• Home >
  • Jurisprudence Library
  • CUB 55884


    - and -

    IN THE MATTER of a claim by

    - and -

    IN THE MATTER of an appeal to an Umpire by the claimant
    from a decision by the Board of Referees given on
    October 2, 2001, at Brampton, Ontario




    GUY GOULARD, Umpire

    The claimant established a claim for benefits effective November 19, 2000. The Commission later determined that the claimant had been employed and had received earnings of $3,922.27 during her benefit period, that is from February 7, 2001 to March 31, 2001, and had failed to declare these earnings. The Commission assigned these earnings. This resulted in an overpayment which is not in issue before me. The Commission further determined that the claimant had given statements regarding her earnings which she knew were false or misleading and that she would have to pay a penalty of $2,144.00 as well as receive a notice of violation.

    The claimant appealed the Commission's decisions to the Board of Referees who unanimously dismissed the appeal. She appealed the Board's decision to the Umpire. This appeal was heard in Toronto, Ontario, on November 12, 2002. The claimant was present. The Commission was represented by Ms. Sadian Campbell.

    The explanation given by the claimant for not declaring her earnings was that a friend had completed the reporting cards which she signed. She initially stated that she signed after the friend had completed the cards and later stated that she had signed the cards before they were completed by the friend. In any event the claimant is responsible for the information provided on the cards. It was incumbent on her to ensure that the information provided was accurate. On this issue the Board concluded:

    She is responsible for the information submitted under her authority. Failing an acceptable explanation for the misinformation, the Board must conclude that the claimant gave the false or erroneous information knowingly.

    I find that the Board arrived at the proper conclusion in deciding that the claimant had knowingly provided false or misleading information but I find that the Board erred in not dealing with the issue of whether the Commission had acted judiciously in fixing the amount of the penalty at $2,144.00 or 100% of the overpayment.

    Jurisprudence has established that a Board of Referees must determine whether the Commission has acted judiciously in fixing the amount of a penalty. The Board, in this case, is silent on this issue.

    The Federal Court of Appeal has, in a number of decisions, addressed the issue of the respective role of the Commission, the Board of Referees and the Umpire in the imposition of a penalty for knowingly making false or misleading statements regarding a claim for benefits and in fixing the amount of such penalty.

    Paragraph 38(1)(c) provides that the Commission may impose a penalty against a claimant for having knowingly failed to declare some or all the earnings received during a benefit period. This paragraph reads:

    38.(1) The Commission may impose on a claimant, or any other person acting for a claimant, a penalty for each of the following acts or omissions if the Commission becomes aware of facts that in its opinion establish that the claimant or other person has
    (c) knowingly failed to declare to the Commission all or some of the claimant's earnings for a period determined under the regulations for which the claimant claimed benefits;

    Subsection 38(2) provides the maximum penalty that can be imposed for knowingly making a false or misleading declaration in the following terms:

    38.(2) The Commission may set the amount of the penalty for each act or omission at not more than
    (a) three times the claimant's rate of weekly benefits;
    (b) if the penalty is imposed under paragraph (1)(c),
    (i) three times the amount of the deduction from the claimant's benefits under subsection 19(3), and
    (ii) three times the benefits that would have been paid to the claimant for the period mentioned in that paragraph if the deduction had not been made under subsection 19(3) or the claimant had not been disentitled or disqualified from receiving benefits; or
    (c) three times the maximum rate of weekly benefits in effect when the act or omission occurred, if no benefit period was established.

    The Federal Court of Appeal has held that the sole discretion to impose a penalty pursuant to section 38 of the Act rests with the Commission and that its decision in this regard should not be interfered with unless its discretion was not exercised in a judicious manner (Morin (A-453-95), Dunham (A-708-95), Gauley (A-353-01)). In Dunham, Justice Marceau wrote:

    There is no reason to think that the Unemployment Insurance Act is unique and that the powers it confers on the agency given the task of administering it must be analysed in isolation, without regard for the general principles of our legal system. The discretion given to the Commission is no different from the discretionary powers given to any other lower tribunal or body of the same sort. We are quite familiar with the situations in which a tribunal hearing an appeal or review of a discretionary decision of an authority subject to such review may intervene. A discretionary decision made on the basis of irrelevant considerations, or without regard for all of the relevant considerations, must be disapproved and set aside by the appeal or review tribunal. The Court has repeatedly stated that discretionary decisions of the Commission do not fall outside that rule.

    In the same decision, the Court went on to assign to the Board the role of protecting the rights of claimants by assuring that the provisions of the Act are administered soundly. On this responsibility, Justice Pratte added:

    I have no hesitation in believing that we would not be betraying the intention of Parliament if we said that the board of referees is not limited to the facts that were before the Commission. In assessing the manner in which the discretion was exercised, it may have regard to facts that come to its own attention. It must find that a relevant consideration was ignored, in that it is not for the board simply to substitute its discretion for that of the Commission; it is essentially the Commission's discretion to which Parliament refers. The board, however, may find such an essential consideration, which the Commission ignored, in the material brought to its own attention. I do not believe that this conclusion goes directly against the basic principles in relation to the exercise of discretionary powers, and it seems to me that it is much more in harmony with the spirit of the system, which does not assign the board the role of merely checking what has been done by officers of the Commission but makes it the central body for protecting the rights of insured persons, which is necessary if the provisions of the Act are to be administered soundly. It may be that the option given to the board, of undertaking a, fresh examination of the facts, will give rise to pointless appeals, but the case law that may then be developed around this point under the supervision of the umpire should put a rapid end to such appeals.

