance Act from the benefits paid to Ms. DeSender and the University remitted corresponding contributions and premiums.

16. Paragraphs 2, 3 and 4 in the Reply to the Notice of Appeal in each of 1999-978(EI)/1999-969(EI), and 1999-988(CPP)/1999-986(CPP) are true and correct.

THE FOREGOING AGREED STATEMENT AS TO FACTS is hereby agreed to and submitted on behalf of the Appellants and the Respondent.

[2] Paragraphs 2, 3 and 4 of the Reply in 1999-969(EI) incorporates all of the Replies. They read:

2. The University of Saskatchewan, (hereinafter the "University"), requested a ruling on whether a premium is payable on amounts paid to Louise DeSender, (hereinafter the "Worker") under the University's Short Term Benefit Plan for members of C.U.P.E. Local 1975, (the "Disability Plan").

3. A ruling was issued that the Worker was in insurable employment while receiving payments from the Disability Plan and both the Worker and the University appealed the ruling.

4. In response to the appeal, the Minister decided that the Worker was in insurable employment while she was receiving short term disability payments from the Disability Plan as the Worker was employed under a contract of service for the period January 1, 1997 to May 13, 1997.

[3] In addition, paragraphs 6 to 10 inclusive of the Reply to 1999-969(EI) sum up the legal question involved in all of the appeals. They read:

C. STATUTORY PROVISIONS, GROUND RELIED ON AND RELIEF SOUGHT

6. He relies on sections 2, paragraph 5(1)(a) and subsection 82(1) of the Employment Insurance Act and on subsection 2(1) of the Insurable Earnings and Collection of Premiums Regulations.

7. He submits that the Worker was engaged in insurable employment within the meaning of paragraph 5(1)(a) of the Employment Insurance Act during the period January 1, 1997 to May 13, 1997 as the Worker was engaged under a contract of service with the University throughout this period.

8. He submits that premiums are payable on remuneration to a person employed in insurable employment pursuant to subsection 82(1) of the Employment Insurance Act.

9. He submits that payments from the Disability Plan are included in the definition of insurable earnings in subsection 2(1) of the Insurable Earnings and Collection of Premiums Regulations in that these payments are amounts that were received or enjoyed by the Worker and were paid to the Worker by the Worker's employer in respect of such employment.

10. He requests that the appeal be dismissed.

[4] The Appellants also called Gary Schlichemeyer, Director of Benefits at the University of Saskatchewan. His testimony clarified paragraph 6 of the Agreed Statement as to Facts. Louise DeSender's pay cheques were paid from the University's payroll account even if part of the payment was for short term disability. Then charges were made to separate subledgers kept by the University. Then the short term disability funds were taken from the short term disability trust fund account to reimburse the University's payroll account.

[5] Section 2 is the definition section. Paragraph 5(1)(a) and subsection 82(1) of the Employment Insurance Act and subsection 2(1) of the Insurable Earnings and Collection of Premiums Regulations read, in that order:

5. (1) Subject to subsection (2), insurable employment 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;

...

82. (1) Every employer paying remuneration to a person they employ in insurable employment shall

(a) deduct the prescribed amount from the remuneration as or on account of the employee's premium payable by that insured person under section 67 for any period for which the remuneration is paid; and

(b) remit the amount, together with the employer's premium payable by the employer under section 68 for that period, to the Receiver General at the prescribed time and in the prescribed manner.

...

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

(b) the amount of any gratuities that the insured person is required to declare to the person's employer under provincial legislation.

[6] Similar pleas were made under the Canada Pension Plan in the Replies to Notices of Appeal. Section 9 of the Canada Pension Plan summarizes the concepts of the Plan at issue in the appeals. Section 9 reads:

9. Every employer shall, in respect of each employee employed by the employer in pensionable employment, make an employer's contribution for the year in which remuneration for the pensionable employment is paid to the employee of an amount equal to the product obtained when the contribution rate for employers for the year is multiplied by the lesser of

(a) the contributory salary and wages of the employee for the year paid by the employer, minus such amount as or on account of the employee's basic exemption for the year as is prescribed, and

(b) the maximum contributory earnings of the employee for the year, minus such amount, if any, as is determined in prescribed manner to be the salary and wages of the employee on which a contribution has been made for the year by the employer with respect to the employee under a provincial pension plan.

