Federal Court Decision #A-34-91 - ATTORNEY GENERAL OF CANADA v. WILLIAM, HARNETT

IN THE MATTER OF:

IN THE MATTER OF:

An Originating Notice under Section 28 of the Federal Court Act.

BETWEEN:

THE ATTORNEY GENERAL OF CANADA,

applicant,

- and -

WILLIAM HARNETT,

respondent.

Heard at Halifax, Nova Scotia, on Monday, February 17, 1992.

CORRESPONDING CUB: 17395

REASONS FOR JUDGMENT OF THE COURT
(Delivered from the Bench at Halifax, Nova Scotia,
on Monday, February 17, 1992);

MARCEAU, J.A.:

The respondent worked for Halifax-Dartmouth Industries Ltd. (HDIL) from November 1974 until he was dismissed on October 3, 1986. He applied for unemployment insurance benefits and a benefit period was established. In January 1987, the respondent retained counsel and commenced an action against HDIL for wrongful dismissal, which he subsequently amended to include a claim for reinstatement under the Nova Scotia Labour Standards Code. On February 10, 1988, the parties settled the action out of Court, the respondent agreeing to drop all claims in return for HDIL's payment of $35,000; $5,000 of the amount was specifically designated to cover legal fees.

On being advised of the settlement, the Canada Employment and Immigration Commission classified the respondent's proceeds of $30,000 (the settlement amount less the legal costs) as earnings in accordance with the subsections 57(1) and 57(a) ¹ of the Unemployment Insurance Regulations. It proceeded to allocate these earnings to the benefit period pursuant to subsection 58(5) ² of the said Regulations and assessed an overpayment against the respondent. After the Board of Referees upheld the Commission's decision, the respondent appealed to the umpire.

The umpire granted the appeal. One paragraph of his reasons clearly sets out his reasoning:

As I have indicated, it is clear that at least some of the settlement moneys were paid to the claimant in order to settle his claim under the Nova Scotia Labour Standards Code. I reach this conclusion based upon the repeated offer to split the reinstatement claim from the rest of the claim (with a corresponding reduction in the amounts requested under the rest of the claim). While this was not acceptable to the employer, in my view part of the moneys paid, from the perspective of the claimant and the employer, were paid to settle the reinstatement claim. At the same time, the institution of the reinstatement claim and declarations that the reinstatement claim was the more important for the claimant, given his advanced age and health problems and hence his belief that finding alternative employment would be difficult, also satisfies me that there was a genuine desire to obtain reinstatement, and that the claim to reinstatement was genuine. Moreover, I accept the view that the right to reinstatement was a principal asset of the claimant in his circumstances. ³

The umpire then referred the matter back to the Commission for it to determine what portion of the settlement was attributable to the reinstatement claim and thus, in his view, did not qualify for allocation as "earnings" under the Regulations.

With respect, we think that the umpire was in error. The umpire said he was relying on the decision of this Court in Attorney General of Canada v. Kenneth Walford, [1979] 1 F.C. 768. In that case, Pratte J. confirmed that damages paid to an ex-employee who has been wrongfully dismissed are in principle income arising out of employment within the meaning of section 57. He also indicated that there could be "special circumstances" where it would be clear on the evidence that part of the damages was meant to indemnify a loss other than that of wages in which case that part would not be subject to allocation. For the umpire, the respondent's loss of his right to reinstatement was sufficiently distinct from a loss of wages to qualify for the exemption from allocation approved by Pratte J. We think that the case law following the decision Walford, more specifically the judgments of this Court in Canada v. Tétreault and Joyal ⁴ and Minister of Employment and Immigration v. Mayor ⁵, clearly conflict with the umpire's view. As we understand it, the distinction only applies if the loss is totally unrelated to advantages arising from employment. For example, settlements paid to address injury to one's health or reputation, or indeed, to address one's legal fees, would not be allocated as earnings. All advantages attached to employment are of the same nature as regards the compensation to which their loss may give rise.

The settlement monies paid to the respondent were paid wholly as compensation for his loss of salary and other pecuniary benefits associated with employment. The respondent's claim for reinstatement does not in any way alter that fact. The surrender by him of that remedy does not change the character of the compensation and the monies received remain income arising out of any employment within the meaning of paragraph 57(2)(a).

The application will therefore be granted. The decision of the umpire will be set aside and the matter will be referred back to him to be reconsidered on the basis that the settlement monies received by the respondent are earnings within the meaning of section 57 of the Unemployment Insurance Regulation.

"Louis Marceau"

J.A.

¹ The applicable portions of subsections 57(1) and 57(2)(a) read as follows:

57.(1) In this section,

"income" means any pecuniary or non-pecuniary income that is or will be received by a claimant from an employer or any other person;

"employment" means

(a) any employment, whether insurable, not insurable or excepted employment, under any express or implied contract of service or other contract of employment,

(i) whether or not services are or will be performed by the claimant for any person, and

(ii) whether or not income received by a claimant is from a person other than the person for whom services are or will be performed; and

(b) any self-employment whether on the claimants own account or in partnership or co-adventure;...

57.(2) Subject to this section, the earnings to be taken into account for the purpose of determining whether an interruption of earnings has occurred and the amount to be deducted from benefits payable under ... the Act are

(a) the entire income of a claimant arising out of any employment; ...

² This provision, which I reproduce here, was revoked on November 23, 1989:

58. (5) Retroactive payments of wages or moneys in lieu of wages and earnings payable pursuant to a labour arbitration award, the judgement of a court or as a settlement of an issue that may otherwise be determined by a labour arbitration award or the judgment of a court shall, whether the claimant is reinstated or not, be allocated to such number of consecutive weeks or portion thereof as will ensure that the claimant's earnings in each week, except the last, are equal to the weekly rate of his normal earnings from his employer, beginning

(a) where the payments are awarded to specific weeks subsequent to the week of lay-off or separation, the first week for which payments are awarded; and

(b) in any other case, the week in which the lay-off or separation occurred

.

³ CUB 17395A, at pp. 8-9

⁴ (1986) 69 N.R. 231 (F.C.A.).

⁵ (1989) 97 N.R. 353 (F.C.A.).