Date: 20110222
Docket: T-808-10
Citation: 2011 FC 207
Ottawa,
Ontario, February 22, 2011
PRESENT: The Honourable Mr. Justice Beaudry
BETWEEN:
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PUBLIC SERVICE ALLIANCE OF CANADA AND CATHY MURPHY
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Applicants
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and
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CANADA REVENUE AGENCY
and
THE CANADIAN HUMAN RIGHTS COMMISSION
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Respondent
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Respondent
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REASONS FOR JUDGMENT AND
JUDGMENT
[1]
This
is an application for judicial review pursuant to s. 18.1 of the Federal
Courts Act R.S., 1985, c. F-7) in respect of a decision of the Canadian
Human Rights Tribunal (the Tribunal) dated April 23, 2010. The decision
concerned a complaint in which it was alleged that the Canada Revenue Agency
(CRA) breached sections 5 and 7 of the Canadian Human Rights Act (CHRA)
in administering the provisions of the Income Tax Act (ITA) in respect
of lump sum payments made to compensate for pay equity. By its decision, the Tribunal
dismissed the applicants’ complaints.
[2]
For
the reasons outlined below, I am of the view that the application for judicial
review should be denied.
Facts
[3]
The
applicant, Cathy Murphy, was a federal public servant from 1981 to 1994. The
other applicant, the Public Service Alliance of Canada (PSAC), was her union. In
1984 and 1990, PSAC filed pay equity complaints pursuant to section 11 of the CHRA
against the Treasury Board of Canada. They maintained that employees in a
number of female-dominated occupational groups, including Ms. Murphy (who
worked most of her career with Revenue Canada), were paid
less than employees in male dominated groups for work of equal value.
[4]
By
1998, and before the Tribunal's decision, PSAC members had begun expressing
concerns to their union regarding the tax implications of a presumed future
favourable decision. One of the concerns was in relation to whether a lump sum
compensation payment would put recipients into a higher tax bracket in the year
that it would be paid. Representatives from PSAC met with Revenue Canada to ask
questions about how the tax treatment of pay equity adjustments would be.
[5]
On
July 29, 1998, the Tribunal ruled that PSAC’s pay equity complaints were
substantiated and concluded that the employees had been underpaid during the period
in question. The Tribunal established a methodology for calculating the wage
gap between female and male-dominated occupational groups. The Tribunal ordered
Treasury Board to make the retroactive wage adjustment payments to the affected
public service employees from 1985 to the date of the decision. It also
ordered the payment of simple interest calculated semi-annually at the Canada
Savings Bonds rate on the wage adjustments.
[6]
On
October 19, 1999, the Tribunal’s decision was upheld by the Federal Court
following an application for judicial review by the Attorney General of Canada.
The parties subsequently entered into negotiation in an effort to deal with
various outstanding matters arising from the Tribunal’s decision, including the
determination of the actual wage adjustment amounts. It seems that the issue of
tax implications had not been raised during these negotiations.
[7]
The
negotiations were ultimately successful and the parties settled all issues
related to what were known as “Phase II and Phase III of the complaints”.
Phase III related to the determination of the wage adjustments. The parties
agreed upon a formula for calculating lump sum wage adjustment amounts due to
the affected employees and also on the interest payable at rates set by the Tribunal
on 90 per cent of the lump sum wage adjustments.
[8]
On
November 16, 1999, a settlement agreement was presented to the Tribunal. The Tribunal
members asked questions on certain parts of the agreement, approved it and
issued an order that had been consented to by the parties.
[9]
In
2000, the affected government departments made the wage adjustments and
interest payments.
[10]
In
the meantime, the government introduced a new budget measure in an attempt to
address concerns raised by various groups regarding the adverse tax
consequences related to lump sum payments received for income earned in
previous years. The Qualifying Retroactive Lump sum Payment (QRLSP) mechanism
applied to lump sum payments over $3,000 and allowed income from qualifying lump
sum payments to be taxed in the year that the income in question should have
been received, if this was advantageous to the individual. The QRLSP included a
calculation of “notional tax”, which was composed of not only the value of the
tax that ought to have been paid in those years, but also an interest component
to reflect the delay in payment of the tax on the retroactive lump sum
payment.
