REASONS
FOR JUDGMENT
Owen J.
I.
Introduction
[1]
This is an appeal under subsection 103(1) of the
Employment Insurance Act (the “EIA”)
of a decision by the Minister of National Revenue under section 91 of the EIA
issued on September 27, 2013, confirming a ruling under subsection 90(1) of the
EIA issued on February 21, 2013. The ruling was to the effect that the
Appellant, Mr. Bradley D. Goodwin, was in receipt of insurable
earnings under the EIA during the period from January 1, 2012
to November 15, 2012. The earnings in question were received by Mr. Goodwin
in the form of long-term disability payments payable to Mr. Goodwin under
the terms of a long-term disability plan.
II. Facts
[2]
The Appellant was employed by CP Airlines as a pilot
commencing in June 1979. CP Airlines subsequently became Canadian Airlines,
which was acquired by Air Canada in 2000.
[3]
As a result of two failed treatments for what,
at first, appeared to be a benign injury to his jaw in the mid 1980’s, the
Appellant had to stop working as a pilot. He initially went on short-term
disability but when that ran out he applied for and was accepted for long-term disability
commencing in 1987. He has been on long-term disability ever since. Several
years later, after a number of unsuccessful operations, the Appellant was
advised that he would never function properly or be integrated back into the
workforce again. Some years after that when he realized the prognosis was
correct, the Appellant applied for, and was granted, a disability benefit under
the Canada Pension Plan.
[4]
That the Appellant is unable to work as a result
of his condition, which has required 11 separate surgeries to his jaw and one
surgery to his brain, is not contested. The Appellant testified that, as a
result of his disability, he has never provided services to Air Canada. The Appellant also stated that he has no work record on file with Service Canada.
[5]
The Appellant was not clear on the details of
the long-term disability plan under which he receives long-term disability
payments except to say that he thought the benefit was about 35% of his income
as a pilot prior to being injured. The Appellant entered into evidence as
Exhibit A-5 a copy of a T4 slip issued by Air Canada to the Appellant for his
2012 taxation year that indicates that the total amount of employment income
received in 2012 was $33,015.90 or $2,751.33 per month and that the total
amount of EI premiums deducted for 2012 was $604.19. The Appellant confirmed
that the employment income identified on the T4 slip is the aggregate of the
disability payments received by him in 2012 under the long-term disability
plan.
[6]
The Appellant did not recall entering into a new
long-term disability plan when Air Canada acquired Canadian Airlines in 2000,
nor did he recall entering into a written employment contract with Air Canada. However, he did recall that he was issued an employee identification number by Air Canada following the acquisition.
[7]
A letter entered into evidence by the Appellant
as Exhibit A-3 from Great-West Life Assurance Company (“Great-West
Life”) to the Appellant dated May 8, 2014 indicates that the plan
under which the Appellant receives payments is identified as Group Plan Number
51648. That same letter indicates that the Appellant’s employee identification
number with Air Canada is E91765.
[8]
A form entered into evidence by the Appellant as
Exhibit A-4, entitled “Claimant’s Explanation of
Benefits” and issued by Great-West Life to the Appellant on March 12,
2014, similarly identified the plan number as 51648; however, the employee I.D.
Number had some additional zeros and was stated as E000091765. Nothing turns on
this slight difference. Exhibit A-4 also includes the following statement: “The Great-West Life Assurance Company provides claim
processing and adjudication services only. Benefits under the plan are funded
by the Contractholder and not the Great-West Life Assurance Company”.
[9]
The Respondent called as a witness Ms. Kate Friedmann,
who is the Director of Disability Management at Air Canada, a position that she
has held since September 2012. Ms. Friedmann’s evidence filled in the
details regarding the Appellant’s entitlement to disability payments under the
long-term disability plan.
[10]
Ms. Friedmann testified that her group
would be responsible for the Appellant’s file although the Appellant’s medical
records would be in the custody of Great-West Life. Ms. Friedmann also
testified that, to her knowledge, the terms and conditions of the long-term
disability plan under which the Appellant receives disability payments have not
changed since the acquisition of Canadian Airlines by Air Canada in 2000.
[11]
Ms. Friedmann confirmed the authenticity of
two documents entered into evidence by the Respondent as Exhibits R-1 and R-2. Great-West
Life and Canadian Airlines are the parties to both documents. Ms. Friedmann
indicated that following the 2000 acquisition, Air Canada stepped into the
shoes of Canadian Airlines with respect to these documents. I take this to mean
that any explicit or implicit reference to Canadian Airlines in the documents
must be read as a reference to Air Canada. For the sake of clarity, the descriptions
that follow make this adjustment where necessary.