[7] Under both the Canada Pension Plan and the Employment Insurance Act the question is whether, during the period January 1, 1997 to May 13, 1997 the Worker was employed by the University.

[8] In the Agreed Statement as to Facts, the parties stated:

(1) The University issued one cheque for each pay period in question. The amounts paid for benefits under the Short Term Disability Plan were reimbursed from the fund. (Para. 6)

(2) Ms. DeSender's contract of service with the University was not terminated during the period in question. (Para. 7)

(3) Ms. DeSender continued to accrue years of service under her defined benefit pension plan with the University but no contributions were made in respect to the benefits received under the Short Term Disability Plan. (Para. 8)

(4) The Short Term Disability Plan is administered by the University and contributions are paid entirely by the University in accordance with Article 19.11.3 of the Collective Agreement. (Para. 10)

(5) The contributions by the University are paid into a trust fund held by the University as trustee in a fiduciary capacity. (Para. 11)

(6) The University does not have access to the fund. (Para. 12)

(7) The cheques for disability benefits are issued to recipients through the normal payroll system and an accounting is done each month to reimburse the University pursuant to the Short Term Disability Plan. (Para. 13)

[9] The Short Term Disability Plan is annexed to the Agreed Statement as to Facts in Tab B. Paragraphs 4 to 8 inclusive, 11 and 12 read:

4. For the purpose of providing benefits under the short term disability plan, the short term disability fund has been created. This fund is an account maintained by the University Controller's Office (Trusts and Endowments) in a fiduciary capacity and receives interest allocations as determined by the University. The fund is used only for the provision of benefits under the short term disability plan and for the purpose of reimbursing the University for its expenses associated with administering the fund and the plan. It is specifically understood that there is no assurance that there will be sufficient funds to pay benefits.

(emphasis added)

5. The short term disability fund consists of monthly contributions made by the University and other employer participants on behalf of their eligible employees. Currently, the contribution is equal to the required maximum of ½ of 1% of basic payroll.

6. The University will provide a financial report after the end of each fiscal year to the Non-Academic Benefits Committee which will contain a summary of the financial transactions which occurred during the previous year in operating the short term disability plan and fund. The summary will include details of contributions made, benefits paid, expenses paid, interest earned, and other information which is pertinent to displaying a complete financial picture.

7. The following expenses of the short term disability plan will be absorbed by the University:

- administration duties related to the calculation and payment of benefits,

- record keeping

- the cost of issuing cheques.

All other expenses of the plan will be charged to the short term disability fund unless paid directly by the University or the Union and shall include expenses for:

- investment services

- consultants and actuarial fees

- legal fees

- medical consultation fees

- third party charges made for vocational assessment of disabled employees and charges made in connection with the undertaking of a vocational rehabilitation program.

8. All claims for benefits under the short term disability plan will be administered and adjudicated by the University in accordance with clause 3 above. To receive benefits, the employees must submit written proof of claim which is satisfactory to the University, including a physician's statement which outlines the nature of the disability and its prognosis. The University reserves the right to authorize the payment of benefits, and to require satisfactory written proof and medical examinations from time to time for the continuance of benefits.

...

11. Benefits will be equal to 66 2/3% of the employee's regular monthly salary on the date on which full salary was last received; that is, the last day at work, or the day on which sick leave credits are exhausted. Benefits are subject to the same reductions and exclusions as are benefits under the long term disability plan.

12. Benefits are subject to source deduction as required by law such as income tax, Canada Pension Plan, Unemployment Insurance premium, and premiums required for employee benefit plans.

[10] The Short Term Disability Plan was created pursuant to the Collective Agreement between the University of Saskatchewan and the University Employees Union, Local 1975. Paragraphs 19.9, 19.10, 19.11.3, 19.11.4, 19.13, 19.14 and 19.15 to 19.15.5 read:

19.9 Employee Benefit Plans Committee

There shall be a joint Union-Management Committee on Employee Benefit Plans with equal representation from the University and the Union to study, review, and make recommendations concerning the pension, group insurance, long term disability, dental and extended health care plans.

19.10 Annually, the University shall provide to each employee a detailed statement which outlines in clear terms each of the benefit plans under which the employee is covered, and the benefits which the employee derives from the plan.

...