[11]
CRA
issued a 2000 notice of assessment to Ms. Murphy on April 18, 2001,
advising her that she was eligible for the QRLSP tax calculation. On April 25,
2001, CRA sent a letter explaining that the calculation did not benefit her and
that the regular tax calculation was more beneficial even though her marginal
tax rate was now higher than when she worked for the public service.
[12]
The
lump sum payments were deemed for income tax purposes to be employment income
in the year 2000 even though they related to employment that had occurred years
earlier.
[13]
On
March 11, 2002, Ms. Murphy and PSAC filed human rights complaints on behalf of
all pay equity recipients who were subject to the payments set out above. The complaints
claimed that, in conducting its QRLSP analysis, CRA had discriminated against
these individuals by charging compound interest on notional tax arrears which
CRA had stated were owed to it from the date at which the income was earned.
The Public Service Alliance of Canada maintained that this conduct reduced the
actual value of the payments ordered by the Tribunal, perpetuating the pay gap
that had been the subject of the 1984 and 1990 complaints and was in violation
of section 5 and paragraph 7(b) of the CHRA.
[14]
On
April 23, 2010, the Tribunal dismissed the applicants’ human rights complaints.
This decision is the subject of the present judicial review.
Impugned decision
[15]
The
Tribunal concluded that the applicants’ evidence fell short of establishing a prima
facie case of discrimination. The Tribunal also concluded that the
applicants failed to demonstrate that the alleged discrimination resulted from
the “provision of a service customarily available to the public” or “in the
course of employment”. It found rather that the assessment of the tax liability
of the equity lump sum recipients came from the application of the ITA
provisions. Accordingly, the Tribunal concluded that the complaints did not
engage section 5 or paragraph 7(b) of the CHRA.
Issues
[16]
The
issues are as follows:
a. What is the
applicable standard of review?
b. Did the Tribunal
err in its appreciation of the evidence in regards to the application of
sections 5 and paragraph 7(b) of the CHRA?
c. Did the Tribunal
err in concluding that Ms. Murphy and other recipients of pay equity lump sum
benefits did not suffer adverse differential treatment?
a. What is
the applicable standard of review?
Applicants’
Arguments
[17]
The
applicants submit that the jurisprudence establishes that questions of law
involving the interpretation of section 5 and paragraph 7(b) of the CHRA are to
be reviewed on a standard of correctness (Canada (Attorney General) v.
Watkin, 2008 FCA 170, 378 N.R. 268, para. 23, Hicks v. Canada (Attorney
General), 2008 FC 1059, 334 F.T.R. 260, paras. 18-19, Powell v. TD
Canada Trust, 2007 FC 1227, 320 F.T.R. 17, paras 20-21, AZ Bus Tours
Inc. v Tanzos, 2009 FC 1134, 353 FTR 121, paras. 22-36).
Respondent’s Arguments -
Canada Revenue Agency
[18]
The
CRA argues that contrary to the applicant’s submission, the standard of review
for decisions of the Tribunal regarding the application of sections 5 and 7 of
the CHRA is not well-established in the jurisprudence, for example in Canada
(Canadian Human Rights Commission) v. Pankiw, 2010 FC 555, 369 F.T.R.
84, para. 36, the Court applied the standard of reasonableness, while in
Brown v. Canada (National Capital Commission), 2008 FC
733, 330 F.T.R. 67, correctness was determined (para. 80).
[19]
The
respondent suggests that the Hicks and Powell cases cited by the
applicants to support a correctness standard are inapplicable given that they
concern decisions of the Canadian Human Rights Commission (CHRC), not the Tribunal.
Furthermore, the respondent underscores that in contrast to Watkin,
there is in this case, a substantial reasoning from the Tribunal to which this
Court can defer.
[20]
As
such, the respondent submits that given that the jurisprudence does not clearly
establish the applicable standard, a standard of review analysis is necessary.
