Date: 20100128
Docket: A-203-09
Citation: 2010 FCA 33
CORAM: NADON
J.A.
EVANS
J.A.
STRATAS
J.A.
BETWEEN:
TORONTO TRANSIT COMMISSION
Appellant
and
THE MINISTER OF NATIONAL
REVENUE
Respondent
REASONS FOR JUDGMENT
EVANS J.A.
A. INTRODUCTION
[1]
The
question to be decided in this appeal is whether long-term disability benefits
paid to employees of the Toronto Transit Commission (“TTC”) under an
employer-funded program are subject to an employer’s contribution under the Canada
Pension Plan, R.S.C. 1985, c. C-8 (“CPP”).
Liability to make an employer’s contribution is governed by subsection
9(1) of the CPP. It provides that an employer must make an employer’s
contribution for the year in which “remuneration for the pensionable employment
is paid to the employee”. Two questions of interpretation arise from this
provision.
[2]
First, do
the disability benefits paid to the employees constitute “remuneration for
the pensionable employment” within the meaning of subsection 9(1) of the CPP?
Second, were the employees in question in “employment” as defined by subsection
2(1) of the CPP at a time when they were excused from performing services for
the TTC because of their disabilities? Only if both questions are answered in
the affirmative is the TTC liable to make an employer’s contribution.
[3]
This is an
appeal by the TTC from a decision of the Tax Court of Canada: Toronto Transit
Commission v. Minister of National Revenue, 2009 TCC 198. In this decision,
Deputy Judge Weisman dismissed an appeal by the TTC from a determination by the
Minister of National Revenue that the monthly disability payments constitute
remuneration for pensionable employment and are subject to an employer’s
contribution under the CPP.
[4]
The Judge
concluded that provisions of the CPP should be interpreted harmoniously with
those of related statutory schemes, namely, employment insurance and income tax.
He held that, even though they were regarded as on a leave of absence and were not
performing services because of their disability, the employees were in
“employment” at that time, and the benefits paid to them constituted “remuneration
for the pensionable employment”.
[5]
In my
respectful opinion, the Judge erred in his interpretation of the legislation.
Subsection 2(1) defines “employment” as an activity: the performance of services
under a contract of service. Subsection 9(1) provides that “remuneration” paid
by an employer to an employee must be for the pensionable employment in order
to require an employer’s contribution. The payments in this case were not for
the pensionable performance of services but were, as the terms of the plans
make clear, an indemnity for the wages lost by employees who could not work. I
can find nothing in either the context of the provisions or the statutory
objectives of the CPP to displace the most obvious meaning of its text. Accordingly,
I would allow the appeal.
B. FACTUAL BACKGROUND
[6]
The two TTC
employees in question in this appeal, Hershell Green and Nancy Murphy, are in
receipt of permanent disability benefits. Mr Green, a unionized employee,
commenced work for the TTC on October 18, 1979, and became disabled in 2005.
His last day of work was June 18, 2005, and he qualified for long-term benefits
under the union plan on April 14, 2006. Ms Murphy started work with the TTC on
April 20, 1986, and become disabled in 2003. Her last day of work was August 4,
2003. She is a non-unionized employee and qualified for long-term disability
benefits under the staff plan on April 6, 2004.
[7]
The TTC
fully funds both plans. The terms of the union plan are negotiated by the TTC
and the employees’ bargaining agent, and form part of the collective agreement.
The staff plan was put in place unilaterally by the TTC and is included in
employees’ contracts of employment.
[8]
The TTC
has contracted with Sun Life Assurance Company of Canada (“Sun Life”) to administer the plans as
agent of the TTC, not as an insurer. Under this agreement, Sun Life determines
claimants’ eligibility and the amount of any payments, and makes the payments, for
which the TTC reimburses it. The TTC retains ultimate control over the disability
income plans and, when a dispute with an employee arises, makes the final
decisions on such issues as employees’ eligibility, their right to receive
benefits and the amount owing.
[9]
The terms
of the plans relevant to this appeal are broadly similar. Both entitle
employees to a percentage of their wages or salary after exhausting other
prescribed benefits and vacation pay. Employees are only eligible for long-term
disability after completing a specified period of time in active employment.
Payments cease at age 65 or on retirement. Disability benefits are stated to be
fully taxable.
