Employment Insurance (EI)

Decision

[1] The appeal is allowed.

[2] The $126,630.00 the Claimant received for relinquishment of his right to reinstatement is not earnings and should not be allocated to the Claimant’s employment insurance (EI) benefits.

Overview

[3] The Claimant was employed in a civilian position connected to the Canadian Armed Forces when he was dismissed. The Claimant filed a grievance requesting reinstatement in accordance with the legislation that governed his employment. It became apparent in mediation with his former employer that reinstatement would not occur so he and his employer reached an agreement whereby the Claimant received a lump sum for the relinquishment of his right to reinstatement. The Commission decided that the money paid to the Claimant for relinquishing his right to reinstatement were earnings paid on termination of his employment and allocated $104,717.00 to his EI benefits beginning the week of November 13, 2016.^{Footnote 1} This decision resulted in an overpayment of EI benefits of $19,322.00. The Commission also extended the Claimant’s benefit period by 52 weeks.

[4] The Claimant disagrees with the Commission’s decision. He says that the money is not earnings because it was paid for the relinquishment of his right to reinstatement and the employer agreed that was the case. When he was dismissed he was not aware he would receive the money two years later. It also took too long for the Commission to correctly inform him that he owed money. The Claimant appeals to the Social Security Tribunal.

Preliminary matters

[5] This hearing was originally scheduled to be heard on December 29, 2020. The Claimant requested the hearing be adjourned because he was not able to properly prepare for the hearing. I granted the Claimant’s request for an adjournment in the interests of natural justice to allow the Claimant time to prepare. The hearing was rescheduled to January 7, 2021, and the appeal was heard on that date.

Issues

[6] I have to decide whether the money the Claimant received is earnings, as defined by the Employment Insurance Act. If I decide the money is earnings, I then have to decide if the Commission allocated the earnings correctly.

Analysis

[7] The law says that earnings are the entire income of a claimant arising out of any employment.^{Footnote 2} The law defines both “employment” and “income.” “Employment” includes any employment under any kind of contract of service or employment.^{Footnote 3} “Income” includes any income that a claimant did or will get from an employer or any other person, whether it is in the form of money or something else.^{Footnote 4}

The money received for relinquishment of the right to reinstatement is not earnings

[8] The $104,717.00 the Claimant received for the relinquishment of his right to reinstatement is not earnings and should not be allocated to the Claimant’s EI benefits. My reasons for deciding this are below.

[9] It is up to the Claimant to show that the money he received is not earnings for the purposes of EI benefits. The Claimant has to prove this on a balance of probabilities. This means that he has to show that it is more likely than not the money he received is not earnings.

[10] The Courts have decided that money received for the relinquishment of a right to reinstatement is not earnings if a claimant can meet three requirements. Those three requirements are that, following a wrongful dismissal, a claimant must show that they had a right to reinstatement, sought reinstatement and, if there is a monetary settlement instead, the agreement must indicate that the monies were paid for the relinquishment of the reinstatement rights.^{Footnote 5}

[11] I find the Claimant has met all three of these requirements. The Claimant testified that his employer changed his position to civilian position in the mid-1990’s. He continued in the position and was promoted, although he remained in a civilian position. He began to experience difficulties at work when a new supervisor was hired. These difficulties ended with an allegation of theft made against him. He was suspended and, following an investigation, later dismissed on November 15, 2016.

[12] The Claimant said that he filed a grievance objecting to his suspension and dismissal. The Claimant asked for reinstatement in his grievance. The Claimant testified that a few days after dismissal, he was charged with theft, under the employer’s disciplinary system. A date had been set to hear those charges. He said sometime in 2017, when the lawyer presented evidence, the charges were dismissed or thrown out. The Claimant then expected his employer would contact him offering him his job back. That call did not come.

[13] A hearing date was set for the Claimant’s grievances. The Claimant decided to enter into mediation with his former employer to discuss the terms of bringing him back to work. He said the Canada Labour Relations Board conducted the mediation. The Claimant’s employer indicated from the outset that it would not be reinstating him so it was agreed the employer would pay him for relinquishing his right to reinstatement. The Claimant’s lawyer assisted by him in the mediation, the employer wrote up the settlement and they and the Claimant signed it. The Claimant received the money on September 13, 2018.

[14] The Commission says that it determined the severance pay the Claimant received constituted earnings pursuant to section 35(2) of the Employment Insurance Regulations because the payment was made to compensate the Claimant for the loss of his employment. The Commission says that earnings paid by an employer by reason of separation from employment must be allocated pursuant to subsection 36(9) of the Employment Insurance Regulations. The Commission submits that the severance monies paid to the Claimant did not include compensation for the relinquishment of reinstatement rights.