Respondent’s Arguments –
The Canadian Human Rights Commission
[21]
In
its Memorandum of Fact and Law, The Canadian Human Rights Commission is of the
view that the proper standard of review is reasonableness with deference and
cites Pankiw, above. At the hearing, it filed Canada Post
Corporation v. Canadian Union of Postal Workers, 2010 FC 154, in which
Justice De Montigny relied on the correctness standard.
Analysis
[22]
Based
on the above case law, I am of the opinion that the questions should be
reviewed on a standard of reasonableness. Although there have been cases where
these questions were reviewed on a standard of correctness, Pankiw established
that the Canadian Human Rights Tribunal is specifically empowered to determine questions
of law, and moreover that when reviewing the Canadian Human Rights Tribunal’s
interpretation of a provision of its enabling statute, the Act, the standard of
review is reasonableness.
[23]
I
refer also to Vilven v. Air Canada, 2009 FC 367, [2010] 2
F.C.R. 189, in which a standard of review analysis was conducted (paras. 61-74)
and arrived at the same conclusion on this question. In Canada Post, the
Federal Court had to analyze if an Appeal Officer’s interpretation of s.146(1)
of the Canada Labour Code, R.S.C. 1985, c. L-2 (CLC) was correct or
not. The question at issue in that case is not the same as in the case at bar.
[24]
Therefore,
in the present instance, the Court’s intervention will not be warranted unless
the decision does not fall within the range of possible, acceptable outcomes
which are defensible in respect of the facts and law (Dunsmuir v. New-Brunswick,
2008 SCC 9, [2008] 1 S.C.R. 190, para. 47).
b. Did the Tribunal
err in
its appreciation of the evidence in regards to the application of sections
5 and 7(b) of the CHRA?
Section 5
Arguments
Applicants’ Arguments
[25]
The
applicants maintain that the Tribunal erred in concluding that the complaint was
beyond the jurisdiction of the CHRA. They argue first that the Tribunal failed
to find that the CRA’s administration of the QRLSP constituted a service
customarily available to the public pursuant to section 5 of the CHRA. The
applicants state that in failing to find that the respondent’s conduct was a
service pursuant to section 5 of the Act, the Tribunal interpreted this section
in a restricted manner and misunderstood the discretion available to the CRA in
performing its functions.
[26]
The
applicants assert that the respondent’s actions in the present case are
properly characterized as services customarily available to the public. The applicants
argue that the amendments to the ITA and the creation of the QRLSP provisions
came about as a result of Parliament’s recognition of the inherent unfairness
of taxing a retroactive lump sum wage payment at a higher marginal rate in the
year it was received. As such, the applicants advance that the determination as
to whether or not the taxpayer would benefit from the application of the QRLSP
provisions was intended to provide a benefit to the public, and that
accordingly, the respondent was providing a service to pay equity recipients.
[27]
The
applicants refer to Watkin in stating that although this decision
overturns the broad holding in Bailey that all government actions in the
performance of statutory functions were services, it does not overturn the
specific finding that the Minister’s functions in assessing taxes constitute a
service pursuant to section 5 of the CHRA (Bailey v. Canada (Minister of
National Revenue), (1980), 1 C.H.R.D/193, Canada (Attorney General) v.
Canada (Human Rights Tribunal) (“Cumming”), [1980] 2 FC 122 at paras.
20-21, see also Wignall v. Canada (Department of National Revenue (Taxation)),
[2001] CHRD No. 9, at paras. 25, 29).
[28]
The
applicants underscore the fact that based on CRA’s application of the
provisions, the QRLSP calculation was more advantageous to only 7% of all QRLSP
claimants in the 2000 tax year and generally did not assist recipients of lump
sum payments that relates back beyond six years (Testimony of S. Barnard, Applicants’
Application Record, Vol. IV, Exhibit E, Tab 5 at 1487, 1493, 1538-1543).
[29]
The
applicants further argue that the Tribunal’s conclusion that the CRA could not
exercise any discretion pursuant to sections 110.2 and 120.31 of the ITA
is directly contradicted by case law from the Tax Court of Canada, which
identified CRA’s discretion to waive the interests pursuant to subsection
220(3.1) (Fetterly v. Canada, 2006 TCC 94 at para 13).