[10]
Employees
on long-term disability are transferred to “inactive” status and new employees
may be hired to replace them. Nonetheless, they remain employees of the TTC,
but on personal leaves of absence. They also retain certain benefits, including
seniority, health and dental benefits, and transportation privileges. In
addition, TTC disability benefits are subject to a cost of living adjustment.
C. LEGISLATIVE FRAMEWORK
[11]
Subsection
2(1) of the CPP defines “employer” and “employment” for the purposes of the
Act.
|
“employer” means a person
liable to pay salary, wages or other remuneration for services performed in
employment, …
“employment” means the
performance of services under an express or implied contract of service or
apprenticeship, and includes the tenure of an office;
|
« employeur »
Personne tenue de verser un traitement, un salaire, ou une autre rémunération
pour des services accomplis dans un emploi. ….
« emploi »
L’accomplissement de services aux termes d’un contrat de louage de services
ou d’apprentissage, exprès ou tacite, y compris la période d’occupation d’une
fonction.
|
[12]
Subsection
6(1) defines categories of “pensionable employment”, each of which involves
“employment”.
|
6. (1) Pensionable
employement is
(a) employment
in Canada that is
not excepted employment;
(b) employment
in Canada under Her Majesty in right of Canada that is
not excepted employment; or
(c) employment
included in pensionable employment by a regulation made under section 7.
|
6. (1) Ouvrent droit à
pension les emplois suivants :
a) l’emploi
au Canada qui n’est pas un emploi excepté;
b) l’emploi au
Canada qui relève de Sa Majesté du chef du Canada, et qui n’est pas un emploi
excepté;
c) l’emploi
assimilé à un emploi ouvrant droit à pension par un règlement pris en vertu
de l’article 7.
|
[13]
Subsection
9(1) is the “charging section” which imposes on employers a duty to make an
employer’s contribution, and governs the calculation of the amount of the contribution.
However, since the amount is not relevant to this appeal, I have not included
those provisions of the subsection.
|
9. (1) 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 …
|
9.(1) Tout employeur doit,
à l’égard de chaque personne employée par lui dans un emploi ouvrant droit à
pension, payer pour l’année au cours de laquelle est payée à l’employé …
|
D. ISSUES AND ANALYSIS
[14]
It is
common ground that on an appeal from a decision of the Tax Court correctness is
the standard of review of questions of law. This appeal turns exclusively on a
question of law: the interpretation of the CPP. The standard of review is
therefore correctness.
Issue 1: Do long-term
disability payments under an employer-funded benefits plan constitute “remuneration
for the pensionable employment” within the meaning of subsection 9(1)?
[15]
Statutes
must be interpreted by reference to their text, context and purpose, and in a
manner that strives for harmony among the constitutive elements of the scheme, and
between those elements and the scheme as a whole. I turn first to the text of
the CPP.
(i) statutory text
[16]
“Remuneration”
is not defined in the CPP. The categories of “pensionable employment” are set
out in subsection 6(1). The category relevant to the present case is found in
paragraph 6(1)(a): “employment in Canada that is not excepted employment”. Since
“pensionable employment” is a subset of “employment” it is also necessary to
determine the meaning of “employment”. This is defined in subsection 2(1),
which for convenience I set out again.
|
“employment” means the
performance of services under an express or implied contract of service or
apprenticeship, and includes the tenure of an office;
|
« emploi »
L’accomplissement de services aux termes d’un contrat de louage de services
ou d’apprentissage, exprès ou tacite, y compris la période d’occupation d’une
fonction.
|
[17]
Thus, to qualify as “remuneration”
for the purpose of subsection 9(1), disability payments must have been made to employees
for the pensionable performance of services under a contract of service. In my
view, the payments by the TTC were in the nature of a partial indemnity for wages
or salary lost by the employees because they were unable to perform services
under their contracts of service by reason of long-term disability: see Minister
of National Revenue v. Visan, [1983] 1 F.C. 820 at 829. The benefits
payments were therefore not “for” the performance of services. I would only add
by way of parenthesis that in reaching this conclusion I have attached no significance
to the fact that the payments to the employees were made by Sun Life because they
were made on behalf of, and reimbursed by, the TTC.
