SOCIAL SECURITY TRIBUNAL DECISION General Division Employment Insurance

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1 Citation: M. M. v. Canada Employment Insurance Commission, 2014 SSTGDEI 7 Appeal No: GE BETWEEN: M. M. Appellant Claimant and Canada Employment Insurance Commission Respondent SOCIAL SECURITY TRIBUNAL DECISION General Division Employment Insurance SOCIAL SECURITY TRIBUNAL MEMBER: Gerry McCarthy HEARING DATE: January 23, 2014 TYPE OF HEARING: Teleconference DECISION: Appeal is allowed

2 PERSONS IN ATTENDANCE M. M., the Claimant, attended by telephone. DECISION [1] The Tribunal finds that Claimant s lump sum payment from the employer of $14, is not earnings and should not be allocated under subsection 35(2) and 36(9) of the Employment Insurance Regulations (EI Regulations). INTRODUCTION [2] The Claimant established an initial claim for Employment Insurance benefits (EI benefits) on November 18, The Claimant worked for Craigwood Youth Services until November 15, 2012, and was dismissed from his job. The employer issued an amended Record of Employment to the Claimant indicating that the settlement pay of $14, was paid in lieu for the loss of the right to reinstatement. The Canada Employment Insurance Commission (Commission) allocated the settlement monies pursuant to subsection 35(2) and 36(9) of the EI Regulations. The Claimant requested a reconsideration of the Commission s decision. The Commission said the Claimant s settlement monies should have been allocated from the date the agreement was signed, which was May 27, 2013, and not from the last day of work. The Claimant appealed to the Social Security Tribunal. FORM OF HEARING [3] The hearing of this appeal was by teleconference for the reasons given in the Notice of Hearing dated December 19, ISSUE [4] The issue is whether there should be an allocation of earnings pursuant to subsection 35 and 36 of the EI Regulations.

3 THE LAW [5] Section 35 of the EI Regulations defines income as 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. [6] Section 35(2) of the EI Regulations states that: 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), (3) or (4) or section 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. [7] Sums received from an employer are presumed to be earnings and must therefore be allocated unless the amount falls within an exception in subsection 35(7) of the EI Regulations or the sums do not arise from employment. EI Regulation 36(4) states that: 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. [8] Earnings paid by an employer by reason of the separation from employment must be allocated pursuant to EI Regulation 36(9). It is the reason or motive for the payment (and not the date of the payment) that determines the date from which the allocation must begin. EVIDENCE [9] The Claimant established an initial claim for EI benefits on November 18, 2012.

4 [10] The Claimant said he worked for Craigwood Youth Services until November 15, 2012, and was dismissed from his job. The Claimant s Record of Employment indicated he was paid vacation pay in the amount of $3, at that time. [11] On June 19, 2013, the Claimant reported he had received a settlement of $14, from the employer. The Claimant said there were no legal costs. [12] The Claimant submitted the Minutes of Settlement (Exhibit GD3-19 to GD3-22). In the agreement, the Claimant relinquished his right to reinstatement in return in for the payment of $14, from the employer. The Claimant was deemed to be permanently laid off from his employment effective November 15, The agreement was signed on May 27, [13] The employer issued an amended Record of Employment to the Claimant indicating the settlement money of $14, was paid in lieu for the loss of the right to reinstatement. [14] On September 9, 2013, the Commission advised the Claimant of the allocation of the settlement monies that resulted in an overpayment of $7, [15] In his request for reconsideration, the Claimant said the monies reported were not wages or earnings. He said the monies were a settlement in which he gave up his rights under his collective agreement for a set amount of money. He said he did not receive his settlement until June 3, He stated that he did not receive any money for employment and there was no severance or retirement package as of Nov 15, He said he was permanently laid off and received no money other than the vacation pay already deducted from his claim. [16] On October 17, 2013, the Commission spoke to the Claimant and advised that the severance monies he received were paid for relinquishing his right to be re-instated to

5 his previous position (as indicated in the minutes of settlement he provided). The Commission further explained that the Claimant s settlement monies should have been allocated from the date the agreement was signed, which was May 27, 2013, and not from the last day of work. [17] The Commission advised the Claimant that his earnings had been allocated at his normal weekly pay of $ each week from May 26, 2013, to October 13, They further advised the Claimant that his benefit period could not be extended due to the allocation of the severance payment, because the allocation did not prevent the payment of benefits each week. They said the Claimant could request a reversion to the 40 percent allowable rule, but there was nothing to indicate the Claimant has done so to date. [18] In his letter of appeal, the Claimant said he did not receive earnings. He said during the mediation process with the employer he was awarded an amount of money for relinquishing his rights under his collective agreement. He said this money was not wages or money earned, because he did not work for these monies and they were given to him in lieu of his rights. He said after the reconsideration process was completed his overpayment was larger, and his benefit period was not extended. [19] During the hearing, the Tribunal and the Claimant were disconnected after approximately five-minutes. The Tribunal and the Claimant then re-connected to the teleconference. The Claimant said after he was dismissed by the employer it was everybody s best intention to resolve the situation. The Claimant confirmed that he signed the Minutes of Settlement listed in Exhibit GD3-19 to GD3-22. He also confirmed he relinquished his right to reinstatement in return in for the payment $14, from the employer. He said he subsequently received a cheque from the employer (approximately two-weeks later) for $10, He said he inquired with his union about this amount and was subsequently given a refund on Canada Pension Plan (CPP) and Employment Insurance (EI) premiums that had

