Employment Insurance (EI)

Decision

[1] The appeal is dismissed.

Overview

[2] The Appellant has worked for X in X since 1990. She ceased to work on July 28, 2017, for medical reasons, and she filed a claim for Employment Insurance sickness benefits on August 8, 2017. In her initial statement, the Appellant claimed that she was covered by a sickness indemnity plan with her employer. The Appellant admits that she received the amount of $350 under her collective agreement for the first seven days of sickness to compensate for the Employment Insurance benefit program’s one-week waiting period. The Employment Insurance Commission (Commission) determined that the $350 paid to the Appellant constitutes earnings within the meaning of the Employment Insurance Act (Act). Therefore, the Commission allocated the amount at a rate of $250 for the week of July 31, 2017, and at a rate of $100 for the week of August 6, 2017, which created an overpayment of $100 for the Appellant. The Appellant argues that the $350 constitutes an advance from the employer that she then repaid and that, therefore, the amount must be considered a loan and not earnings.

Issues

[3] The Tribunal must decide the following issues:

1. Does the $350 paid to the Appellant constitute earnings?
2. If so, did the Commission correctly allocate the amounts?

Analysis

[4] The relevant statutory provisions appear in the annex of this decision.

[5] The general rule with Employment Insurance is that any amount considered earnings under the Employment Insurance Act (Act) must then be allocated. It is section 35 of the Employment Insurance Regulations (Regulations) that sets out the rules for determining whether an amount constitutes earnings.

[6] Once an amount has been identified as earnings, it is section 36 of the Regulations that governs when and how the earnings must be allocated.

Issue 1: Does the $350 paid to the Appellant constitute earnings?

[7] Earnings are defined under section 35(2) of the Regulations. The concept has also been defined by the case law. In this regard, the Federal Court of Appeal considers amounts to be earnings if they are earned by an employee as a result of their work or in consideration of work or if a sufficient connection exits between the employment and the amount received (Roch, 2003 FCA 356).

[8] I find that the $350 the Appellant received constitutes earnings under the Act.

[9] In this case, the Appellant had to have surgery on Tuesday, August 1, 2017, followed by a recovery period. This is why she applied for sickness benefits. The Appellant and Ms. R. from the employer’s payroll department stated that the employee group insurance offered insurance coverage for the beginning of the disability. Furthermore, they both stated that the employer usually pays employees on disability an advance at a rate of $50 a day for the first seven days of disability, up to a maximum of $350. The advance is a gesture of good faith from the employer to offset the insurer’s administrative delays in paying the insured their benefits. Ms. R. stated that usually the insurer issues a cheque to the employer that is equivalent to what the employer gave as an advance to the insured.

[10] In this case, the Appellant submits that the insurer sent the cheque of $350 directly to her rather than to the employer, as is the custom. Therefore, the Appellant had to repay the employer for the $350 advance that she had received. Understandably, if the employer paid an advance and the insurer sent an amount directly to the Appellant, this means that the Appellant received a double payment. Indeed, the Appellant testified that she received $350 from the employer and an extra $350 from the insurer. Therefore, it was entirely appropriate for her to repay her employer for the advance.

[11] I accept the documentary evidence filed showing that the Appellant did repay the employer. However, I find that the question of whether the Appellant repaid her employer for the advance is not relevant for deciding the issue.

[12] The documentary evidence indicates that the employer confirmed that the Appellant had received wage-loss insurance benefits for the period of August 1 to August 7, 2017, at a rate of $50 a day for a total of $350. Ms. R. from the employer’s payroll department testified that the Appellant was covered by the insurer under the group short-term disability plan while waiting for Employment Insurance program benefits.

[13] The Appellant argues that the $350 advance the employer paid does not constitute earnings because she never really received that amount, since she instead repaid it. She submits that the Court has confirmed that a loan does not constitute earnings under the Act and must therefore not be allocated.