    In this case, there are only two comments by the Commission on how it determined the amount of the penalty:

    - (Exhibit 12-1) ... we have imposed a penalty of $2,144.00 because you have knowingly failed to declare all your earnings.
    - (Exhibit 16-1) No mitigating circumstances in this case exist as her intent was to fraud. The Commission imposed a penalty equal to the overpayment ...

    As stated, the Employment Insurance Act does not impose any mandatory or minimum penalty. The discretion to impose is left to the Commission and the only limit to the penalty is a maximum of 300% of, in this case, the undeclared amounts. As stated earlier, the Federal Court of Appeal has clearly indicated that, in the exercise of its discretion as to whether to impose a penalty and in fixing the amount of such penalty, the Commission is required to act in good faith, to give regard to all the relevant factors and not be influence by irrelevant factors.

    In this case, the only factor that the Commission appears to have taken into consideration is the fact that the claimant knowingly gave the false or misleading information which, in the Commission's opinion, was made with an intent to defraud. It has been well established in the jurisprudence that such an intention is not required for the imposition of a penalty. The Commission must only show that the false or misleading information was knowingly given. This it has proven.

    In determining the amount of the penalty, the Commission must base its decision on all relevant factors and disregard all irrelevant factors. As stated earlier, the Board had the mandate to ensure that the Commission has properly exercised its discretion. In doing so, the Board must determine what factors were considered or ignored. The Board may also take into consideration relevant factors that are brought to its attention. In this case, the claimant did indicate to the Board that she is a single mother of three and could not afford to pay a penalty. This is a relevant factor that the Commission or the Board could not ignore in fixing the amount of the penalty.

    The Federal Court has not, to my knowledge, stipulated what should be included in the "all relevant factors" that the Commission must consider in fixing the penalty. In Dunham, the Court stated that the imposition of a penalty "is a punitive decision that depends on the subjective responses of the body making the decision, even where there are instructions deriving from a general policy". From this, one can logically conclude that there was a requirement that the Commission go beyond the mere application of its policy regarding the imposition of a given percentage of the amount of the overpayment or undeclared earnings.

    I would suggest that in fixing the amount of the penalty, guidance might be provided by what is required of judges in fixing fines for convictions under either the Criminal Code or other federal laws. In R v. Tracy (1992), 71 C.C.C. (3d) 329 (B.C.C.A.), the issue before the British Columbia Court of Appeal was whether a fine imposed following a plea of guilty to a charge of unlawfully smuggling an automobile into Canada contrary to the Customs Act, R.S.C. 1985, c. 1 (2nd Supp.), had been properly imposed. The Court recognized that there was an obligation on the judge to consider the accused's ability to pay in fixing the fine. In R v Savard (1998), 126 C.C.C. (3d) 562 (Q.C.A.), Justice LeBel stated:

    I cannot satisfy myself that Parliament intended to have fines imposed on people who do not have property or income sources which would allow them to pay them.
    Before paying fines, the offender must be able to live, and in the appropriate case, provide for those who depend on him. Otherwise, it would be to condemn them to idleness or to have to make money from criminal activities. That cannot be the objective pursued by Parliament ...

    Echoing Justice LeBel's comments, I believe that in fixing the amount of a penalty of any significance, it is incumbent on the Commission to take into consideration the claimant's means and his ability to pay, along with other factors such as the amount of money involved, whether it is a first or subsequent infraction and the circumstances in which the false statement was made. Keeping in mind the social nature of the Employment Insurance Act, I do not believe that it was the intention of Parliament to encourage the Commission to impose fines that would put a worker in the conditions described in Justice LeBel's comments.

    In regards to who should have the responsibility to inquire in factors relevant in fixing a penalty, including a claimant's ability to pay, I believe that it should be the Commission. The Board then has a responsibility, in its role, as mandated by the Federal Court of Appeal, of "protectors of insured persons' rights", to assure that the Commission has properly given regards to all significant factors in exercising its discretion in fixing a penalty. If the Board members are not satisfied that this has been done, they should then proceed with their own fact finding in this regard.

    In this case, the claimant did mention to the Board that she was a single mother of three and could not pay a penalty. I fail to see how the Commission or the Board could ignore to address this as a relevant factor in determining the amount of the penalty. The Board's failure to consider this factor and to recognize the Commission's failure to do so in fixing the penalty consititutes an error of law.

    The appeal is accordingly allowed. The decision of the Board is set aside. The matter will be returned to a newly constituted Board for a redetermination taking into consideration my comments in regards to its duties in determining whether the Commission has judiciously exercise its discretion in fixing the penalty and its competence to determine the factors that have been brought to its attention and that should be taken into consideration in fixing the penalty.

    The decision of the Board dated October 2, 2001 will be removed from the appeal docket.



    OTTAWA, Ontario
    November 29, 2002