[18]
In my opinion, the
word “for” in subsection 9(1) indicates that the remuneration must be closely
connected to the performance of services by employees. It is not enough that either
the payments were made only to employees who had performed services at one time
under their contracts, or the TTC’s duty to pay benefits arose out of a contract
of employment.
[19]
On the other hand, I
have little doubt that a bonus paid in one year in respect of services rendered
in the previous year would constitute “remuneration” in the year of payment, in
respect of which an employer’s contribution would be payable. I would also expect
vacation pay to be treated as part of an employee’s “remuneration” for the performance
of services. For instance, an employee is normally entitled on termination to
pay in lieu of vacation not taken, and the number of weeks of vacation
pay is also commonly linked to the length of an employee’s employment. A short vacation
break from work does not mean that an employee ceases to be an active employee.
[20]
The wording of subsection
9(1) of the CPP is different from the analogous subsection 2(1) of the Insurable
Earnings and Collection of Premiums Regulations, SOR/97-33, issued in
connection with the Employment Insurance Act, S.C. 1996, c. 23. It provides:
|
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, …
|
2 (1)
Pour l’application de la définition de « rémunération assurable »
au paragraphe 2(1) de la Loi et pour l’application du présent règlement, le
total de la rémunération d’un assuré provenant de tout emploi assurable
correspond à l’ensemble des montants suivants :
a) le montant total, entièrement ou
partiellement en espèces, que l’assuré reçoit ou dont il bénéficie et qui lui
est versé par l’employeur à l’égard de cet emploi;
|
[21]
This provision has been
considered in several cases decided by this Court where payments have been made
to employees at a time when they were not performing services. It has been held
that benefits paid by an employer under a wage loss indemnity plan may
constitute “insurable earnings” for employment insurance purposes, even though
no services were being performed.
[22]
Thus, for example, in Université Laval
v. Canada (Minister of National Revenue), 2002 FCA 171, 300 N.R. 294, the Court concluded that
payments made to employees under a short-term, employer-funded wage loss
indemnity plan constituted “insurable earnings”. However, writing for the
Court, Décary J.A. noted (at para. 15) that he had underscored the words “in
respect of such employment” when reproducing the text of subsection 2(1) of the
Regulations, in order “to point out that the courts have consistently held that
the expression “in respect of”, « à l’égard de », is particularly broad.”
See also National Bank of Canada v. Canada (Minister of National Revenue), 2003 FCA 242 at para. 3.
[23]
Consequently,
in my opinion, this decision is of limited assistance to the Minister in the
present case, where Parliament has indicated through its use of the word “for”,
rather than “in respect of”, that a close connection must exist between the
payment and the performance of services.
(ii) context
[24]
The
Minister argues that the employment insurance scheme and the CPP are related
and that provisions of one should be interpreted similarly to corresponding
provisions of the other. And, as noted above, since disability payments made by
employers to indemnify employees unable to work have been found to be
“insurable earnings” for employment insurance purposes, similar payments should
be found to be “remuneration” for the purpose of the CPP.
[25]
I do not
agree. It is difficult to avoid the conclusion that, when Parliament uses
different words in analogous provisions of related statutes, it intends the
words to have different meanings. Indeed, to the extent that the contextual
argument is based on the related nature of the two schemes, the different
wording of the relevant provisions seems to me to reinforce the argument based
on the text of subsection 9(1) of the CPP.
(iii) statutory purpose
[26]
Counsel
for the Minister also argued that it would be inconsistent with the purpose of
the CPP to interpret subsection 9(1) so narrowly as to exclude from
“remuneration” the disability benefits paid in this case. He relied on the
following statement by Strayer J.A. when writing for the Court in Bear v. Canada (Attorney General), 2003 FCA 40, [2003] 3 F.C.
456, at para. 7:
It is equally
useful to note that the CPP was deliberately designed as a universal,
mandatory, pension scheme to which, with few exceptions, anyone 18 years of age
or over would have to contribute if they had taxable income.
[27]
It is
agreed that the disability benefits paid to employees by the TTC are taxable in
the hands of the recipients, apparently as employment income under paragraph
6(1)(f) of the Income Tax Act, R.S.C. 1985, c. 1 (5th
Supp.). However, the issue in Bear was very different from that in the
present case. It concerned a challenge to the constitutional validity of a
statutory amendment which removed the former exclusion from the CPP of Indians
whose income arose from employment on a reserve and was therefore non-taxable. The
Court rejected the argument that the amendment was unconstitutional because it
was not retroactive.