[30]
The
applicants also contend that the human rights dimension in the present
situation required the respondent to interpret the ITA in a manner that would
avoid a discriminatory result.
[31]
Finally,
the applicants submit that the Forward v. Canada (Citizenship and
Immigration Canada), 2008 CHRT 5 case,
relied upon by the Tribunal is distinguishable from the case at bar. First, the
applicants state that the Court concluded in Forward that there was no
discretion available in that case and that the “sole source of the alleged
discrimination […] was the legislative language in the 1977 Act”.
Second, the applicants point out that the Tribunal in that case emphasized the
unique circumstances surrounding the granting of citizenship. The applicants add
that these considerations do not apply in the present case, and that this
case is more factually analogous to Druken v. Canada 9 CHRRD/5359 (4th)
29 in which the Federal Court of Appeal upheld a Tribunal order to cease
applying certain sections of the Unemployment Insurance Act (UIA) and
Unemployment Insurance Regulations (UIR).
Respondent’s Arguments
Commission Human Rights
Commission
[32]
The
Commission submits that at issue in the hearing was the service performed by
the CRA when it assesses taxes. The Commission believes that this can only be
described as a service.
[33]
It
further states that while the assessment of the taxes owed may have offered
formal equality, the rules applied by the CRA did not offer substantive equality
to the applicants. The Commission goes on to say that by assessing the tax
owing in a way that forces Ms. Murphy (and others in her situation) to pay more
tax as a result of receiving a lump sum payment, she is worse off than she
would have been if she had just received a non-discriminatory wage in each of
the relevant years during which she worked for the federal public service.
Accordingly, the Commission states that as a result of the tax assessment
carried out by the CRA, the applicant has paid more taxes than her Federal
Public Service Counterparts in male-dominated occupational groups.
[34]
The
Commission argues that the CHRA does not define what is a “service
customarily available to the public”, and that most of the case law has looked
at the meaning of “customarily available to the public” and rarely at whether a
particular act constituted a service or not.
[35]
The
Commission refers to Gould v. Yukon Order of Pioneers, [1996] 1 S.C.R.
571, at paras 49, 50 and 59, and suggests that this case dictates that
the wording of the CHRA must be interpreted generously, and must ensure that
the underlying objects of the CHRA are given full effect.
[36]
Finally,
the Commission argues that the actions of the CRA, calculating the tax payable by
a party and the assessment of income, do constitute a “service” under the CHRA.
It therefore could not apply discriminatory legislation. It cites also the
Saskatchewan Court of Appeal’s decision “In the Matter of Marriage
Commissioners Appointed Under The Marriage Act, 1995, S.S. 1995, c.
M-4.1, 2011 SKCA 3”.
[37]
Based
on the above, the Commission contends that it was within the Tribunal’s
jurisdiction to make an order that the discriminatory practice of the
respondent cease pursuant to subsection 53(2) of the CHRA.
Respondent’s Arguments
Canada
Revenue Agency
[38]
The
CRA refers to Watkin, where the Court expressly clarified that not every
government activity is a service within the meaning of section 5. In that
case, the Court held that a “service” within the meaning of section 5
contemplates a benefit being “held out” as services and “offered” to the public
in the context of a public relationship. The Court determined that,
administration and enforcement pursuant to a statute did not constitute
services. The Court specifically “disavowed” the old broad approach to section
5 including the approach taken by Bailey, in which the Tribunal had
found administration of the ITA to be a service (see Bailey).
[39]
The
CRA submits that the obiter suggestions of the Tax Court in Fetterly relied
upon by the applicants, which discuss an application of the ITA’s
fairness provision, have no bearing on the present case since Ms. Murphy never argued
those provisions. As such, according to the CRA, even if it did have any
discretion under the fairness provisions of the ITA, it is irrelevant.
The CRA says, Fetterly was an informal procedure appeal that pursuant
to the Tax Court of Canada Act, R.S., 1985, c. T.-2, s. 18.28, it has no
precedential value.