[14] I find that, even though the Appellant received an advance of $350 from her employer and that this advance can seem much like a loan, the fact remains that the evidence indicates on a balances of probabilities that the Appellant also received the amount of $350 as short-term disability benefits. That amount the Appellant received cannot be ignored, and I find that it constitutes earnings under section 35 of the Regulations. I note that section 18.08 of the collective agreement between the union of employees at the X and X supports my finding. Indeed, paragraph 18.08 a) states that an employee who must cease to work because of sickness will receive from the employer [translation] “a wage advance equal to the amount of the wage benefit established by the group or public insurance plan …” [my emphasis]. In my view, these words are another indicator that the insurer did pay wage-loss insurance benefits in the end. The advance the employer paid has ultimately been replaced by the insurer’s coverage, which in itself constitutes earnings.

[15] Section 35(2)(c)(i) of the Regulations clearly states that payments from a group wage-loss indemnity plan are earnings. I find it hard to reach a different conclusion in this case. Furthermore, as the Commission noted, the Federal Court of Appeal has confirmed that short-term disability benefits under a group insurance plan are considered income under section 35(2)(c)(i) of the Regulations (Mercer v Canada (Attorney General), 2012 FCA 37).

Issue 2: Did the Commission correctly allocate the amounts?

[16] Regarding allocation, the Federal Court of Appeal has confirmed the principle that amounts that are earnings under section 35 of the Regulations must be allocated under section 36 of the Regulations (Boone et al v Canada (Attorney General), 2002 FCA 257). Therefore, I must determine how the amounts paid to the Appellant should be allocated to her benefit period.

[17] I find that the Commission allocated the Appellant’s earnings correctly.

[18] The amounts paid to the Appellant under a group sickness or disability wage-loss indemnity plan must be allocated to the weeks in respect of which the payments are paid or payable, in accordance with section 36(12)(b) of the Regulations.

[19] In this case, the amounts were earmarked for covering the seven-day waiting period; therefore, I find that they are payable during these seven days. It has been established that the employer has paid an advance to the Appellant while waiting for the short-term disability insurer to pay her benefits. The advance in question constitutes a payment of $50 a day for the first seven days starting from the date the Appellant had her surgery on August 1, 2017. Without additional evidence and without evidence to the contrary, I find that the earnings from the insurer that must be allocated were payable under the same scheme as the employer’s cash advance. Therefore, I find that the earnings from the group insurance short-term disability benefits were payable at a rate of $50 a day from August 1 to August 7, 2017. This is why the Commission allocated the $350 to the Appellant’s benefit period, and I do not see an error in this.

Conclusion

[20] The appeal is dismissed.

