REASONS
FOR JUDGMENT
V.A. Miller J.
[1]
The issue in this appeal is whether the payments
received by the Appellant under a Wage Loss Replacement Program (“WLRP”) during
the period from January 1, 2013 to December 31, 2013 are insurable earnings in
accordance with section 2 of the Employment Insurance Act (the “EI
Act”) and section 2 of the Insurable Earnings and Collection of Premiums
Regulations (the “IECPR”).
FACTS
[2]
The witnesses at the hearing were the Appellant
and Sherwyn Wharton who is a CPP/EI Appeals Officer with the Canada Revenue
Agency (“CRA”).
A. Appellant’s
Evidence
[3]
The Appellant is an employee of Dow Chemical
Canada ULC (“Dow”). She started to work for Dow in 1990 as a chemical
technologist and in 1993 she became a research technologist. In September 2003,
the Appellant became ill. During the period September 2004 until March 21,
2005, she was unable to work and she received benefits pursuant to a Short-Term
Disability Plan. In 2005, Sun Life Assurance Company (“Sun Life”) approved her
application to receive payments from the Long-Term Disability (“LTD”) Plan retroactively
to March 22, 2005. Sun Life was the plan administrator.
[4]
The Appellant has not worked since 2004.
However, she continues to be an employee at Dow and she participates in their
insurance, dental and medical plan.
[5]
As part of her evidence, the Appellant submitted
the following documents:
•
Letters dated January 31, 2005 and June 29, 2005
from Dow with respect to LTD benefits;
•
An e-mail from Dow dated March 28, 2008 with
respect to the rehabilitation protocol;
•
A page from the Benefits Guide bearing the date
2002;
•
A document titled CLAIM FILE dated February 23,
2005 for the Appellant;
•
7 pay notifications from Sun Life with dates
from June 22, 2005 to January 8, 2007;
•
Amendment Agreement to Group Policy 83140
(“Policy 83140”) issued by Sun Life to Dow on July 1, 2004.
[6]
The Appellant stated that in 2005 Sun Life
determined her eligibility to receive LTD benefits. She noted that when her
claim to receive LTD benefits was approved, the policy number of the agreement
between Sun Life and Dow was 83140. The Appellant entered a copy of the
document entitled Amendment Agreement No. 7, Amendment to Group Policy 83140
(“Policy 83140” or the “Policy”) into evidence. The Policy was issued to Dow by
Sun Life. The Policy number was written on various other documents submitted
into evidence by the Appellant. In particular, it appeared on the pay
notifications which were sent to her by Sun Life when it deposited money into
her bank account (the “pay notifications”). The pay notifications showed the
gross payment, federal tax deducted and amount deposited in her account. The
pay notifications in evidence were dated from June 22, 2005 to January 8, 2007.
[7]
Policy 83140 was an insurance policy between Sun
Life and Dow with an effective date of July 1, 2004. The Policy included Life
Insurance and Long Term Disability Insurance. According to the Policy, Dow paid
premiums to Sun Life and Dow was responsible for the administration of the
Policy in accordance with the instructions provided by Sun Life. The Long Term
Disability Insurance Provision contained a subrogation clause. It stated that
if Sun Life had paid or was obligated to pay a benefit for an injury or disease
for which a third party was or may be liable, Sun Life would assert its right
to reimbursement.
[8]
I note that Dow could terminate the Policy by
giving written notice and the termination date would be the date Sun Life
received the notice or the termination date specified in the notice. Sun Life
could also terminate the Policy on the first policy anniversary or on a premium
due date after that by giving Dow 60 days written notice.
B. Respondent’s Evidence
[9]
Mr. Wharton explained that this file was opened
in the Appeals Division by a screener named Laurie Vallette. In opening the
file, Laurie Vallette sent a letter to the Appellant and to Dow. The letter to
Dow was dated May 7, 2014 (exhibit R-3) and requested Dow to provide all
relevant information in support of its position with respect to the Appellant.
The file was then assigned to Mr. Wharton.
[10]
The letter from Dow in response to CRA’s request
was dated July 16, 2014 (exhibit R-4). A portion of that letter
reads:
Your letter does
not describe Ms. Ilijoic’s exact issue. However, in her calls to our service
center she expressed concern that Employment Insurance (“EI”) premiums had been
deducted from her 2013 Long-Term disability (“LTD”) benefit payments, and said
that she planned to appeal. Below is a summary of information and fact in
support of our position that EI premiums were correctly deducted from Ms.
Ilijoic’s 2013 LTD payments from Sun Life Financial on behalf of Dow.
…
Ms. Ilijoic was
actively employed by Dow from September 18, 1990 through March 21, 2005. On
March 22, 2005, she began receiving benefits under the Dow Long-Term Disability
(“LTD”) program, which is administered by Sun Life Financial through an
Administrative Services Only (“ASO”) arrangement.