[12]
The first document, Exhibit R-1, is entitled “Plan Document” on the front page and “Group Disability Income Plan – Pilots” at the top of
each page commencing on page 3 (pages 1 and 2 being the table of contents). The
cover page indicates that the Plan Document Holder is Canadian Airlines
International Ltd. (subsequently replaced by Air Canada according to Ms. Friedmann),
that the Plan Document Number is 51648 and that the effective date of the Plan
is July 1, 2000. The coverage provided is identified as “Group
Disability Income”. Ms. Friedmann testified that, to her knowledge,
that is the plan under which the Appellant receives his disability payments,
which accords with Exhibits A-3 and A-4. The Appellant did not contest this
fact.
[13]
The Group Disability Income Plan – Pilots (the “Plan”) includes a number of terms and conditions
relevant to the issue at hand:
1. Section
1(1) states that the purpose of the Plan is to provide a reasonable level of income
protection during periods that a pilot is, for medical reasons, unable to
perform his regular duties, subject to the limitations stated in the Plan.
2. Section
2(1) states that participation in the Plan is a condition of employment
(including pilots in training).
3. Section
2(3) states that the Plan covers a pilot who is “Disabled”
or “Totally Disabled,” as defined in sections
2(3)(a) and (b) of the Plan.
4. A
pilot is considered Disabled if either Air Canada’s medical department or
Transport Canada determines that, for medical reasons, the pilot is unfit to
fly.
5. Under
the definition of Totally Disabled, a totally disabled employee is one whose
condition is judged by Great-West Life to be such that he is unable to work at
any job for which he is reasonably fitted by education, training or experience.
The parties agree that Mr. Goodwin was totally disabled under this
definition.
6. Section
2(6) describes the circumstances in which coverage may be suspended or
reinstated. Sections 2(6)(a) to (d) consistently refer to an employee.
7. Section
2(7) provides that coverage under the Plan terminates on the earliest of:
a. The date the
employee leaves Air Canada.
b. The date the
employee ceases to be a pilot.
c. The date the
employee retires.
d. The
last day of the month in which the employee attains his 60th birthday.
e. The date that
the employee dies.
A Note to section 2(7) emphasizes
that coverage may not be terminated at the option of the individual member.
8. Section
3(1) provides that the total monthly premium for the Plan is paid by Air Canada.
9. Section
3(4) provides that for claimants who are assessed as Totally Disabled, benefits
in the second and subsequent years will be paid at 60% of salary to the earlier
of death, recovery or attainment of age 60.
10. Section
3(7) provides indexation for eligible claimants as of July 1, 2000
being employees who are classified by the Company as “disabled
or totally disabled”.
11. Section
3(8) provides that all benefits will cease for all employees on the last day of
the month in which his or her 60th birthday is attained.
12. Section
3(9) provides that while an employee is in receipt of benefits under the Plan,
contributions are waived and allowable service is continued in the Air Canada
Pension Plan; and the employee is entitled to full coverage under the Group
Life, Dental and Supplementary Health Insurance Plans, and the Basic Accidental
Death, Dismemberment and Loss of Use Insurance Plan without cost.
13. Section
4(2)(b) provides that the assessment of disability will be based on the reports
of the employee, the employer and the attending physician.
14. Section
4(2)(c) provides that prior to the end of the first year of disability, Great-West
Life will assess the degree of the employee’s disablement to determine whether
the employee is Disabled or Totally Disabled. The results of such assessment
will be forwarded to the Corporate & Human Resources Branch, the Advisory
Committee and to Payrolls.
15. Section
4(3)(b) provides that Air Canada may require an investigation be made of a
particular case.
16.
Section 4(4) provides that should an employee be dissatisfied with the
assessment, he may lodge an appeal through his representatives on the Advisory
Committee for consideration. In addition, where an assessment is in dispute, a
three man medical board will be established and the findings of the board are
final.
17. Section
5 provides that the Advisory Committee shall consist of three representatives
of Air Canada and three representatives of the pilots’ association.
18. Section
6 provides that a medical board will consist of one medical examiner appointed
by Air Canada, one appointed by the claimant and a third neutral party appointed
by the first two appointees.