[40]
The
CRA also alleges that the applicants’ reliance on the Tribunal’s Wignall
decision is misplaced, since that case predated Watkin from the Federal
Court of Appeal. It is therefore unsurprising that the “service” issue was not
raised. Furthermore, in the judicial review of Wignall, the Federal
Court found that the complaint was not made out and that that the source of the
alleged adverse treatment was the ITA itself.
[41]
The
CRA advances that even if the Tribunal erred in finding that it was the ITA rather
than CRA’s actions that were impugned by the complaint, those actions would not
constitute services within the meaning of section 5. The activity here is the
assessment of taxes actually owed by taxpayers under the ITA and it is not an
optional prospective planning tool; rather, it is the ultimate application of
the ITA in furtherance of collection and is not a service unlike for example:
advance tax rulings offered to taxpayers for a fee.
[42]
The
CRA further contends that the ingredient common to the examples of services
given by the Court of Appeal in Watkin, is advice or information offered
to the public. Members of the public are free to decide whether and how to use
the information provided. The CRA adds that its assessment of taxes
owing is neither advice nor information offered that a taxpayer can take or
leave.
[43]
The
CRA says that determining taxpayers’ tax liabilities is a first and integral
step in enforcing the provisions of the ITA. It points out that in Watkin,
the impugned actions found to fall outside of section 5 included not only
Health Canada’s “enforcement” actions in the narrow sense of its call on the
complainant to “recall, cease and desist” selling its products, but also
included Health Canada’s original determination that the complainant’s products
not be approved for sale in the first place. The CRA submits that in this
case, its assessment of tax was part of its administration and enforcement of
the ITA.
Analysis
[44]
Watkin
has
established that not every government activity is a service within the meaning
of s. 5 of the CHRA. The contention therefore, lies in whether the Court in Watkin
completely disavowed the finding in Bailey and in Wignall that
the administration of the ITA is a service.
[45]
In
Watkin at paras. 31, the Court stated :
[31] Addressing this question, I agree
that because government actions are generally taken for the benefit of the
public, the “customarily available to the general public” requirement in
section 5 will usually be present in cases involving discrimination arising
from government actions (see for example Rosin, supra at para. 11, and Saskatchewan Human Rights Commission v.
Saskatchewan (Department of Social Services) (1998), 52 D.L.R. (4th) 253 at
266-268). However, the first step to be performed in applying section 5 to
determine whether the actions complained of are “services” (see Gould,
supra, per La Forest J., para.60). In this respect, “Services” within the
meaning of section 5 contemplate something of benefit being “held out” as
services and “offered” to the public (Gould, supra, per La Forest J.
para. 55). Enforcement actions are not “held out” or “offered” to the public
in any sense and are not the result of a process which takes place “in the
context of a public relationship” (Idem, per Iacobucci J., para. 16). I
therefore conclude that the enforcement actions in issue in this case are not
“services” within the meaning of section 5.
[46]
Further
at paragraph 32 it determined:
[32] Given this conclusion, the opinion expressed
by the Canadian Human Rights Tribunal in Bailey et al v. Minister of
National Revenue (1980), 1 C.H.R.R. D/193 at D/212 – D/214 (“Bailey”)
(applied in LeDeuff v. The Canada Employment and Immigration Commission
(1987), 8 C.H.R.R. D/3690 at D/3693 (aff’d on this issue by a Review Tribunal
without discussion (1989), 9 C.H.R.R. D/4479) that all government actions in
the performance of a statutory function constitute “services” within the
meaning of section 5 because they are undertaken by the “public service” for
the public good, must be disavowed. The same comment applies to the
decision of the Canadian Human Rights Tribunal in Anvari v. Canada (Canadian
Employment and Immigration Commission) (1989), 10 C.H.R.R. D/5816 at para.
42271, aff’d by a Review Tribunal (14 C.H.R.R. D/292 at D/297, para. 19)
(applied in Menghani, supra, at D/244, para. 26 which decision
was later confirmed by the Federal Court on other grounds (Canada (Secretary
of State for External Affairs) v. Menghani, 1993 CanLII 3018 (F.C.), [1994]
2 F.C. 102)), insofar as it holds that all actions of immigration officials
under the Immigration Act are “services” because the performance of a
statutory duty is “by definition” a service to the public (see also Bailey,
supra at p. D/214). (my underline)
[47]
Given
these comments, one can deduce that had the reasoning in Watkin been
applied in Bailey, the result would not necessarily have been the same.
