IN THE MATTER of the EMPLOYMENT INSURANCE ACT
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IN THE MATTER of a claim
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IN THE MATTER of an appeal to an Umpire by the Canada Employment
Insurance Commission from a decision by the Board of Referees given
on August 21, 2003, at Burnaby, British Columbia
DECISION
KRINDLE, Hon.
The commission appeals a finding of the board of referees that royalties which the claimant received during the week January 26th to February 1, 2003 from the sale of images of the whole or parts of photographs which he submitted for consideration of acceptance years earlier constituted earnings during the week of receipt of the royalties.
Factually, the claimant takes photographs on his own time, when he feels like it, with no obligation to anyone. He retains at all times the copyright on his photographs. The claimant sends the photographs to an agent, who contracts to market, not the photograph, but the image, to prospective buyers. The agent decides on the marketing tools to be used to sell the images and he sets the fee structure for these sales. The claimant has no input on these decisions. The photograph is not what is sold. What is sold is a license to use the image or a part of it for a specific period.
At issue in this appeal is whether the royalties received from the sale of the license to use the image for a specific period constitute earnings.
Ss. 35(2) of the Regulations states that
.... the earnings to be taken to account for purpose of determining... the amount to be deducted from benefits payable... are the entire income of a claimant arising out of any employment, including ...
The Federal Court of Appeal has, on a number of occasions, discussed what is to be considered earnings: A-486-95 and A-597-94. A consistent requirement is that for a payment to constitute earnings, "the receipt must evince the character of consideration in return for work done by a recipient".
Income "arising out of any employment", for these purposes, has been broadly interpreted. In CUB 45788, Umpire Marin held that a Canada Council subsistence grant, given to a visual artist for 12 months subsistence while working at his studio, fell within the head of income arising out of employment. Umpire Marin relied on the definition of employment which included "any express or implied contract of service or other contract of employment." The agreement of the artist with the Canada Council to devote most of his time over the twelve months to creative production amounted to such a contract of employment, held Umpire Marin.
In this case, the commission relies on the existence of the contract between the claimant and the agent whereby the agent undertook to market images of the photograph supplied by the claimant. The commission argues that without the work of the claimant, there would be no images for the agent to market.
The claimant argues that the royalties paid to him are more akin to a return of income on an investment rather than a payment for the work that was done by him, namely the photograph itself. He notes in particular that the photographs which he produced are not what is subsequently sold to purchasers by the agent. Rather, the agent sells something quite distinct, something not produced by the claimant, namely, images of the whole or parts of photographs. The photograph, under the agreement, remains the property of the claimant himself. The photograph is the investment. It remains intact and remains his alone.
The board of referees found in favour of the claimant, stating:
The claimant took photographs some years ago, on his own volition and then entered into a contract with an agent to market the images of these photographs, retaining the copyrights for his property [...] The claimant also explained in exhibit 11-2, that when the sale took place, there was no sale of the tangible item produced, nor any consideration for the labour in producing that item: the revenue was generated by the licensing of rights, not any sale of labour or tangible property. The Board further believes that the author of the work performs no service or work associated with the payment of the royalty; it is "mere ownership" of the property itself which generates the income.
The board relied on CUB 39976 as being the only intellectual property ruling which could be located in the cases. A search of the decided cases has produced nothing else under that head. The commission has failed to satisfy me that the board of referees was in error in concluding as it did.
The appeal is dismissed.
Ruth Krindle
UMPIRE
OTTAWA, Ontario
February 17, 2004