[14]
Ms. Friedmann testified that the question
of whether an individual is Disabled (as defined in the Plan) is determined by
medical specialists at Air Canada who are certified in aviation medicine. In
order for an individual to be considered Disabled, the Air Canada medical
specialists must determine that the individual is unfit to fly for medical
reasons. Once this determination is made and is communicated to Great-West
Life, Great-West Life is responsible for determining whether the individual is
eligible for benefits under the Plan. Great-West Life is also responsible for
determining whether an individual is Totally Disabled (as defined in the Plan).
This determination must be made before the end of the first year of disability.
If an employee wishes to challenge the medical assessment, he or she may lodge
an appeal through his or her representative on the Advisory Committee and a
three-person medical board will determine the issue.
[15]
The second document, Exhibit R-2, is entitled “Services Agreement”. The cover page indicated that the
contract holder is Canadian Airlines International Ltd. (subsequently replaced
by Air Canada according to Ms. Friedmann), that the effective date is July
1, 2000 and that the contract type is Services Agreement. The relevant terms
and conditions of the Services Agreement are as follows:
1. The
preamble states that Great-West Life has agreed to act as the servicing agent
on behalf of Air Canada for the purposes of executing the terms of the Plan.
2. Article
II(4) provides that Great-West Life in performing its obligations under the Services
Agreement is acting only as servicing agent of Air Canada and the rights and
responsibilities of Great-West Life and Air Canada shall be determined in
accordance with the law of agency except as otherwise provided.
3. Under
Article III, Great-West Life agrees to perform the services described in the
Schedule of Services described in Appendix II and Air Canada agrees to pay to
Great-West Life, for such services, the fees described in the Schedule of Fees
in Appendix I. Appendix II includes the following services:
a. The
preparation and printing of claims forms, claim cheques, administrator’s guides
and other administrative forms.
b. The
provision of monthly statistical reports including bank reconciliation.
c. The
provision of monthly benefit payment reports.
d. Adjudication
of claims.
e. The
preparation and issue of cheques.
4. Article
V provides that Air Canada shall indemnify and hold Great-West Life harmless
from any loss, liability, claim or expense arising out of any act or omission
of Air Canada in connection with the Plan.
[16]
Ms. Friedmann testified that Great-West
Life was working for Air Canada in an administrative services capacity pursuant
to which it would execute the Plan and carry out the administration of the
Plan. In terms of funding, Air Canada would pay into a trust account on a
monthly basis an amount sufficient to cover the payments to be made by Great-West
Life to beneficiaries under the Plan and the fees payable to Great-West Life. Great-West
Life would draw on these funds to make payments to the beneficiaries and to pay
its fees and would submit bimonthly invoices to Air Canada that itemized the
payments it had made to the beneficiaries together with the fees it was
entitled to under the Services Agreement.
[17]
Ms. Friedmann testified that, under the
terms of the Services Agreement, Great-West Life was responsible for drafting
the documents that would support the benefits provided and for the administration
of the benefits. To this end, Great-West Life would provide Air Canada with claim forms, cheques, guidelines, tax slips and regular reporting including
bank reconciliations that described the deposits to and withdrawals from the
trust account. Great-West Life would also provide reports on benefits paid,
undertake an annual review with Air Canada and address any required revisions
or reconciliations. Finally, Great-West Life was responsible for adjudicating
the entitlement to benefits under the Plan.
[18]
Ms. Friedmann testified that the financial
obligations and risks under the Plan were solely those of Air Canada. To the extent that Great-West Life incurred a loss in the administration of the
Plan, Air Canada would reimburse Great-West Life.
[19]
In cross-examination, Ms. Friedmann
confirmed that Air Canada’s system identified the Appellant as an employee of
Air Canada who is on leave and consequently is not providing services to Air Canada. Ms. Friedmann also testified that the Plan applied to individuals who were
pilots at Canadian Airlines prior to its acquisition by Air Canada and that Exhibit A-3 confirmed that the Plan applied to the Appellant.
A. Appellant’s Position
[20]
The Appellant submitted that the terms of the
Plan had not changed after 2011 and that it is arbitrary for the Canada Revenue
Agency to amend its interpretation of the Plan and collect EI premiums in 2012
when it had not done so in the past. He submitted that he should not be
required to pay EI premiums when the terms of the Plan did not originally
attract such premiums. He also submitted that he was not able to provide
services and, in fact, had not provided services to anyone since he became
permanently disabled and that paying EI premiums in such circumstances is a
hardship and is unfair to him and to others receiving long-term disability
payments as they cannot benefit from the employment insurance scheme. The
Appellant also referred to a Department of Justice document on the retroactive
effect of conditional obligations in tax law, which explored the retroactive
effect of civil law conditional obligations and the impact they have in a tax
context.
