Hutton v. M.N.R., docket 98-327-UI

Date: 19991004

Docket: 98-327-UI

BETWEEN:

ERIC HUTTON,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Reasons for Judgment

CUDDIHY, D.J.T.C.C.

[1] This appeal was heard in St-John's, Newfoundland, on September 2, 1999.

I- The appeal

[2] This is an appeal from a decision by the Minister of National Revenue (the "Minister") of February 23, 1998, where it was determined that the employment of Eric Hutton (the "Appellant") with the Newfoundland Legal Aid Commission (the "Payor") from June 30 to July 23, 1997, was insurable employment within the meaning of paragraph 5(1)(a) of the Employment Insurance Act (the "Act").

[3] The Minister also determined that the lump sum payment made to the Appellant at the termination of his employment with the Payor on July 23, 1997, was considered as "insurable earnings", however, there were no insurable hours pursuant to paragraph 9.1 of the Employment Insurance Regulations (the "E.I. Regulations").

II- The facts

[4] In rendering his decision the Minister relied on the facts and reasons outlined in his Reply to the Notice of Appeal and particularly in paragraph 6 as follows:

"(a) the Appellant was employed with the Payor from June 30, 1997 to July 23, 1997, approximately 3½ weeks;

(b) the Appellant was required to work 40 hours per week for an annual salary of approximately $32,000.00;

(c) upon termination of the contract, the payment given to the Appellant consisted of $8,775.20 paid to him in lieu of notice;

(d) the record of employment issued to the Appellant by the Payor reported the number of hours worked by the Appellant during his employment as per the terms of his contract, a total of 135 hours;

(e) the record of employment also reported as insurable earnings for the weeks worked, the regular wages totalling $2,430.00 and also reported the payment of $8,775.20;

(f) the Appellant's insurable earnings include the wages paid and the payment made to him upon termination;

(g) the Appellant did not have insurable employment with the Payor after July 23, 1997 as he performed no work after that period;

(h) the increased insurable earnings do not affect the number of hours worked by the Appellant during his employment with the Payor."

[5] The Appellant, admitted the allegations in subparagraphs (a) to (f). The allegations in subparagraphs (g) and (h) were denied.

III- The Law and Analysis

[6] i) Definitions from the Employment Insurance Act

"employment" means the act of employing or the state of being employed;

"insurable employment" has the meaning assigned by section 5;

Paragraph 5(1)(a) of the new Act reads as follows:

"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;

..."

"insurable earnings" means the total amount of the earnings, as determined in accordance with Part IV, that an insured person has from insurable employment;

..."

"Employee's premium"

67. Subject to section 70, a person employed in insurable employment shall pay, by deduction as provided in subsection 82(1), a premium equal to their insurable earnings multiplied by the premium rate set by the Commission.

... "

[7] ii) Employment Insurance Regulations

9.1 Where a person's earnings are paid on an hourly basis, the person is considered to have worked in insurable employment for the number of hours that the person actually worked and for which the person was remunerated.

...

10.(1) Where a person's earnings are not paid on an hourly basis but the employer provides evidence of the number of hours that the person actually worked in the period of employment and for which the person was remunerated, the person is deemed to have worked that number of hours in insurable employment.

...

21. The insurable earnings reported in a record of employment with respect to an insured person shall be determined pursuant to Parts III and IV of the Act and any regulations made under those Parts and allocated in accordance with section 23.

...

23. (1) For the purposes of section 14 of the Act, insurable earnings shall be allocated in the following manner:

(a) remuneration, including statutory holiday pay, other than the remuneration referred to in paragraph (b), paid in respect of a pay period or that remains unpaid for the reasons described in subsection 2(2) of the Insurable Earnings and Collection of Premiums Regulations shall be allocated to that pay period; and

(b) overtime pay, shift premiums, pay adjustments, retroactive pay increases, bonuses, gratuities, accumulated sick leave credits, incentive payments, cost of living allowances, separation payments, wages in lieu of notice and any other remuneration including vacation pay not paid in respect of a pay period or that remains unpaid for the reasons described in subsection 2(2) of the Insurable Earnings and Collection of Premiums Regulations, shall be allocated proportionately over the pay period in which they are paid.

(1.1) Where an insured person is on unpaid leave or has quit their employment or been terminated or laid off, the remuneration referred to in paragraph (1)(b) shall be allocated proportionately over the last pay period for which regular salary, wages or commissions are paid.

... "

[8] iii) Insurable earnings and collection of premiums regulations

1. (1) The definition in this subsection apply in these Regulations.

"Act" means the Employment Insurance Act. (Loi)

"Minister" means the Minister of National Revenue.