[15] The Claimant’s former employer refused to discuss the Claimant’s separation from employment and settlement with the Commission.

[16] The appeal file has a copy of the Minutes of Settlement (Minutes) signed by the Claimant on August 7, 2018. The employer issued an amended Record of Employment (ROE) on September 13, 2018, showing that $121,010.00 was paid as severance pay and $5,620.00 was paid as other as an RRSP rollover. These amounts total $126,630.00. The Claimant testified that he received the money on September 13, 2018.

[17] The Minutes state that the Claimant filed grievances with his employer which were denied and referred to adjudication before the Federal Public Sector Labour Relations and Employment Board. The Minutes state that the Claimant “was seeking an Order for reinstatement to his position as one of the remedies.” This evidence tells me the Claimant was seeking reinstatement.

[18] The Federal Public Sector Labour Relations Act provides for the adjudication of grievances. Grievances referred to adjudication must be heard by an adjudicator or Board.^{Footnote 6} After considering a grievance, the adjudicator or Board must issue a decision, and the decision maker has the power to make the order that it considers appropriate in the circumstances.^{Footnote 7} The Federal Public Sector Labour Relations Regulations require that the parties to a grievance must participate in the mediation provided by the Board unless the party that did not file the grievance notifies the Board it does not intend to participate.^{Footnote 8} The Minutes specified the Claimant had sought reinstatement through grievances that he filed and provided for the payment of a lump sum for the Claimant’s relinquishment of his right to reinstatement. This evidence tells me that an adjudicator or Board appointed under the Federal Public Sector Labour Relations Act has the power to order reinstatement.

[19] Following the settlement the Claimant’s employer issued an amended ROE to change the reason for issuing and to report that the employer had made a payment after the final pay period. The ROE reported that the Claimant had received other monies, which the employer described as “E – Severance Pay $121,010.00” and “O – Other $5,620.00.” The employer noted that the $5,620.00 was an “RRSP Rollover.” The ROE issued by the employer contradicts the Minutes, which are clear that the payment of $126,630.00 was paid to the Claimant for the relinquishment of his right to reinstatement. That the employer chose to describe $121,010.00 of the lump sum as severance pay is not determinative of the matter. Nor is the RRSP rollover amount determinative of the matter. The RRSP rollover is referenced in the Minutes at paragraph 6(a) which states, in part, “The employee shall be entitled to roll over a portion or all of this payment into an RRSP …” and “The Employer confirms it has received RRSP instructions from the Employee to this effect.” The employer’s amendment of the ROE to amend the reason for issuing the ROE to “Other K” and “No Fault – Administrative Reasons” is also not determinative of the matter. The reason for issuing the ROE was amended in accordance with the terms agreed in the Minutes.^{Footnote 9}

[20] The Claimant testified that he initiated mediation as a means to settle his grievances. He and his former employer reached a settlement with the aid of a mediator. He testified that had he left his employment of his own accord he would not receive severance pay. The legal bills submitted to the Commission by the Claimant show that he was billed in relation to mediation on August 3, 2018 and again in April 2019. The Claimant’s lawyer witnessed the Claimant’s signature on the Minutes on August 7, 2018. The Claimant testified he received the money on September 13, 2018. The amended ROE was issued on September 13, 2018. The employer refused to discuss the details of separation and settlement with the Commission as per the legal agreement between the employee and employer. This evidence tells me that a settlement was reached between the Claimant and his former employer.^{Footnote 10} The evidence of the rollover of money to an RRSP and the change in the reason for issuing the ROE tells me the employer was aware of the terms of the settlement and enacted those terms as per the Minutes. There is no evidence to suggest that the $126,630.00 was paid for any other reason than the Claimant’s relinquishment of his right to reinstatement as was clearly stated in the Minutes. As a result, I find as fact that the $126,630.00 was paid to the Claimant for the relinquishment of his right to reinstatement. Accordingly, I find the $126,630.00 is not earnings within the meaning of the Employment Insurance Regulations and should not be allocated.

Other matters

[21] The Commission wrote to the Claimant that he may be entitled to special EI benefits in light of his family’s circumstances that he described in his request for reconsideration. Nothing in my decision prevents the Claimant from contacting the Commission to ask about his entitlement, if any, to additional EI benefits.

[22] I am sympathetic to the Claimant’s financial circumstances and the impact that the payment of the money for relinquishment of his right to reinstatement has had with respect to the payment of income tax on those funds and the loss of the Canada Child Benefit. I note that this decision arises from my authority to hear appeals arising from reconsideration decisions made by the Commission.^{Footnote 11} My decision is made within the context of the Employment Insurance Act and the Employment Insurance Regulations and has no application to any other appeal processes in which the Claimant may be engaged.

Conclusion

[23] The appeal is allowed.