Employment Insurance (EI)

Decision and Reasons

Decision

[1] The appeal is allowed.

Overview

[2] The Appellant, Y. Z. (Claimant), claimed payments from his employer in respect of banked hours just prior to his lay off from employment, even though he had not accrued those banked hours. He later paid this money back to the employer. When he applied for Employment Insurance benefits, the Respondent, the Canada Employment Insurance Commission (Commission), considered the payments to be earnings and allocated them to weeks in the Claimant’s benefit period. The Claimant disagreed that these payments should be considered earnings and requested a reconsideration. After investigating, the Commission equated all of the banked hours to vacation pay which it considered to be subject to allocation. However, the Commission reduced the amount to be allocated, because the Claimant had repaid the employer for that part of what he had claimed that was in excess of his vacation pay entitlement. The Commission allocated only the portion he had not repaid, which represented the vacation pay to which the Claimant had actually been entitled.

[3] The Claimant appealed to the General Division of the Social Security Tribunal, which “dismissed the appeal with modification”. The General Division found all of the payments for the unearned banked hours to be earnings, but it not did accept that the payments were vacation pay. It noted that the amounts should be allocated to the periods in which they were payable and found that they were payable in the periods that were represented by the time sheets in which the hours were claimed. As a result, the General Division found that the entire amount should be allocated, without regard for the Claimant’s partial repayment. The Claimant now appeals to the Appeal Division.

[4] The appeal is allowed. The General Division erred in fact by determining a “sufficient connection” between the payments and the employment without regard for the material before it. It also erred in law by misapplying the test to determine that the payments received were earnings and by failing to adequately explain how it determined that the payments were earnings.

Issue

[5] Did the General Division misapply the legal test to determine earnings or did it err in law by giving inadequate reasons?

Analysis

Standard of review

[6] The grounds of appeal set out in s. 58(1) of the Department of Employment and Social Development Act (DESD Act) are similar to the usual grounds for judicial review in the Courts, suggesting that the same kind of standards of review analysis might also be applicable at the Appeal Division.

[7] However, I do not consider the application of standards of review to be necessary or helpful. Administrative appeals of Employment Insurance decisions are governed by the DESD Act. The DESD Act does not provide that a review should be conducted in accordance with the standards of review. The Federal Court of Appeal in Canada (Citizenship and Immigration) v. Huruglica,^{Footnote 1} was of the view that standards of review should be applied only if the enabling statute provides for their application. It stated that the principles that guided the role of courts on judicial review of administrative decisions have no application in a multilevel administrative framework.

[8] Canada (Attorney General) v. Jean^{Footnote 2} concerned a judicial review of a decision of the Appeal Division. The Federal Court of Appeal was not required to rule on the applicability of standards of review, but it acknowledged in its reasons that administrative appeal tribunals do not have the review and superintending powers that are exercised by the Federal Court and the Federal Court of Appeal where the standards of review are applied. The Court also observed that the Appeal Division has as much expertise as the General Division and is therefore not required to show deference.

[9] While certain other decisions of the Federal Court of Appeal appear to approve of the application of the standards of review,^{Footnote 3} I am nonetheless persuaded by the reasoning of the Court in Huruglica and Jean. I will therefore consider this appeal by referring to the grounds of appeal set out in the DESD Act only.

General principles

[10] The Appeal Division’s task is more restricted than that of the General Division. The General Division is required to consider and weigh the evidence that is before it and to make findings of fact. In doing so, the General Division applies the law to the facts and reaches conclusions on the substantive issues raised by the appeal.

[11] However, the Appeal Division is permitted to intervene in a decision of the General Division only if it can find that the General Division has made one of the types of errors described by the “grounds of appeal” in s.58(1) of the DESD Act.

[12] The only grounds of appeal are described below:

1. The General Division failed to observe a principle of natural justice or otherwise acted beyond or refused to exercise its jurisdiction;
2. The General Division erred in law in making its decision, whether or not the error appears on the face of the record; or
3. The General Division based its decision on an erroneous finding of fact that it made in a perverse or capricious manner or without regard for the material.

Did the General Division misapply the legal test to determine earnings or did it err in law by giving inadequate reasons?

[13] The General Division justified its findings that there was a sufficient connection between the payments and the employment on the basis that the payments were directly linked to the employer’s banked hour accumulation system.

[14] In the leave to appeal decision, I considered the question of whether the General Division may have erred by ignoring or misunderstanding relevant evidence. I also considered whether the General Division misapplied the law by finding the payment to be earnings solely on its finding of a “sufficient connection”. In its submissions to the Appeal Division, the Commission accepted that the General Division erred on the basis that the General Division failed to adequately justify its determination.

