CRA considers amounts received in settlement of employment grievances to be s. 5 income on general principles

CRA found that lumps sums paid to current and former employees in settlement of a grievance regarding the cancellation of various post-retirement health and insurance benefits likely did not qualify as retiring allowances (since current employees were included) and likely were deemed to be s. 5 employment income under s. 6(3)(b) (i,e., they were provided “to an employee (or former employee) to satisfy an obligation outlined in a written or oral agreement made with his or her employer (or former employer), either immediately before, during, or immediately after employment.” CRA also considered the amounts to be s. 5 employment income on more general principles, stating:

The Canadian courts have consistently viewed amounts received as the result of grievances filed by virtue of a contract of employment (e.g., grievance for violation of a collective agreement) to be taxable as employment income.

Neal Armstrong. Summaries of 28 July 2017 External T.I. 2017-0685961E5 under s. 248(1) – retiring allowance, s. 6(3)(b) and s. 5(1).