During the period
January 1, 2013 to December 31, 2013, Ms. Ilijoic continued to receive ASO LTD
benefits. Because Sun Life Financial pays benefits to Ms. Ilijoic on
behalf of Dow through a wage loss replacement plan (LTD), Sun Life deducted EI
premiums from her 2013 ASO LTD payments. Based on the Employers’ Guide
language above, we believe that action was correct.
[11]
Mr. Wharton then requested and received a copy
of the Administrative Services Contract (“ASO Contract”) between Sun Life and
Dow. The ASO Contract has number 25506 and its effective date is January 1,
2008. I will discuss the provisions of this contract in the Analysis section of
my decision.
C. Appellant’s
Position
[12]
The Appellant was represented by Bradley Angove,
law student. He quoted the relevant legislative provisions. Mr. Angove stated
that when the Appellant made her claim for LTD payments, the agreement between
Dow and Sun Life was Policy 83140. Her eligibility to receive LTD payments was
determined in accordance with Policy 83140; it was an insurance contract and
not an administrative services only contract. Dow paid the premiums to Sun Life
for the insurance policy but Sun Life, the insurer, determined the Appellant’s
eligibility for benefits pursuant to Policy 83140. Sun Life made the payments
to the Appellant and bore the risk pursuant to this Policy. There was a
subrogation clause in this contract. The ASO Contract (exhibit R-1) is not
relevant because it was not in force when the Appellant was found to be
eligible to receive the WLRP payments.
D. Respondent’s Position
[13]
Mr. Pasichnyk, student-at-law, represented the
Respondent. He stated that the issue in this appeal is whether the WLRP
payments received by the Appellant in 2013 were insurable earnings. He quoted
the relevant statutory provisions and then stated that the WLRP received by the
Appellant in 2013 was completely funded by Dow.
[14]
It was the Respondent’s position that the period
at issue in this appeal is 2013. The Appellant may have first received her WLRP
payments under the insurance contract, Policy 83140, but that contract was not
effective for 2013. The ASO Contract was effective as of January 1, 2008 and
remained in effect during 2013. As a result, the WLRP payments received by the
Appellant in 2013 were pursuant to the ASO Contract. The amounts paid to the
Appellant in 2013 by Sun Life were actually payments by Dow to the Appellant as
Sun Life was agent for Dow.
II. LEGISLATION
[15]
The relevant provisions of the EI Act and
the IECPR read:
Employment
Insurance Act
2(1) Definitions—In this Act,
[…]
insurable
earnings means the total amount of the earnings, as
determined in accordance with Part IV, that an insured person has from
insurable employment; (rémunération assurable)
5(1) Types of
insurable employment—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 and Collection of Premiums Regulations,
SOR/97-33
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;
III. ANALYSIS
AND DECISION
[16]
The first question to answer in this appeal is
whether the WLRP payments received by the Appellant in 2013 were pursuant to
Policy 83140 or the ASO Contract. I have concluded that it was the ASO
Contract.
[17]
It is my view that many of the documents
submitted by the Appellant were not relevant to the issue before me. All
documents submitted by her bore a date prior to 2013. The pay notifications
which showed the amount of money deposited into her bank account by Sun Life
bore the contract number 83140. However, all of these pay notifications were
dated prior to 2008. The last one was dated January 8, 2007.
[18]
In cross-examination, the Appellant admitted
that she received pay notifications from Sun Life at least once a year and she
did have pay notifications for 2013. She did not include them in her book of
documents and she failed to bring them to Court. I have drawn an adverse
inference from her failure to submit any pay notifications for 2013. I have
inferred that the Appellant did not submit a 2013 pay notification because it
would not have supported her position in this appeal. I note that each of the
pay notifications for 2005 to 2007 inclusive contained the contract number
under which the payments were made. I have also inferred that the 2013 pay
notifications most likely contained the number of the contract in force for
2013 which was the ASO Contract – 25506.
[19]
The Appellant may have received her WLRP
payments under Policy 83140 in 2005 to 2007, but it appears that that Policy was
not effective for 2013. The ASO Contract was effective as of January 1, 2008
and remained in effect in 2013. In cross-examination, the Appellant admitted
that “most likely” her 2013 WLRP payments were paid in accordance with the ASO
Contract.
[20]
The letter from Dow to the CRA is clear that, in
2013, the Appellant was paid benefits by Sun Life through an Administrative
Services Contract. When Mr. Wharton requested the relevant contract from Dow,
the ASO Contract was sent to him.