6 been mistakenly deducted from his cheque. The Claimant said he never received the $41.03 referred to in the agreement for added hours worked. He also said he never received any travel or lunch monies from his union for the day the arbitration with the employer took place. The Claimant said the monies he received from the employer for relinquishing his reinstatement rights were not severance monies or vacation monies. He said he tried to resolve the issues with the employer and would have been willing to return to work. He disputed the Commission s description of the lump sum money from the employer as severance or vacation monies. He questioned the structural method the Commission used in allocating monies. He re-iterated that the lump sum payment from the employer was for relinquishing his reinstatement rights and that those monies were not earnings. SUBMISSIONS [20] The Claimant submitted that: a) The settlement monies were not wages or money earned, because he did not work for these monies and they were given to him for relinquishing his reinstatement rights. b) He received a refund from CPP and EI premiums that had been mistakenly deducted from his lump sum payment from the employer. [21] The Respondent submitted that: a) The settlement monies the Claimant received constituted earnings pursuant to subsection 35(2) of the EI Regulations, because the payment was made to compensate the Claimant for relinquishing his recall rights. b) The payment of these monies was paid by reason of the Claimant s separation from employment. Consequently, the settlement monies were

7 allocated pursuant to subsection 36(9) of the EI Regulations, according to the Claimant s normal weekly earnings from May 26, 2013, to October 13, 2013 ANALYSIS [22] The Tribunal must decide whether the lump sum payment of $14, the Claimant received from the employer is earnings and should be allocated pursuant to subsection 35(2) and 36(9) of the EI Regulations [23] The Tribunal finds the Claimant established an initial claim for EI benefits on November 18, The Claimant worked for Craigwood Youth Services until November 15, 2012, and was dismissed from his job. The Claimant s Record of Employment indicated he was paid vacation pay in the amount of $3, at that time. [24] The Tribunal finds the Minutes of Settlement involving the Claimant (Grievor), the Ontario Public Service Employees Union (the Claimant s Union) and Craigwood Youth Services (the Employer) is listed in Exhibit GD3-19 to GD3-22. The Tribunal finds paragraph three of this agreement states: The Griever acknowledges and understands that he has the right to be reinstated to his previous position but is relinquishing and giving up any and all rights under the Collective Agreement and is relinquishing and renunciating his right to reinstatement in return for the payment of $14,500.00, less statutory deductions, for relinquishing his right to be reinstated to his previous position. The Tribunal also wishes to emphasize that paragraph two of the same agreement states: The Parties agree that under the terms of the Collective Agreement, an Arbitrator has the right to reinstate the Grievor to his previous position if the Employer was found to have terminated his employment without just cause. [25] The Tribunal finds the Minutes of Settlement Agreement was signed by the Claimant, the employer, and the Claimant s union on May 27, The Tribunal recognizes the Claimant was deemed to be permanently laid off from his employment effective November 15, The Tribunal further recognizes that the Claimant s

8 amended Record of Employment stated that the settlement pay of $14, was paid in lieu for the loss of the right to reinstatement. The Tribunal also finds the Claimant received a cheque from the employer approximately two-weeks after the Minutes of Settlement was signed for $10, The Tribunal recognizes the Claimant was subsequently given a refund on Canada Pension Plan (CPP) and Employment Insurance (EI) premiums that had been mistakenly deducted from his lump sum payment. [26] The Tribunal recognizes that at a certain point in the Appeal Docket, the Commission refers to the settlement monies the Claimant received from the employer as severance. However, in their representations the Commission makes it clear that their position is that the settlement monies the Claimant received constituted earnings pursuant to subsection 35(2) of the EI Regulations as the payment was made to compensate the Claimant for relinquishing his recall rights. The Tribunal wishes to emphasize the Commission has stated that the lump sum payment to the Claimant was for relinquishing his rights to reinstatement. [27] The Tribunal finds that the lump sum payment the Claimant received is linked directly to the Claimant relinquishing and renunciating his right to reinstatement in return for the payment of $14, The Tribunal finds the language in the Minutes of Settlement about the lump sum payment is clear. The question for the Tribunal then becomes: Is the payment the Claimant received for giving up his right to reinstatement earnings? The Federal Court of Appeal (FCA) has addressed this question in Meehan v. Attorney General of Canada, 2003 FCA 368. The Tribunal finds that in this FCA decision, Justice Sexton wrote that: This Court in Canada v. Plasse [2000] F.C.J at paragraph 18, decided that a payment received for renunciation of a right to reinstatement does not constitute earnings under the Employment Insurance Regulations. [28] The Tribunal further recognizes that in Plasse v. Attorney General of Canada (A ) Justice Decary wrote that: It cannot now be said that an amount paid to an

9 employee for giving up his right to go back to his former position, has been earned by labour or has been given in return for work done, to use the words of Linden J.A. at paragraph 10 of his reasons in Vernon. [29] The Tribunal re-iterates that in the Minutes of Settlement the employer s reason for providing the Claimant a lump sum payment is described in clear terms. In short, the lump sum payment is explicitly tied to the Claimant giving up his right to reinstatement. The Tribunal finds the Federal Court of Appeal (FCA) has affirmed the principle that monies paid to a claimant for giving up his (or her) right to be reinstated are not earnings. [30] In the last analysis, the Tribunal therefore finds Claimant s lump sum payment from the employer of $14, is not earnings and should not be allocated under subsection 35 (2) and 36(9) of the EI Regulations. CONCLUSION [31] The appeal is allowed. Gerry McCarthy Member, General Division DATED: January 23, 2014.

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