Annex

The law

Employment Insurance Regulations

1. 35 (1) The definitions in this subsection apply in this section.
2. employment means
   1. (a) any employment, whether insurable, not insurable or excluded employment, under any express or implied contract of service or other contract of employment,
      1. (i) whether or not services are or will be provided by a claimant to any other person, and
      2. (ii) whether or not income received by the claimant is from a person other than the person to whom services are or will be provided;
   2. (b) any self-employment, whether on the claimant’s own account or in partnership or co-adventure; and
   3. (c) the tenure of an office as defined in subsection 2(1) of the Canada Pension Plan. (emploi)
3. income means any pecuniary or non-pecuniary income that is or will be received by a claimant from an employer or any other person, including a trustee in bankruptcy. (revenu)
4. pension means a retirement pension
   1. (a) arising out of employment or out of service in any armed forces or in a police force;
   2. (b) under the Canada Pension Plan; or
   3. (c) under a provincial pension plan. (pension)
5. self-employed person has the same meaning as in subsection 30(5). (travailleur indépendant)
6. (2) Subject to the other provisions of this section, the earnings to be taken into account for the purpose of determining whether an interruption of earnings under section 14 has occurred and the amount to be deducted from benefits payable under section 19, subsection 21(3), 22(5), 152.03(3) or 152.04(4) or section 152.18 of the Act, and to be taken into account for the purposes of sections 45 and 46 of the Act, are the entire income of a claimant arising out of any employment, including
   1. (a) amounts payable to a claimant in respect of wages, benefits or other remuneration from the proceeds realized from the property of a bankrupt employer;
   2. (b) workers’ compensation payments received or to be received by a claimant, other than a lump sum or pension paid in full and final settlement of a claim made for workers' compensation payments;
   3. (c) payments a claimant has received or, on application, is entitled to receive under
      1. (i) a group wage-loss indemnity plan,
      2. (ii) a paid sick, maternity or adoption leave plan,
      3. (iii) a leave plan providing payment in respect of the care of a child or children referred to in subsection 23(1) or 152.05(1) of the Act,
      4. (iv) a leave plan providing payment in respect of the care or support of a family member referred to in subsection 23.1(2) or 152.06(1) of the Act, or
      5. (v) a leave plan providing payment in respect of the care or support of a critically ill child;
   4. (d) notwithstanding paragraph (7)(b) but subject to subsections (3) and (3.1), the payments a claimant has received or, on application, is entitled to receive from a motor vehicle accident insurance plan provided under a provincial law in respect of the actual or presumed loss of income from employment due to injury, if the benefits paid or payable under the Act are not taken into account in determining the amount that the claimant receives or is entitled to receive from the plan;
   5. (e) the moneys paid or payable to a claimant on a periodic basis or in a lump sum on account of or in lieu of a pension; and
   6. (f) where the benefits paid or payable under the Act are not taken into account in determining the amount that a claimant receives or is entitled to receive pursuant to a provincial law in respect of an actual or presumed loss of income from employment, the indemnity payments the claimant has received or, on application, is entitled to receive pursuant to that provincial law by reason of the fact that the claimant has ceased to work for the reason that continuation of work entailed physical dangers for
      1. (i) the claimant,
      2. (ii) the claimant’s unborn child, or
      3. (iii) the child the claimant is breast-feeding.
7. (3) Where, subsequent to the week in which an injury referred to in paragraph (2)(d) occurs, a claimant has accumulated the number of hours of insurable employment required by section 7 or 7.1 of the Act, the payments referred to in that paragraph shall not be taken into account as earnings.
8. (3.1) If a self-employed person has sustained an injury referred to in paragraph (2)(d) before the beginning of the period referred to in section 152.08 of the Act, the payments referred to in that paragraph shall not be taken into account as earnings.
9. (4) Notwithstanding subsection (2), the payments a claimant has received or, on application, is entitled to receive under a group sickness or disability wage-loss indemnity plan or a workers’ compensation plan, or as an indemnity described in paragraph (2)(f), are not earnings to be taken into account for the purpose of subsection 14(2).
10. (5) Notwithstanding subsection (2), the moneys referred to in paragraph (2)(e) are not earnings to be taken into account for the purposes of section 14.
11. (6) Notwithstanding subsection (2), the earnings referred to in subsection 36(9) and allowances that would not be deducted from benefits by virtue of subsection 16(1) are not earnings to be taken into account for the purposes of section 14.
12. (7) That portion of the income of a claimant that is derived from any of the following sources does not constitute earnings for the purposes referred to in subsection (2):
    1. (a) disability pension or a lump sum or pension paid in full and final settlement of a claim made for workers’ compensation payments;