[21]
The second question is whether it matters that
the Appellant’s eligibility for LTD payments was first determined under Policy
83140. I think not. The question is not under which policy she was first found
to be eligible to receive LTD payments but under which policy was she determined
to be eligible to receive benefits in 2013. That policy is the relevant policy
in this appeal.
[22]
According to the ASO Contract, to be eligible
for benefits, “an employee must be a member of a class
of eligible employees as agreed between the Plan Sponsor (Dow) and the Plan
Administrator” (Sun Life). It is clear from the ASO Contract that Dow
had the final determination concerning an employee’s eligibility for coverage
under the Plan attached to the ASO Contract.
[23]
The Appellant’s documents included an email dated
March 27, 2008 from her to Paula Westaway who is a Benefits Plan Specialist at
Dow. According to this email, in 2008, the Appellant was required to obtain
further independent medical examinations. It seems to me that her eligibility
to receive WLRP payments was again determined in 2008. I note that the ASO
Contract was effective January 1, 2008.
[24]
The next question is whether the WLRP payments
received by the Appellant in 2013 were insurable earnings.
[25]
Subsection 2(1) of the EI Act defines
“insurable earnings” as the “total amount of earnings”, determined in
accordance with Part IV, that an insured person has from insurable employment.
In this case, it is not disputed that the Appellant was engaged in “insurable
employment” during the relevant period. Both parties agreed that the Appellant
was an employee of Dow in 2013 and therefore she was employed under a contract
of service in accordance with paragraph 5(1)(a) of the EI Act.
[26]
Paragraph 2(1)(a) of the IECPR sets
out that the “total amount of earnings” is “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.” (emphasis added).
[27]
In Banque nationale du Canada v Ministre du
Revenu national, 2003 FCA 242, Letourneau J.A. summarized the legal
principles from the earlier Federal Court of Appeal decision in Université
Laval v Ministre du Revenu national, 2002 FCA 171. That decision discussed
the legal principles involved in determining whether WLRP payments are paid by
an employer in respect of employment. He wrote:
(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)
[28]
According to the Federal Court of Appeal, it is
not necessary for all the indicia listed in principle (5) to exist in
order to find that the benefits are paid by the employer.
[29]
The WLRP is a group plan and is referred to in
the ASO Contract as the Plan. The ASO Contract contains the following
provisions:
a)
Clause 2: Sun Life performed its obligations
under the ASO Contract as agent for Dow and not as an insurer;
b) Clause 7: Sun Life did not insure or underwrite the Plan. Dow
retained the legal and financial liability to pay benefits under the Plan and
all expenses incurred in administering the Plan except those expenses which Sun
Life assumed. Sun Life had no duty to defend any action against the Plan or
Dow. Dow indemnified Sun Life against any damage, liability and expenses which
resulted from claims or lawsuits brought against Sun Life in connection with
the Plan or the ASO Contract;
c)
Clause 10: Sun Life opened a bank account in its
name which was used solely in connection with the Plan and the ASO Contract.
The bank account was funded by Dow;
d) Appendix “B”: Sun Life performed administrative and claims services
for Dow. They consisted of:
Administrative
Services
i.
maintain the necessary records for experience
analysis, reserve calculation purposes, payment of benefits, projection of
future costs, and cost estimates for plan modifications;
ii.
provide a monthly accounting of payments with
sufficient detail to allow for the control and audit of the Plan's funds;
iii.
prepare an annual financial report reviewing
activity in the Plan during the year;
iv.
assist in the preparation of communication
material for employees concerning the benefits provided under the Plan;
v.
prepare and print claim forms;
vi.
prepare the Plan documents and any proposed
modifications for review and approval by Dow;
Claims
Services
i.
advise as to the entitlement of covered persons
to receive benefits in accordance with the Plan documents;
ii.
investigate any claim which required
investigation and obtain the opinion of experts, including medical experts,
where necessary;
iii.
refer to Dow for consideration and final
determination:
(a) any dispute concerning a person's eligibility or
coverage under the Plan, or his right to receive benefits;
(b) any situation where a person has disputed the amount due;
(c) generally any controversial matter or
non-routine matter arising out of the administration of the Plan where such
matters cannot be satisfactorily resolved by following the claims
administration procedures and practices established;
[30]
It is clear that Sun Life merely acted as agent
for Dow who entirely funded the WLRP and bore all financial risks of the Plan.
Sun Life was not an insurer but the administrator of the Plan. Dow had the
final determination with respect to a person’s eligibility or coverage under
the Plan.
[31]
I have concluded that the WLRP payments received
by the Appellant in 2013 were paid to her by Dow in respect of her employment
and the WLRP payments are insurable earnings. The appeal is dismissed.
Signed at Ottawa, Canada, this 22nd day of March 2016.
“V.A. Miller”
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