REASONS
FOR JUDGMENT
Boyle J.
[1]
This appeal by Simone Sherman is from an Employment
Insurance Ruling that ruled that she was employed in “insurable employment” by
Canada Revenue Agency (“CRA”) in the years 2007 through 2010 for purposes of
the Employment Insurance Act (“the EI Act”). Ms. Sherman is wanting
to get her EI premiums refunded for those years.
Facts
[2]
Ms. Sherman is a chartered accountant and has been a
long time employee of the CRA. She commenced her employment with the CRA in
1985. Beginning in 1993 she had a very long‑running dispute with her
employer relating to CRA’s alleged failure to accommodate her ability
impairment which she testified resulted from having been injured at work.
[3]
The employment relationship was acrimonious and the
subject of much litigation. Grievances were filed in respect of her employment
in 1997, 1998 and 1999. A harassment complaint was filed by her against her
employer and certain fellow employees in 1998. Ms. Sherman was twice terminated
by CRA and twice reinstated. In 2003, she was reinstated with back pay. She
disputed the CRA’s calculation of her back pay and pursued that successfully in
the Federal Court. She disagreed with how interest was calculated by the CRA on
the Court awarded back pay and unsuccessfully pursued a contempt order in the
Federal Court against the CRA. She then unsuccessfully pursued a mandamus
order in the Federal Court with respect to CRA’s interest calculation and
payment. This was dismissed by the Federal Court and appealed to the Federal
Court of Appeal. She brought multiple motions for issue estoppel
relating to issues decided in her successful termination grievances, and
judicial review applications in the Federal Court. She filed other grievances.
She commenced objections and appeals of decisions of the Ontario Workplace Safety
and Insurance Board.
[4]
In 2000, she filed a Human Rights complaint against her
employer. This was referred to the Canadian Human Rights Tribunal. She brought
an unsuccessful motion before the Tribunal for issue estoppel. She
unsuccessfully sought judicial review of the decision on that motion in the
Federal Court. The Canadian Human Rights Tribunal then set her complaint down
for hearing.
[5]
Following mediation, Simone Sherman, her union, and the
CRA and its involved employees entered into a Settlement Agreement in November
2006 in respect of the Human Rights complaint. By its terms, the Settlement
Agreement was to be a full and final settlement of all issues between them.
[6]
The key provisions of the Settlement Agreement relevant
to this appeal in respect of her EI contributions and withholdings are as
follows:
1.
Ms. Sherman’s sick leave and vacation leave
credits that had been used prior to the Settlement Agreement were reinstated. Sick
leave credits and vacation leave credits during a period prior to the Settlement
Agreement were accrued. These resulted in Ms. Sherman having
2,144.95 hours of vacation leave credits and 1,470.125 hours of sick
leave credits, or approximately 100 work weeks of banked sick and vacation
time.
2.
The CRA would “continue its employment” of
Ms. Sherman until June 7, 2010 “during which time she will be on
leave with pay for other reasons”.
3.
Following June 7, 2010 CRA would “continue
her leave from the office, during which she will be compensated by [CRA] by
means of her accumulated vacation credits and sick pay”.
4.
Ms. Sherman continued “to accrue sick leave
and vacation leave credits in accordance with the terms of her collective
agreement” throughout the periods described above.
5.
Once her vacation credits and sick leave credits
were exhausted, Ms. Sherman would “commence leave without pay for other
reasons”. The evidence is that she had used all of her credits accumulated to
the date of the Settlement Agreement, and those accrued thereafter in
accordance with 4. above, in July 2013, slightly more than
3 years after the commencement of the period described in 3. above.
6.
Ms. Sherman agreed with the CRA and her
union that “on June 22, 2015, the employment relationship between
[Ms. Sherman] and the [CRA] will end, and [Ms. Sherman] agrees that
she has hereby notified the [CRA] that she will retire from employment
effective June 22, 2015”.
7.
The Settlement Agreement provides that the terms
of Ms. Sherman’s collective agreement, as amended from time to time, will
continue to apply to her except as otherwise provided in the Settlement Agreement.
8.
For the period from December 2006 until
Ms. Sherman’s retirement, the Settlement Agreement specifies that
Ms. Sherman will not enter any CRA premises “for purposes related to her
employment relationship”, will “not perform any duties or work activities”, and
will “not represent herself or hold herself out to be an active employee of
[CRA]”.
9.