(ministre)

"Pay period" means the period in respect of which earnings are paid to or enjoyed by an insured person.(période de paie)

...

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.

(2) For the purposes of this Part, the total amount of earnings that an insured person has from insurable employment includes the portion of any amount of such earnings that remains unpaid because of the employer's bankruptcy, receivership, impending receivership or non-payment of remuneration for which the person has filed a complaint with the federal or provincial labour authorities, except for any unpaid amount that is in respect of overtime or that would have been paid by reason of termination of the employment.

..."

[9] No evidence was heard as the facts in the Reply served as the basis of the argumentation of the parties. Exhibits A-1 to A-4, were filed in the Court record.

[10] The Appellant worked for the Newfoundland Legal Aid Commission from July 2 to July 28, 1997. His employment was terminated by way of letter dated July 28, 1997 (Exhibit A-4).

[11] He was advised by the Payor that he would receive three month's salary in lieu of notice.

[12] The Appellant filed for benefits on July 28, 1997 (Exhibit A-3). The record of employment of the Appellant indicated that the total insurable hours were 135. It also indicated total insurable earnings of $2,430.03. The employer also indicated that the Appellant would be receiving other monies in the amount of $8,775.20. The Appellant received from the Payor a cheque in the amount of $6,110.51, (net pay). The customary deductions were made (Exhibit A-2).

[13] The Appellant was advised by the Commission, that he had not worked long enough since July 20, 1997 to qualify for benefits because he had 310 hours of work, when 420 hours were required (Exhibit A-1).

[14] The Appellant addressed a letter to the Chief of Appeals of the Respondent on December 10, 1997, which is on file. The decision of the Respondent was sent to the Appellant on February 23, 1998.

[15] The Appellant argues that the Respondent deducted employment insurance premiums from the amount he received as a salary in lieu of notice. The three month period of salary in lieu of notice should be considered as work in insurable employment for the number of hours that the Appellant would normally have worked and for which he would normally have been remunerated. The hours that the salary represents must be insurable, because premiums were deducted from it.

Concluding analysis

[16] The pay period of the Appellant is the period in respect of which earnings were paid or enjoyed by him. The pay period of the Appellant, indicated on his record of employment, is from June 30 to July 23, 1997 (Exhibit A-3).

[17] The only hours worked by the Appellant in the pay period were indicated by the employer on the record of employment (Exhibit A-3).

[18] For the purposes of the definition "insurable earnings" in the Act and the Regulations, the total amounts of earnings that the Appellant had from insurable employment is the total of all amounts received or enjoyed by him that were paid to him by the Payor in respect of that employment. The Appellant was paid for the hours worked and in addition was paid three months of salary in lieu of notice when his employment was terminated. It was therefore because of his employment and hours worked that the employer in terminating his work period as he did, paid him three month of salary in lieu of notice. The Appellant did not work for the Payor after July 23, 1997.

[19] As to the premiums, these were deducted as prescribed in section 67 of the Act, which stipulates that a person employed in insurable employment shall pay by deduction a premium equal to their insurable earnings multiplied by the premium rate set by the Commission. This is mandatory. The premium is based on the total amount of earnings and not only on the remuneration paid for the hours worked.

[20] Therefore, the Appellant was paid for 135 hours of work, (Exhibit A-3) which formed part of his earnings during his pay period. For that same pay period he received three months of salary in lieu of notice which formed the second part of his earnings. These two sources of total earnings were his insurable earnings with which was calculated the mandatory premium which was deducted by his employer. Because the premium was calculated on the Appellant's insurable earnings as defined in the Act does not have the effect of qualifying the Appellant for an additional number of hours of work derived from the payment of the three months of salary in lieu of notice. This lump sum payment is considered an earning but not equal to a number of hours worked. The only hours actually worked were those described in the record of employment.

[21] In other words benefits are payable for hours actually worked. Premiums for these benefits are calculated on the insurable earnings which include, as in this case, the remuneration paid for the hours actually worked and the three months of salary paid in lieu of notice. Since the Appellant did not actually work any hours for the Payor after July 23, 1997, he could not be deemed to have worked in insurable employment after that day.

[22] The legislation indicates that insurable employment is a period of time where work was actually accomplished and paid for. It also defines "insurable earnings" as the basis upon which the premium for insurable employment is calculated.

[23] The able argument of the Appellant cannot be accepted.

IV- Decision

[24] The appeal is dismissed and the decision of the Minister is upheld.

Signed at Dorval, Quebec, this 4th day of October 1999.

"S. Cuddihy"

D.J.T.C.C.