The finding in Bailey that income tax assessment was a “service” was
made based on a completely different set of factors. As such, I cannot find
that the conclusions in Bailey can be applied here.
[48]
The
applicants also raise the issue of discretion by the CRA based on Fetterley
from the Tax Court. The comments made in that case were made with regards
to the fairness provisions of the ITA, which are governed under a different set
of rules, and thus cannot be presumed to apply in this case.
[49]
I
therefore find that the Tribunal’s findings with regards to its assessment on
whether or not the actions by the CRA could be described as “services” under
the meaning of s. 5 were reasonable.
Section 7
Arguments
Applicants’
Arguments
[50]
With
regards to s. 7(b) of the CHRA, the applicants submit that the Tribunal erred
in concluding that the applicants’ complaint did not arise in the course of
employment as the respondent CRA had not “utilized” the employee’s
services.
[51]
The
applicants rely on Canadian Pacific Limited v Canada (Human
Rights Commission) [1990] FCJ No 1028 at paras. 5-6, where
the Court held that even where an entity was not an employer of an individual,
it could, nonetheless, have a discriminatory impact on the employment of that
individual.
[52]
The
applicants also refer to jurisprudence from British Columbia for the
proposition that discrimination “with respect to employment or any term or
condition of employment” includes discrimination by a licensing authority that
impacts on an individual’s ability to gain employment in a particular field.
The applicants argue that accordingly, there is no requirement that the
discriminatory treatment in the course of employment be the actions of an
employer or an individual in a position akin to that of an employer.
[53]
The
applicants contend that the use of the word “indirectly” in section 7 of the CHRA
is demonstrably broader than the one used in British Columbia: “refuse to
employ or refuse to continue to employ a person” (Mans v. British Columbia
Council of Licenced Practical Nurses, [1990] BCCHRD No. 38 at paras 74-77, 83-87; aff’d:
[1991] BCJ No. 2666 (BSSC) and [1993] BCJ No. 371 (BCCA).
[54]
The
applicants contend that the decision relied on by the Tribunal in Canada (Attorney
General) v. Bouvier, [1998] FCJ No. 176, 98 CLLC para. 230-016 does
not detract from the conclusion set out above. The applicants state that in Bouvier,
the department had no discretion in the application of the regulations in
question. The applicants believe that this is not the case in the
present instance, as the respondent maintains discretion in the application of
the provisions.
[55]
Finally,
the applicants ascertain that the QRLSP treatment by the CRA perpetuated the
wage discrimination in the female dominated groups still retaining a lower
percentage of their earned employment income than male dominated groups who
receive their income in the year in question.
Respondent’s Arguments: Canada
Revenue Agency
[56]
The
CRA submits that the Tribunal’s conclusion with respect to section 7 is
reasonable.
[57]
It
says that Bouvier is the authority for the argument that section 7 does
not extend the concept of an “employer” beyond the “utilizer” of an employee’s
services. In that case, notwithstanding the purposive interpretation granted
to quasi-constitutional human rights legislation, the Federal Court of Appeal
refused to extend section 7 to a government department simply because it was
responsible for administering a statutory scheme connected with the complainant’s
employment. Similarly, in the assessment of lump sum pay equity recipients,
the CRA was not acting as an employer, nor was it the “utilizer” of their
services. Rather, it was simply administering the provisions of the ITA which
were enacted by Parliament.
Analysis
[58]
I
am of the view that the Tribunal’s analysis of Bouvier and its
determination that the Federal Court of Appeal in that case was far more
relevant and persuasive is reasonable with regards to section 7 in the present
instance (Tribunal’s decision, paras 66-68).