In addition, the Settlement Agreement provided
that, following the withdrawal of her Human Rights complaint, CRA would pay to
her $140,000 in respect of lost wages less applicable statutory deductions,
$20,000 in respect of damages under the Canadian Human Rights Act, and
$80,000 in respect of her legal fees.
[7]
The parties have abided by the provisions of the Settlement
Agreement. In 2013, Ms. Sherman applied for a disability insurance benefit
from SunLife which is CRA’s agent/insurer. The CRA maintains that is a breach
of the Settlement Agreement, as was her attending at a CRA Taxation Services Office
to hand deliver her disability insurance application documents.
Ms. Sherman maintains these are not breaches and is still pursuing this
claim.
[8]
Ms. Sherman has consistently reported this income
as employment income for income tax purposes, including taking employment
related deductions and credits. She does not dispute that this is the correct
characterization of her work relationship and its income for income tax
purposes.
Law
[9]
Paragraph 5(1)(a) of the EI Act reads as
follows:
|
5. (1) Subject to subsection (2), insurable
employment is
|
5. (1) Sous réserve du paragraphe (2), est
un emploi assurable :
|
|
(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;
|
a) l’emploi exercé au Canada pour un ou plusieurs
employeurs, aux termes d’un contrat de louage de services ou d’apprentissage
exprès ou tacite, écrit ou verbal, que l’employé reçoive sa rémunération de
l’employeur ou d’une autre personne et que la rémunération soit calculée soit
au temps ou aux pièces, soit en partie au temps et en partie aux pièces, soit
de toute autre manière;
|
Analysis and
conclusion
[10]
The Appellant did not seriously pursue an argument that
she was not in an employment relationship in law throughout the period for
purposes of the EI Act. Such an argument was not directly raised in the ruling
request or the notice of appeal or in Appellant’s written argument; it was only
addressed in response to my question on this point. Given the language
consistently used throughout the Settlement Agreement, I see no merit
whatsoever to any argument that her employment ceased as a matter of law before
or upon its signing. “In tax law, form matters” per Linden J. in HMQ v.
Friedberg, 92 DTC 6031 at 6032. While the relationship between the employer
and the employee had clearly broken down, and perhaps even irretrievably so, by
2006, there was no other evidence that the parties ever behaved or maintained
that there was no longer an employment relationship.
[11]
While it is possible, I see nothing to suggest that
“employment” in paragraph 5(1)(a) of the EI Act was intended to, or
should, from a statutory interpretation point of view, a policy point of view
or otherwise, mean anything different than the word employment means for
purposes of the Income Tax Act. Nor do I see any uncertainty or
ambiguity that would warrant any statutory interpretation analysis of the word
employment as used in paragraph 5(1)(a) of the EI Act in any event.
[12]
The principal position of the Appellant is that she was
not employed under a “contract of service” as expressly required by the
definition of insurable employment, because the terms of the Settlement Agreement
precluded her from performing any duties or work activities, entering CRA
premises for purposes related to her employment, or holding herself out to be
an active employee of CRA after December 2006.
[13]
Her counsel’s argument is that the use of the phrase
“contract of service” in the definition of “insurable employment” introduces a
requirement for service or services, or that some work function or activity be provided
within the employment during the relevant period, notwithstanding that “contract
of service” is a term of art used in jurisprudence to describe an employment
relationship as distinct from an independent contractor or self‑employed
work relationship.
[14]
I do not agree with this position. There are several
Federal Court of Appeal decisions and Tax Court decisions that very clearly
deal with some of these very issues. I consider myself bound by the
interpretation given to the meaning of “contract of service” for EI purposes by
the Federal Court of Appeal in these decisions. Further, I agree with the
interpretations in these court decisions.
[15]
In Canada v. Verreault, 86 NR 389 (1986), the
Federal Court of Appeal quashed the decision of the Umpire relating to
unemployment insurance claims made by employees whose employer closed its plant,
and placed each of them on leave for two months after which they were to be
dismissed. The employees claimed UI benefits during the period they were
placed on leave. The Board of Referees found their employment continued through
the leave period and the employees therefore did not have an interruption of
earnings. The Umpire quashed the Board’s decision. In quashing the Umpire’s
decision, the Federal Court of Appeal wrote “It seems quite certain that the
parties to a contract of employment can legally agree to extend the contract
for a period in which the employee will not be required to do any work.”