    2. (b) payments under a sickness or disability wage-loss indemnity plan that is not a group plan;
    3. (c) relief grants in cash or in kind;
    4. (d) retroactive increases in wages or salary;
    5. (e) the moneys referred to in paragraph (2)(e) if
       1. (i) in the case of a self-employed person, the moneys became payable before the beginning of the period referred to in section 152.08 of the Act, and
       2. (ii) in the case of other claimants, the number of hours of insurable employment required by section 7 or 7.1 of the Act for the establishment of their benefit period was accumulated after the date on which those moneys became payable and during the period in respect of which they received those moneys; and
    6. (f) employment income excluded as income pursuant to subsection 6(16) of the Income Tax Act.
13. (8) For the purposes of paragraphs (2)(c) and (7)(b), a sickness or disability wage-loss indemnity plan is not a group plan if it is a plan that
    1. (a) is not related to a group of persons who are all employed by the same employer;
    2. (b) is not financed in whole or in part by an employer;
    3. (c) is voluntarily purchased by the person participating in the plan;
    4. (d) is completely portable;
    5. (e) provides constant benefits while permitting deductions for income from other sources, where applicable; and
    6. (f) has rates of premium that do not depend on the experience of a group referred to in paragraph (a).
14. (9) For the purposes of subsection (8), portable, in respect of a plan referred to in that subsection, means that the benefits to which an employee covered by the plan is entitled and the rate of premium that the employee is required to pay while employed by an employer will remain equivalent if the employee becomes employed by any other employer within the same occupation.
15. (10) For the purposes of subsection (2), income includes
    1. (a) in the case of a claimant who is not self-employed, that amount of the claimant’s income remaining after deducting
       1. (i) expenses incurred by the claimant for the direct purpose of earning that income, and
       2. (ii) the value of any consideration supplied by the claimant; and
    2. (b) in the case of a claimant who is self-employed in farming, the gross income from that self-employment, including any farming subsidies the claimant receives under any federal or provincial program, remaining after deducting the operating expenses, other than capital expenditures, incurred in that self-employment;
    3. (c) in the case of a claimant who is self-employed in employment other than farming, the amount of the gross income from that employment remaining after deducting the operating expenses, other than capital expenditures, incurred therein; and
    4. (d) in the case of any claimant, the value of board, living quarters and other benefits received by the claimant from or on behalf of the claimant’s employer in respect of the claimant’s employment.
16. (11) Subject to subsection (12), the value of the benefits referred to in paragraph (10)(d) shall be the amount fixed by agreement between the claimant and the claimant’s employer and shall be an amount that is reasonable in the circumstances.
17. (12) Where the claimant and the employer do not agree on the value of the benefits referred to in paragraph (10)(d), or where the value fixed for those benefits by agreement between the claimant and the claimant’s employer is not reasonable in the circumstances, the value shall be determined by the Commission based on the monetary value of the benefits.
18. (13) The value of living quarters referred to in paragraph (10)(d) includes the value of any heat, light, telephone or other benefits included with the living quarters.
19. (14) Where the value of living quarters is determined by the Commission, it shall be computed on the rental value of similar living quarters in the same vicinity or district.
20. (15) Where the remuneration of a claimant is not pecuniary or is only partly pecuniary and all or part of the non-pecuniary remuneration consists of any consideration other than living quarters and board furnished by the employer, the value of that consideration shall be included in determining the claimant’s income.
21. (16) For the purposes of this section, living quarters means rooms or any other living accommodation.
22. 36 (1) Subject to subsection (2), the earnings of a claimant as determined under section 35 shall be allocated to weeks in the manner described in this section and, for the purposes referred to in subsection 35(2), shall be the earnings of the claimant for those weeks.
23. (2) For the purposes of this section, the earnings of a claimant shall not be allocated to weeks during which they did not constitute earnings or were not taken into account as earnings under section 35.
24. (3) Where the period for which earnings of a claimant are payable does not coincide with a week, the earnings shall be allocated to any week that is wholly or partly in the period in the proportion that the number of days worked in the week bears to the number of days worked in the period.
25. (4) Earnings that are payable to a claimant under a contract of employment for the performance of services shall be allocated to the period in which the services were performed.