19.11.3 Short Term Disability Plan

Each full-time or part-time permanent and seasonal employee, working at least half the normal working hours of the classification, shall be covered by a Short Term Disability Plan, which in the event of a medically certified disability or illness which prevents the employee from working, will make payments to the employee at the conclusion of two weeks or the expiration of the employee's accumulated sick leave, whichever occurs later. Notwithstanding this, at the conclusion of one year of absence from work because of the disability, payments from this plan shall be discontinued. The University funds the Plan at one-half of one percent of insurable earnings of the employees.

This plan is administered in accordance with the provision and the procedures of the Long Term Disability Plan.

19.11.4 Long Term Disability Plan

Each full-time or part-time permanent and seasonal employee, working at least half the normal working hours of the classification, shall be covered by a long term disability plan which makes payments to employees after one year of approved disability or illness. The plan is paid for by the employees.

This plan is administered according to the terms of the policy.

...

19.13 Employee Status While on Disability Plan

An employee drawing benefits from either the Short Term Disability Plan or the Long Term Disability Plan will retain seniority rights in the same manner as if at work. The employee will retain coverage in the group insurance plan, the dental plan and the pension plan. Pension service is deemed and no contributions are made.

19.14 Return to Work

An employee who returns to work after being on the Short Term Disability Plan or the Long Term Disability Plan and who is able to satisfactorily carry out the duties of the position which was held immediately prior to the commencement of the disability will be placed in the position the employee left or, if that is not possible, in one with the same classification.

An employee whose position has been declared redundant while on disability will be provided with placement, bumping and recall rights as per Article 12 provided thirty days' notice has been given by the employee prior to returning to work.

19.15 Joint Union-Management Rehabilitation Committee

There shall be a Joint Union-Management Committee consisting of two management representatives, two Union representatives and a Chair to be appointed by mutual agreement between the University and the Union.

19.15.1 Referral to Committee

An employee who returns to work after being on sick leave, the disability plan (either the university portion or the insurance company's portion), or from having been injured, and who is unable to satisfactorily carry out the requirements of the employee's last regular position, shall have the case referred to the Joint Union Management Committee.

Cases may also be referred to the Committee where an employee has not experienced significant time loss from work but where the Committee deems the probability of time loss from work in the near future, for medical reasons supported by medical documentation, to be so significant as to warrant the Committee's involvement.

19.15.2 All actions of the Committee shall be within the terms of the Collective Agreement and current university policy. Changes or revisions to any policy related to the jurisdiction of this Committee shall be a matter of mutual agreement between the University and the Union.

19.15.3 The Committee shall be responsible for recommending the placement of the employee in a job which can be satisfactorily carried out within the University, if such a position is available. Job bidding procedures may be waived as individual circumstances warrant on recommendation of the Committee to the University and the Union.

19.15.4 The University will not be required to create a special position to accommodate such cases but The University, CUPE Local 1975 and the employees, will implement recommendations for cases where a satisfactory rearrangement of duties can be made consistent with the requirements of the Labour Standards Act and the Human Rights Code.

19.15.5 Where no position can be found within the University, all reasonable efforts will be made to assist the employee to find employment in some other institution or business.

[11] Paragraph 19.11.3 of the Collective Agreement states that the Short Term Disability Plan is administered in accordance with the provisions of the Long Term Disability Plan. But the Long Term Disability Plan (which is exclusively funded by the employees – 19.11.4) is an insurance plan with The Mutual Life Assurance Company of Canada. (See Tab C, Agreed Statement as to Facts). This is in contrast with the Short Term Disability Plan which is exclusively funded by the University which funds remain in the University's possession and which are used to reimburse the University's payroll account. Neither the Collective Agreement nor the Short Term Disability Plan requires that funds from it be paid to the employee. The payment to the University's payroll account for reimbursement is within the governing rules.

[12] In the Court's view this is fatal. The decisions appealed from are that Ms. DeSender was in pensionable employment and that Ms. DeSender was in insurable employment while she was receiving benefits from the Short Term Disability Plan as she was employed under a contract of service for the period January 1, 1997 to May 13, 1997. Ms. DeSender was paid by the University which employed her and the University was in turn reimbursed from the Short Term Disability Plan.

[13] Ms. DeSender was on the University of Saskatchewan's payroll during the period and she had all of the rights and powers of an employee during the period as a result of her rights and powers while on the Short Term Disability Plan and as set forth in the documents quoted.

[14] For these reasons, the appeal is dismissed.

Signed at Saskatoon, Saskatchewan this 21^st day of December 1999.

"D.W. Beaubier"

J.T.C.C.