[59]
Its
conclusion at para.71 that "…the Complainant's allegations .., even if
believed, cannot engage the liability of the CRA under paragraph 7(b) of the
CHRA" stems from the application of para. 4 in Bouvier in which
it was said that a Government cannot be held accountable to the
Commission for a questionable provision of a Regulation simply because it has
been given by Parliament the responsibility of administering the Act on the
authority of which the Regulation was validly enacted by the Governor in
Council.
[60]
As
such, I agree with the principle enunciated at paragraph 79 of the CRA's
Memorandum of Fact and Law: "…. Although the CRA does have pay equity
recipients among its employees and Ms. Murphy was herself a CRA employee, the
CRA did not assess their tax returns in its capacity as an employer…..".
[61]
Therefore,
the Court's intervention on this issue is not warranted.
c. Did the Tribunal err
in concluding that Ms. Murphy and other recipients of pay equity lump sum
benefits did not suffer adverse differential treatment?
Applicants’ Arguments
The Tribunal’s
Assessment of the Expert Evidence
[62]
The
applicants contend that the Tribunal erred in concluding that the evidence
advanced by PSAC and Ms. Murphy failed to demonstrate adverse differential
treatment.
[63]
With
respect to the Tribunal’s analysis of the expert evidence, the applicants
submit that while this evidence assisted in understanding the impact of
discrimination, it was not filed necessarily to support the applicants’ case
but it illustrated the negative impact of the CRA’s actions on lump sum pay
equity recipients (Applicant’s Memorandum of Fact and Law, paras. 49-63). Accordingly,
the applicants believe that the Tribunal erred in using this evidence to
undermine the basis for the applicants’ complaint.
The Legal
Role of Interest
[64]
The
applicants submit that given that the Tribunal determined that the amount of
interest received adequately compensated the individual for the additional tax
burden, then if it can be demonstrated that interest was not intended to
compensate for this amount, it must follow that the prima facie case of
discrimination stands.
[65]
The
applicants submit that it is well established that when Tribunals order in the
same case, remedies for the income tax consequences of receiving payments in a
lump sum in a single year (i.e. in the form of a gross-up), to account for tax
differences, it add interests to compensate for the time use of money which is
distinct (Green v. Canada (Public Service Commission), 2003 CHRT 34 at
paras. 4, 24).
[66]
The
applicants point out that when the respondent’s expert was asked expressly in
cross-examination whether she was suggesting that the Tribunal intended that
interests be compensation for the fiscal impact, she confirmed that she was
not. The applicants allege that given their area of expertise as accountants,
neither expert was in the position to provide evidence regarding the legal
basis for the Tribunal’s determination on that point.
[67]
The
applicants also highlight that although the Tribunal implied that PSAC ought to
have negotiated damages for the tax implications with Treasury Board, the CRA
was not a party to the proceedings before the Tribunal, nor was it present
during the negotiation process.
[68]
The
applicants also say that Burrow v. The Queen, 2005 TCC 761 relied upon
by the Tribunal do not address a situation where legislation was changed
expressly to address a negative tax impact. That decision from the Tax Court
dealt with different issues.
[69]
Finally,
the applicants contend that the Tribunal’s statement that the complaint was not
the “kind of inconsistency” that should be addressed under the CHRA was
unfounded. The applicants argue that the CHRA does not allow for degrees
of discrimination, some of which is acceptable and some of which is not. The
applicants further state that the Federal Court of Appeal in Sveinson v.
Canada (Attorney General), 2003 FCA 259, 4 FC 927, was not suggesting that
if the differential treatment was discriminatory, then there would be no remedy
available. Rather, the Court was focusing on the nature of the distinction
which it did not think represented a violation of the CHRA. Therefore,
its analysis does not apply in this case.
Respondent’s
Arguments
Canada
Revenue Agency
[70]
The
CRA submits that the Tribunal reasonably applied the logic used in Burrows to
the present case, in stating that if the PSAC did not find the amounts proposed
under the settlement to be enough, taking into account that its members would
be taxed in accordance with the ITA, it should have negotiated higher amounts,
structured the settlement to attract different tax consequences, or ultimately
not have settled.
No Reliable Evidence
of Adverse Effect
[71]
The
CRA contends that contrary to the applicants’ argument, the evidence of Ms.