26. (5) Earnings that are payable to a claimant under a contract of employment without the performance of services or payable by an employer to a claimant in consideration of the claimant returning to or beginning work shall be allocated to the period for which they are payable.
27. (6) The earnings of a claimant who is self-employed, or the earnings of a claimant that are from participation in profits or commissions, that arise from the performance of services shall be allocated to the weeks in which those services are performed.
28. (6.1) The earnings of a claimant who is self-employed, or the earnings of a claimant that are from participation in profits or commissions, that arise from a transaction shall be allocated
    1. (a) if the aggregate amount of earnings that arise from a transaction occurring in a week is greater than the maximum yearly insurable earnings referred to in section 4 of the Act divided by 52, to the weeks in which the work that gave rise to the transaction was performed, in a manner that is proportional to the amount of work that was performed during each of those weeks or, if no such work was performed, to the week in which the transaction occurred; or
    2. (b) if the aggregate amount of earnings that arise from a transaction occurring in a week is less than or equal to the maximum yearly insurable earnings referred to in section 4 of the Act divided by 52, to the week in which the transaction occurred or, if the claimant demonstrates that the work that gave rise to the transaction occurred in more than one week, to the weeks in which the earnings were earned, in a manner that is proportional to the amount of work that was performed during each of those weeks.
29. (6.2) The earnings of a claimant who is self-employed, or the earnings of a claimant that are from participation in profits or commissions, that do not arise from the performance of services or from a transaction shall be allocated equally to each week falling within the period in which the earnings were earned.
30. (7) The earnings of a claimant who is self-employed in farming shall be allocated
    1. (a) if they arose from a transaction, in accordance with subsection (6.1); and
    2. (b) if they were received in the form of a subsidy, to the week in which the subsidy was paid.
31. (8) Where vacation pay is paid or payable to a claimant for a reason other than a lay-off or separation from an employment, it shall be allocated as follows:
    1. (a) where the vacation pay is paid or payable for a specific vacation period or periods, it shall be allocated
       1. (i) to a number of weeks that begins with the first week and ends not later than the last week of the vacation period or periods, and
       2. (ii) in such a manner that the total earnings of the claimant from that employment are, in each consecutive week, equal to the claimant’s normal weekly earnings from that employment; and
    2. (b) in any other case, the vacation pay shall, when paid, be allocated
       1. (i) to a number of weeks that begins with the first week for which it is payable, and
       2. (ii) in such a manner that, for each week except the last, the amount allocated under this subsection is equal to the claimant’s normal weekly earnings from that employment.
32. (9) Subject to subsections (10) to (11), all earnings paid or payable to a claimant by reason of a lay-off or separation from an employment shall, regardless of the period in respect of which the earnings are purported to be paid or payable, be allocated to a number of weeks that begins with the week of the lay-off or separation in such a manner that the total earnings of the claimant from that employment are, in each consecutive week except the last, equal to the claimant’s normal weekly earnings from that employment.
33. (10) Subject to subsection (11), where earnings are paid or payable to a claimant by reason of a lay-off or separation from an employment subsequent to an allocation under subsection (9) in respect of that lay-off or separation, the subsequent earnings shall be added to the earnings that were allocated and, regardless of the period in respect of which the subsequent earnings are purported to be paid or payable, a revised allocation shall be made in accordance with subsection (9) on the basis of that total.
34. (10.1) The allocation of the earnings paid or payable to a claimant by reason of a lay-off or separation from an employment made in accordance with subsection (9) does not apply if
    1. (a) the claimant’s benefit period begins in the period beginning on January 25, 2009 and ending on May 29, 2010;
    2. (b) the claimant contributed at least 30% of the maximum annual employee’s premium in at least seven of the 10 years before the beginning of the claimant’s benefit period;
    3. (c) the Commission paid the claimant less than 36 weeks of regular benefits in the 260 weeks before the beginning of the claimant’s benefit period; and
    4. (d) during the period in which the earnings paid or payable by reason of the claimant’s lay-off or separation from an employment are allocated in accordance with subsection (9) or, if the earnings are allocated to five weeks or less, during that period of allocation or within six weeks following the notification of the allocation, the claimant is referred by the Commission, or an authority that the Commission designates, under paragraph 25(1)(a) of the Act, to a course or program of instruction or training
       1. (i) that is full-time,
       2. (ii) that has a duration of at least 10 weeks or that costs at least $5,000 or 80% of the earnings paid or payable by reason of the claimant’s lay-off or separation from employment,