[28]
In these
circumstances, I cannot regard Strayer J.A.’s explanation of the purpose of the
CPP as having much bearing on the particular issue before us. The question in
the present case is whether the purpose of the CPP is to provide a regular
pension to “inactive” employees in receipt of long-term disability benefits
from their employer, as well as to those actively engaged in the workforce, and
thus to require an employer’s contribution in respect of employees providing no
services to the employer because of their disability.
[29]
The CPP
contains no objectives clause, and its long title, included below, provides
little guidance.
|
An Act to establish a
comprehensive program of old age pensions and supplementary benefits in Canada
payable to and in respect of contributors.
|
Loi instituant au Canada un
régime général de pensions de vieillesse et de prestations supplémentaires
payables aux cotisants et à leur égard
|
(iv) conclusion
[30]
I can find
nothing in either the broader statutory context or the objectives of the CPP to
indicate that the words of subsection 9(1) do not have their most obvious, or
“plain and ordinary” meaning. It is for Parliament to decide whether the terms
of the CPP, as interpreted, should be amended to include employer-funded
disability benefits within “remuneration” and thus to require an employer to
pay an employer’s contribution on them.
ISSUE 2: Is an
employee on long-term disability in “employment” within the meaning of
subsection 2(1) of the CPP?
[31]
My
determination of the first issue is sufficient to dispose of this appeal.
Nonetheless, the definition of “employment” reinforces the conclusion that the
CPP does not include employees who are not actively employed. Subsection 2(1)
provides:
|
“employment” means the
performance of services under an express or implied contract of service or
apprenticeship, and includes the tenure of an office;
|
« emploi »
L’accomplissement de services aux termes d’un contrat de louage de services
ou d’apprentissage, exprès ou tacite, y compris la période d’occupation d’une
fonction.
|
[32]
The most
obvious meaning of this provision is that an employee who is not performing
services (because of a long-term disability, for example) is not in
“employment”, and is thus not in “pensionable employment” for the purpose of
subsection 9(1).
[33]
In other
words, “employment” involves an activity, not just the status or position of
being employed under a contract of service. In this respect, the contrast with
the definition of “employment” in the Income Tax Act is striking. It
provides:
|
“employment” means the
position of an individual in the service of some other person (including Her
Majesty or a foreign state or sovereign) …
|
« emploi » Poste
qu’occupe un particulier, au service d’une autre personne (y compris Sa
Majesté ou un État ou souverain étrangers); …
|
[34]
The
definition of “employment” in the Employment Insurance Act is in similar
vein.
|
“employment” means
the act of employing or the state of being employed;
|
« emploi »
Le fait d’employer ou l’état d’employé.
|
[35]
Counsel
for the Minister argued that subsection 12(1) of the CPP indicates that “employment”
is not limited to employees’ active performance of services. Paragraph 12(1)(b)
excludes from “pensionable salary and wages” income received by an employee from
pensionable employment while in receipt of a disability pension under the CPP
or a provincial plan. It is unlikely, he said, that such employees would be
performing services under their contracts of employment. If “employment”
requires the performance of services, he submitted, paragraph 12(1)(b) would
not have been necessary. Statutory provisions are presumed not to be redundant.
[36]
While
there is some force in this argument, I do not regard it as sufficient to
displace the most obvious meaning of the CPP’s definition of employment. For
example, some provincial plans may provide pensions to persons who are not
totally prevented by their disability from being actively engaged in
employment. Statutory provisions may also be included in a complex statutory
scheme to remove doubt on a particular issue.
[37]
As for the
argument that subsection 12(1) incorporates the Income Tax Act and its
definitions into the Plan, I would note that this is only for the purpose of computing
a person’s income for the year from pensionable employment. The Income Tax
Act does not determine whether the person was in pensionable employment;
this is a matter for the CPP itself.
E. CONCLUSIONS
[38]
For these
reasons, I would allow the appeal with costs in this Court.
“John M. Evans”
“I
agree
M.
Nadon J.A.”
“I
agree
David
Stratas J.A.”
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