B. Respondent’s Position
[21]
The Respondent submitted that the issue is
whether the long-term disability payments received by the Appellant are “insurable earnings” under the EIA. The
Respondent submitted that there was no issue that the Appellant was first an
employee of CP Air, then Canadian Airlines and now Air Canada and that the Appellant received long-term disability benefits for the period from January 1, 2012
to November 15, 2012.
[22]
The Respondent referred to the definitions of “insurable earnings” and “insurable
employment” in subsection 2(1) of the EIA. “Insurable
earnings” is defined to mean the total amount of the earnings, as
determined in accordance with Part IV, that an insured person has from
insurable employment. “Insurable employment” in
turn has the meaning provided for by section 5 of the EIA. Paragraph
5(1)(a) 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;
[23]
Counsel also referred to subsection 1(2) and paragraphs
2(1)(a) and 2(3)(d) of the Insurable Earnings and Collection
of Premiums Regulations (the “IECPR”),
which provide as follows:
1(2)
For the purposes of Part IV of the Act and for the purposes of these
Regulations, “employer” includes a person who pays or has paid earnings of
an insured person for services performed in insurable employment.
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 . . .
2(3) For the purposes
of subsections (1) and (2), “earnings” does not
include
. . .
(d)
a supplement paid to a person by the person's employer to increase a wage loss
indemnity payment made to the person by a party other than the employer under a
wage loss indemnity plan;
III. The
Law
[24]
The relevant statutory provisions are those
cited by the Respondent and described above. The scope of these statutory and
regulatory provisions is discussed in two cases decided by the Federal Court of
Appeal: Université Laval v Canada (Minister of National Revenue), 2002 FCA
171 and Attorney General of Canada v National Bank of Canada, 2003 FCA 242. In each of these cases, the Court held that payments under a wage
loss replacement plan funded by the employer were insurable earnings for
purposes of the EIA. In National Bank, the Court summarized the
principles propounded in Université Laval in paragraph 3 of the judgment
as follows:
3 In our
view, the decision of this Court in Université Laval v. Canada (Minister of Revenue), 2002 FCA 171, dated May 3, 2002, is applicable in this
case, and accordingly the application for judicial review must be allowed. In
that case, this Court enunciated the following principles:
(1) The expression “in respect of” such
employment, which qualifies earnings paid by the employer and which is found in
subsection 2(1) of the Regulations is particularly broad;
(2) There can be insurable earnings within the meaning of the
Regulations even where the employee has not performed any services;
(3) Benefits paid by an employer under a wage loss indemnity plan
constitute insurable earnings within the meaning of the Act and the
Regulations, while benefits paid by a third party insurer are excluded from the
definition;
.
. . and
(5) Wage loss benefits are paid by an employer under a contract of
employment where the following indicia exist, which are not necessarily
exhaustive: the wage loss insurance plan is entirely paid for by the employer,
the employment relationship continues to exist during the disability, the
benefits payable are increased if there is a salary increase during the
disability period, the benefits are paid by the employer during normal pay
periods for the first 52 weeks of disability and thereafter by the insurer and
lastly, the employer determines eligibility for the benefits and signs the
cheques.
(Emphasis added)
[25]
The Court went on to state in paragraph 4 that:
4 It seems
clear to us from our review of that judgment that it is not necessary for all
these indicia to exist in order to conclude that the benefits are paid by the
employer under a contract of employment.
[26]
The Federal Court of Appeal determined that
there can be insurable earnings even where the employee has not performed any
services. The issue is not whether services are performed by the recipient of
the payments but whether, in view of the circumstances, the employee is paid
the disability payments by the employer in respect of insurable employment.
[27]
According to the Federal Court of Appeal, the
determination of whether the payments are paid by, and received from, the
employer is dependent upon whether or not the employer is funding the
disability payments. The fact that a person other than the employer may issue
the cheques does not determine the identity of the person making the payment.
[28]
Finally, the Federal Court of Appeal observed in
paragraph 18 of Université Laval that paragraph 2(3)(d) of the IECPR
expressly excludes from insurable earnings a supplemental payment made by an
employer where the base payment is made under a wage loss replacement plan by a
person other than the employer. It follows from this exclusion that wage loss
replacement type payments made by an employer are otherwise considered
insurable earnings within the meaning of subsection 2(1) of the IECPR.