[15] In determining that there was a “sufficient connection”, the General Division focused on its finding that the amounts that had been paid were not a loan. Although the General Division had accepted that the Claimant was never entitled to the payments and that he paid them back, it found that there was a sufficient connection with regard only to the fact that the improper payments were obtained through the employer’s payroll system. The General Division did not analyze the evidence that  Claimant had not been entitled to the payments in the first place and that he had returned the improperly disbursed payments to determine whether the payments were earnings. The payments may not have been a loan but this is not determinative of whether they were earnings.

[16] The fact that the Claimant improperly claimed the payments and paid them back in one form or another is relevant to the characterization of those payments and whether they have a sufficient connection to the employment. In failing to take that evidence into account, the General Division based its decision on an erroneous finding of fact that it made in a perverse of capricious manner or without regard for the material before it under s. 58(1)(c) of the DESD Act.

[17] Furthermore, Canada (Attorney General) v. Roch^{Footnote 4}stipulates that an assessment of the “sufficient connection” of the payments to the employment must be taken together with a consideration of whether the payments are “comparable to earnings”. Roch accepted that “an amount which is not in consideration of work done in the traditional sense and which is not expressly included in the Regulations” may be considered earnings within the meaning of the Regulations “on condition that this amount is comparable to earnings and that there is a ‘certain connection’ or a ‘sufficient connection’ between the claimant’s employment […] and the sum received.” [emphasis added]

[18] The General Division found that there was a “sufficient connection” but did not consider whether the payments were comparable to earnings. I find that the General Division thereby misapplied Roch and erred in law under s. 58(1)(b) of the DESD Act. I acknowledge that the General Division found that the amounts that the Claimant had claimed from the employer represented “unearned cash advances from future banked hours.” However, if the General Division intended its finding of an “unearned cash advance” to be equivalent to a finding that it was a payment “comparable to earnings,” it did not say so in its reasons.

[19] The General Division found that the payments were not a loan. This is only what the payments were not. The General Division’s characterization of the payments as “unearned cash advances” is also unhelpful. It is not intuitive that an advance that is acknowledged to be “unearned” can be considered “earnings” under s. 35(2) of the Employment Insurance Regulations (Regulations) or “comparable to earnings” under Roch.

[20] I find that the General Division erred in law under s. 52(1)(b) of the DESD Act by misapplying Roch or alternately, providing inadequate reasons for its decision.

Conclusion

[21] The appeal is allowed.

Remedy

[22] The Commission has accepted that it may be appropriate in this case that I make the decision that the General Division should have made, in accordance with my authority under s. 59 of the DESD Act. It submits that its reconsideration decision should be restored and that the payments received in the weeks of September 13, 2015, and October 4, 2015, in the amounts of $662.40 and $1004.36, respectively, were vacation pay and subject to allocation.

[23] Based on the General Division’s own view of the evidence, the payments were paid/received in error. The Claimant had no right to the payments and he should never have received them. No work had been performed in relation to those payments, and the employer did not authorize the payments in consideration of future work. Furthermore, the Claimant received no benefit from the payments because he was required to reimburse the employer in some fashion, so I find that the payments were not earned as an advance against future time off.

[24] However, I appreciate that the Claimant actually repaid the employer only $320.44 of what was paid to him. I find that this amount is not allocable as earnings. However, the remainder of the Claimant’s obligation to repay was settled by way of an offset against other obligations owed by the employer to the Claimant. These other obligations related to 20.13 hours of vacation pay in the total amount of $1,666.76 (GD3-42) that would have been paid at the Claimant’s request and by reason of separation. Therefore, even though the original payment was an improper advance and was not intended to be paid as vacation pay, the Claimant was entitled to vacation pay in the same amount.

[25] Section 36 of the Regulations describes the manner in which the Commission must allocate earnings. It defines “earnings” with reference to s. 35 of the Regulations. Subsection 35(2) states that earnings are “the entire income of a claimant arising from employment,” and “income” is defined in s. 35(1) as “any pecuniary or non-pecuniary income that is or will be received from an employer or any other person, including a trustee in bankruptcy.”

[26] Whether the Claimant had received the amount or whether he expected to receive the amount, the $1,666.76 is still income under s. 35(1), earnings “payable in respect of wages or benefits” under s. 35(2), and allocable under s. 36.

[27] I find that the $1,666.76 is earnings and I direct that $662.40 shall be allocated to the week of September 13–19, 2015 and $1004.36 shall be allocated to the week of October 4–10, 2015, in accordance with s. 36(8) of the Regulations.