[16]
The Verreault decision was again considered and
applied approvingly by the Federal Court of Appeal in its decision in Canada
v. Sirois, 243 NR 212 (1999) when considering whether employees on pre‑retirement
leave were under a contract of service for purposes of the definition of
“insurable employment” in the former Unemployment Insurance Act.
Paragraph 8 of Sirois reads:
[8] In my opinion, the judge erred in concluding that no
contract of service existed on the ground that the defendant was no longer
providing any work. The courts have recognized that even if an employee, who is
still receiving money from his or her employer, is no longer working it does not
necessarily follow that there is no longer a contract of service between the
employee and the employer. The Court has to consider whether the employment
relationship has been broken.
[17]
In referring to its Verreault decision, the
Federal Court of Appeal in Sirois said “the Court laid down the
principle that the parties to a contract of service could legally agree to
extend its duration for a period in which the employee would be excused from
providing any work.”
[18]
In Serafini v. M.N.R., 89 DTC 653, the Federal
Court of Appeal considered whether certain amounts received by an employee in a
particular early retirement program were retiring allowances for income tax
purposes. The Court wrote that “it is quite possible to be an employee without
actually working. The fact that Mr. Serafini was no longer required to
perform any duties is not per se determinative of the issue. If his
situation requires characterization it can be likened to a pre‑retirement
leave with full pay and benefits… It is neither unusual nor infrequent that one
can remain employed without actually working. Instances come quickly come to
mind such as sabbatical leave enjoyed by tenured university professors; leaves
of absence, both with or without pay, for educational purposes; collective
agreements permitting the utilization of excess sick leave as pre‑retirement
or vacation leave, and so forth.”
[19]
In Canadian Pacific Ltd. v. M.N.R., [1995]
T.C.J. No. 1755, this Court was considering an employee on a “bridging
period” until he could elect early retirement and the definition of insurable
employment for UI purposes. During this period, he was paid by his employer and
received full benefits and accrued pension credit even though he did not
perform any work. The Court’s conclusion was “It is well established that
Mr. Oliver did not terminate his contract of employment when he chose the
bridging agreement and that employees do not have to do employment duties to
preserve their insurable employment when they are on leave of absence.”
[20]
In Community Living Huntsville v. M.N.R., 2003
TCC 932, and in Wronski v. M.N.R., [1999] T.C.J. No. 666 (QL), this
Court referred to and applied the Federal Court Appeal position in Verreault.
[21]
Appellant’s counsel also sought to make reference to
the Insurable Earnings Regulations to interpret the scope of the definition
of “insurable employment”, including its use of the term “contract of service”.
The Insurable Earnings Regulations are not directly relevant as they
apply to the computation of insurable hours for one who is in insurable
employment. They do not address the concept of insurable employment. Given the
definition of insurable employment and its clear and consistent interpretation
by the Federal Court of Appeal as it relates to the use of the word
“employment” and the phrase “contract of service” in the defined term, there is
no need to look to the Insurable Hours Regulations to understand or
inform the definition of “insurable employment”. This was also the approach of
the Federal Court of Appeal in Sirois. In any event, in Université
Laval v. Canada, 2002 FCA 171, the Federal Court of Appeal, in considering employees
on sick leave, expressly rejected “the employer’s legal argument that there can
be no insurable earnings within the meaning of the regulations where no services
are performed.”
[22]
The law on the point in issue in this appeal is very
clear and has been consistently applied by the courts. I am therefore reminded
somewhat of the comments of Cory J. of the Supreme Court of Canada in Alberta
Treasury Branches v. M.N.R., [1996] 1 S.C.R. 963, that “agile legal minds can probably find an ambiguity in as simple a
request as “close the door please” and most certainly in even the shortest and
clearest of the ten commandments”. If I may also paraphrase the comments of Stephen J.
in In Re Castioni, [1891] 1 QB 149: On many occasions people try
to misunderstand legislation that is easy to understand. In drafting
legislation it is not enough to attain a degree of precision which a person
reading in good faith can understand, but it is necessary to attain if possible
a degree of precision which a person reading it otherwise cannot misunderstand.
It is all the better if he cannot pretend to misunderstand.
[23]
For these reasons, I conclude
that Ms. Sherman was in “insurable employment” throughout the years
2007 through 2010 because throughout that period she continued to be employed
by CRA under a contract of service within the meaning of the EI Act as
interpreted by the Federal Court of Appeal and applied by this Court in
previous decisions. The appeal is dismissed.
Signed at Ottawa, Canada, this 30th day of September 2014.
“Patrick Boyle”
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