IV. Conclusion
[29]
The first question to answer is whether the
Appellant is in insurable employment during the period in issue? Insurable
employment would include employment by Air Canada under an express or implied
contract of service whether written or oral. The Appellant testified that he became
an employee of CP Air in June 1979 at which time he commenced to provide services
as a commercial pilot. There is no evidence that his employment with CP Air
terminated when he became disabled in the mid-1980s and was no longer able to perform
his duties as a pilot. CP Air subsequently became Canadian Airlines and
Canadian Airlines was acquired by Air Canada in 2000. Again, there is no
evidence that his employment terminated as a result of these events. In fact,
the Appellant has had an employee number with Air Canada since its acquisition
of Canadian Airlines and Air Canada’s records show the Appellant as an employee
of Air Canada who is on leave. The Appellant argued that he did not provide
services to Air Canada but he did not argue that he was not an employee of Air Canada. In view of these facts, I find that the Appellant was an employee of Air Canada during the period in issue, which, incidentally, is one of the conditions for eligibility
under the Plan (see sections 2(1) and 2(7)(a) of the Plan). The fact that the
Appellant did not provide services to Air Canada because of his disability does
not in and of itself alter his status as an employee of Air Canada.
[30]
The second question to answer is whether or not
Air Canada is paying the disability payments to the Appellant? The disability
payments received by the Appellant are funded entirely by Air Canada through
its monthly deposits in the trust account maintained for that purpose. Great-West
Life issues cheques to the Appellant as servicing agent for Air Canada and draws upon the trust account to cover those cheques. Air Canada pays Great-West Life for its services and indemnifies and holds Great-West Life harmless from
any loss or liability arising out of any act or omission of Air Canada in connection with the Plan. In view of these facts, I find that Air Canada pays the
disability payments to the Appellant and that the Appellant, therefore,
receives the disability payments from Air Canada. The fact that a person other
than Air Canada may issue the cheques does not determine the identity of the
person making the payment. Air Canada is making the payments through its servicing
agent, Great-West Life.
[31]
The third question to answer is whether the
disability benefits are paid to the Appellant in respect of his insurable employment
by Air Canada. In answering this question, the broad nature of the words “in respect of” must be taken into account. In Nowegijick
v Her Majesty The Queen, [1983] 1 S.C.R. 29, the Supreme Court of Canada observed at paragraph 30:
The words “in
respect of” are, in my opinion, words of the widest possible scope. They import
such meanings as “in relation to”, “with reference to” or “in connection with”.
The phrase “in respect of” is probably the widest of any expression intended to
convey some connection between two related subject matters.
[32]
There are a number of important indicia that
suggest that the disability benefits are paid to the Appellant in respect of
his employment by Air Canada:
1. Air
Canada funds the Plan and takes all financial risk associated with the Plan.
2. Eligibility
under the Plan is a condition of employment by Air Canada.
3. The
stated purpose of the Plan is to provide a level of income protection during
periods that a pilot cannot perform his regular duties.
4. The
Appellant is categorized by Air Canada as an employee notwithstanding his total
disability and his consequential inability to perform services. The Appellant
is simply considered to be on leave.
5. Benefits
under the Plan cease as soon as the Appellant is no longer an employee of Air Canada.
6. Air
Canada determines initial eligibility under the Plan by determining whether
an employee is Disabled as defined in the Plan.
7. Through
its representation on the Advisory Committee and the medical board, Air Canada
retains input on decisions related to eligibility that are not expressly
determined by the terms of the Plan itself.
8. The
Appellant is entitled to full coverage without cost under Air Canada’s group life and accident insurance plans and its group health and dental plans. As
well, allowable service is continued in the Air Canada Pension Plan.
9. The
amount of the disability payments is fixed at 60% of the Appellant’s salary.
[33]
Although not all of the indicia identified in National
Bank are found in this case, the Federal Court of Appeal stated that the
list of indicia provided in that case was not exhaustive and that not all of
the indicia identified in that case need be present to find that a payment is
in respect of employment. In light of the indicia that I have identified, I
conclude that the disability payments received by the Appellant under the Plan
are paid to the Appellant by Air Canada in respect of his insurable employment
by Air Canada and that, consequently, the payments are “insurable
earnings” for purposes of the EIA. The fact that employment
insurance premiums were not deducted from the Appellant’s disability payments
in years prior to 2012 does not alter this conclusion.
[34]
For the foregoing reasons, the appeal is
dismissed without costs.
Signed
at Ottawa, Canada, this 28th day of November 2014.
“J.R. Owen”
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