       3. (iii) for which the claimant assumes the entire cost, and
       4. (iv) that begins during one of the 52 weeks following the beginning of the claimant’s benefit period.
35. (10.2) If any of the conditions under which the Commission may terminate the claimant’s referral under paragraph 27(1.1)(b) of the Act exists, the earnings paid or payable to the claimant by reason of a lay-off or separation from an employment shall be re-allocated under subsection (9).
36. (11) Where earnings are paid or payable in respect of an employment pursuant to a labour arbitration award or the judgment of a tribunal, or as a settlement of an issue that might otherwise have been determined by a labour arbitration award or the judgment of a tribunal, and the earnings are awarded in respect of specific weeks as a result of a finding or admission that disciplinary action was warranted, the earnings shall be allocated to a number of consecutive weeks, beginning with the first week in respect of which the earnings are awarded, in such a manner that the total earnings of the claimant from that employment are, in each week except the last week, equal to the claimant’s normal weekly earnings from that employment.
37. (12) The following payments shall be allocated to the weeks in respect of which the payments are paid or payable:
    1. (a) payments in respect of sick leave, maternity leave or adoption leave or leave for the care of a child or children referred to in subsection 23(1) or 152.05(1) of the Act;
    2. (b) payments under a group sickness or disability wage-loss indemnity plan;
    3. (c) payments referred to in paragraphs 35(2)(d) and (f);
    4. (d) workers’ compensation payments, other than a lump sum or pension paid in full and final settlement of a claim made for workers’ compensation payments;
    5. (e) payments in respect of the care or support of a family member referred to in subsection 23.1(2) or 152.06(1) of the Act; and
    6. (f) payments in respect of the care or support of a critically ill child.
38. (13) A payment paid or payable to a claimant in respect of a holiday or non-working day that is observed as such by law, custom or agreement, or a holiday or non-working day immediately preceding or following a holiday or non-working day that occurs at the establishment of the employer or former employer from whom the claimant receives that payment, shall be allocated to the week in which that day occurs.
39. (14) The moneys referred to in paragraph 35(2)(e) that are paid or payable to a claimant on a periodic basis shall be allocated to the period for which they are paid or payable.
40. (15) The moneys referred to in paragraph 35(2)(e) that are paid or payable to a claimant in a lump sum shall be allocated beginning with the first week that those moneys are paid or payable to the claimant in such a manner that those moneys are equal in each week to the weekly amount, calculated in accordance with subsection (17), to which the claimant would have been entitled if the lump sum payment had been paid as an annuity.
41. (16) The moneys allocated in accordance with subsection (14) or (15) shall not be taken into account in the allocation of other earnings under this section.
42. (17) The weekly amount shall be calculated in accordance with the following formula, according to the claimant’s age on the day on which the lump sum payment is paid or payable:
43. A / B
44. where
45. A is the lump sum payment; and
46. B is the estimated actuarial present value* of $1 payable at the beginning of every week starting from the day on which the lump sum payment is paid or payable and payable for the claimant’s lifetime, as calculated each year in accordance with the following formula and effective on January 1 of the year following its calculation:
47. B = [Σt = 0 to infinity of (tPx/ (1+ i)t) – 0.5] × 52
48. where
49. tPx is the probability that the claimant will survive for “t” years from the claimant’s age “x” using the latest Canadian mortality rates used in the valuation of the Canada Pension Plan prorated in equal parts between males and females,
50. i is the annualized long-term Government of Canada benchmark bond yields averaged over the 12-month period beginning on the September 1 and ending on the August 30 before the January 1 on which the estimated actuarial present values are effective, expressed as a percentage and rounded to the nearest one tenth of a percentage, and
51. t is the number of years that the claimant survives according to the claimant’s age for which the probability of survival is estimated by tPx.
52. *Note: The estimated actuarial present values are published annually on the Service Canada website.
53. (18) Earnings that are payable to a claimant under a government program intended to encourage re-employment and that are payable to the claimant as a supplement to earnings arising from a contract of employment shall be allocated to the period for which they are payable.
54. (19) Where a claimant has earnings to which none of subsections (1) to (18) apply, those earnings shall be allocated
    1. (a) if they arise from the performance of services, to the period in which the services are performed; and
    2. (b) if they arise from a transaction, to the week in which the transaction occurs.
55. (20) For the purposes of this section, a fraction of a dollar that is equal to or greater than one half shall be taken as a dollar and a fraction that is less than one half shall be disregarded.