CRA indicates that an arbitration award made in the normal course following a collective bargaining process could qualify for lump-sum averaging

Ss. 110.2 and 120.31 may provide relief to individuals receiving taxable lump-sum payments from their employer relating to services that were performed in prior years. The relief is through calculating the tax liability based on the lower rates applicable had the sums been earned over the course of those years rather than as the lump sum. An employee bargaining unit and the employee, after their collective bargaining process, agreed to resolve the remaining issues by referring them to a three-person binding conciliation board, which awarded salary increases and wage adjustments.

In finding that these could constitute “qualifying amounts” for s. 110.2 purposes, the Directorate stated:

[I]f the particular lump-sum amount is paid to the individual as the result of an arbitration award resulting from a bona fide arbitration process, such a lump-sum amount could be a qualifying amount. This could apply even when the arbitration process is part of a normal collective bargaining process.

Neal Armstrong. Summary of 21 August 2020 Internal T.I. 2019-0834911I7 under s. 110.2(1) – qualifying amount.