Murphy was not sufficient in itself to make out a prima facie case of
discrimination. The CRA points out that the Tribunal did accept that if Ms.
Murphy had “actually received the wage adjustments in the years to which they
related, she would have paid tax at a lower marginal rate”. However, the CRA
states that this fact alone did not establish that Ms. Murphy, or any other pay
equity recipient, was financially disadvantaged. Accordingly, CRA submits that
the Tribunal properly focused on expert evidence in determining whether there
was reliable evidence of adverse treatment.
[72]
CRA
also underscores that as the possibility of disadvantage in only two of five
hypothetical scenarios presented by Ms. Murphy is far from convincing evidence
that the QRLSP had an adverse impact on the finances of Ms. Murphy, or the
other recipients, or constituted adverse differential treatment on the basis of
the prohibited ground of sex. The fundamental issue before the Tribunal was
whether the applicants were worse off than others in society who had received
lump sum payments as a result of CRA’s tax treatment.
Interest
properly considered in adverse effect analysis
[73]
CRA
urges that the principal lump sum payments and the interest sums were
inexorably linked as part of the remedy ordered by the Tribunal and further
negotiated by the parties. CRA points out that neither the settlement agreement
nor the Consent Order specified the purpose of the interest paid.
[74]
Furthermore,
CRA highlights that both experts agreed that the interest payments more than
offset the effects of inflation and any increased tax liability resulting from
receiving the principal lump sums in 2000. As such, CRA believes that it was
open to the Tribunal to conclude that the interest payments should factor into
its analysis of whether the QRLSP had an adverse financial impact on the
complainants.
Analysis
[75]
The
Tribunal’s finding that Ms. Murphy and other recipients of pay equity lump sum
benefits did not suffer adverse differential treatment was reasonable.
[76]
The
Tribunal did accept that if Ms. Murphy had actually received wage adjustments
in the year to which they related, she would have paid tax at a lower marginal
rate. However, this did not establish that the applicant was financially
disadvantaged.
[77]
As
stated in paragraph 61 of the CRA’s Memorandum of Fact and Law, “There was
evidence, however, that the interest payments more than offset the effects of
inflation and any increased tax liability resulting from receiving the
principal lump sum in 2000. Both experts agreed on this point”. I verified
this statement and I have to say that it is supported by the evidence (CRA
Memorandum of Fact and Law, footnotes No. 53 and 54, para. 61).
[78]
It
was therefore reasonable for the Tribunal to take into consideration all the
factors that related to the question of whether or not the applicants had been
financially disadvantaged. One of these factors was the interest awarded, whether
or not it was initially intended for this specific purpose. As stated by the Tribunal
at para 97, regarding Ms. Murphy, “If her loss had been more than entirely
covered by the interest (in Ms. Murphy’s case, by an excess of over $1,500),
how can she assert that she has been disadvantaged? It just does not make any
sense”.
[79]
Another
factor was the evidence of the applicants’ expert, which was not able to
demonstrate that the QRLSP had an adverse impact on the applicants, especially
in light of the problems highlighted by the CRA’s expert.
[80]
Finally,
I have to agree with the Tribunal’s observations at para 101, where it states “
… According to Ms. Jaekl, the PSAC is one of Canada’s largest
unions with offices nationwide and staff lawyers. The union has been involved
in numerous lawsuits and settlements related to employment, pay equity and
human rights. It has sought and obtained verification of this tax information
from Revenue Canada over a year
earlier, before the Tribunal decision had even been issued. This is the tax rule
that was ultimately applied to Ms. Murphy’s lump sum payments. This tax
consequence was thus neither unforeseen nor unforeseeable”. (My underline)
[81]
Finally,
I find that the Tribunal’s determination and conclusions in dismissing the
applicants’ complaint are supported by the evidence and meet the test in Dunsmuir.
JUDGMENT
THIS COURT ORDERS
that
the application for judicial review be dismissed. The
applicants shall pay costs by way of a lump sum for an amount of $4,000 to the
respondent, Canada Revenue Agency. No costs are awarded against the Canadian
Human Rights Commission.
“Michel
Beaudry”
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