CUB 69245

GUY GOULARD, Umpire

The claimant worked for a transport company from August 15, 1999 until October 12, 2004. He applied for employment insurance benefits and an initial claim was established effective October 17, 2004. At the termination of his employment, the claimant was paid vacation pay in the amount of $674.60 and a severance pay of $3,600.00. These moneys were allocated. Subsequently, the claimant's counsel advised that the claimant had received an additional lump-sum payment of $14,050.00 as a retirement allowance pursuant to a settlement with his employer. The Commission determined that the amounts received by the claimant represented earnings which were allocated. This decision resulted in an overpayment of $7,910.00.

The claimant appealed the Commission's decision to a Board of Referees which dismissed his appeal. The claimant appealed the Board's decision. This appeal was heard in Toronto, Ontario on October 4, 2007. The claimant was present.

In this matter, the claimant acknowledged having received the amounts stated above from his employer. He maintained throughout his appeal that the amount of $14,050.00 he received was not considered totally as a retiring allowance but had been paid in part for unpaid overtime his employer owed him and that only the equivalent of five weeks' salary should be considered as severance pay. In a document he presented to the Board of Referees (exhibit 12), the claimant stated that his employer owed him 2,553 hours of overtime over two years for a total of $21,918.38 plus interest. He stated that he had instructed his lawyer to seek these moneys plus a severance package from his employer.

The claimant also submitted three letters from his lawyer. In the first letter, dated August 30, 2006 (exhibit 12-9 and also found at exhibit 6), his lawyer wrote: "... we have negotiated a settlement of our client's severance and unpaid wages, the latter of which alone had been in excess of $20,000.00, in exchange for payment by the employer to our client of $14,050.00 ...". In the second letter dated September 5, 2006 (exhibit 12-10), it is stated: "Next, in response to your request for a further breakdown, it will be difficult for ourselves to provide yourselves with the portion of the settlement that is directly attributable to severance as the total sum awarded to our client including legal fees and expenses was approximately equal to the original unpaid wages claimed of $21,918.38." In a third letter dated September 22, 2006 (exhibit 12-12), the claimant's lawyer explained that they had requested the employer to pay 20 weeks of salary as severance pay. The lawyer then stated:

"We can confirm that at mediation, at which time this matter had settled, we were required to deduct the total number of weeks that had previously been paid with respect to severance from our settlement proposal, and therefore, it is our position that the maximum amount from the recent settlement which could be allocated towards severance would be 15 weeks of salary, which would come into force five weeks after the termination date of October 12, 2004."

The Minutes of Settlement of the Court action by the claimant against his employer (exhibit 5-1), stated that of the $22,000.00 to be paid by the employer, $7,500.00 plus GST of $450,00 was paid as legal fees and "the balance of $14,050.00 constitutes a retiring allowance subject to statutory remittances, deductions and EI rebates."

The claimant appeared before the Board and reiterated that he was of the view that the whole amount of $14,050.00 he received in settlement of his action against his employer should have been considered as payment for unpaid overtime and should not have been allocated. He blamed his lawyer for not making sure that this was reflected in the Minutes of Settlement.

In regard to the allocation of the $14,050.00 received by the claimant pursuant to the Minutes of Settlement, the Board stated:

"The Board finds that the Commission was subsequently advised by the claimant's lawyer that the claimant did receive a settlement payment of $14,050.00 which was allocated by the Commission in accordance with pursuant to (sic) Regulation 36(9).

(...)

The Board finds that based on the information in the docket, particularly from the claimant's lawyer (Exhibit 6), the Commission acted appropriately."

The Board dismissed the claimant's appeal.

The general rule regarding awards, judgments and settlements resulting from the termination of employment is that they constitute earnings from employment that must be allocated pursuant to section 58 of the Regulations. There are exceptions to this general rule for awards or parts thereof that are allowed specifically for damages other than resulting from the loss of employment or income such as legal costs incurred in the recovery of the damages (CUB 17849) as well as damages for injury to reputation or emotional hardship caused by the employer's conduct relating to the termination of employment (CUB 18646). The jurisprudence has stated clearly that the onus is on the claimant to prove that the payment was not related to his loss of employment.

In CUB 44266, Umpire Houston stated as follows:

"It is clear from the case law that the Commission is in no way bound by agreements made between an employee and his employer. That is to say, the Commission is entitled to look at the circumstances surrounding the payment of money to an employee on separation and determine, according to the Act, whether the payment was in fact "earnings" as defined by the Act, regardless of what the parties claim the payment was for. The Board is right that the presumption that money paid is "earnings" is rebuttable, but the case law indicates that the threshold is very high.

(...)

I can well appreciate that the Commission feels that the monies paid to the claimant should be allocated because it is income derived from employment (or dismissal) but the documentary evidence is to the contrary.

I am satisfied that this claimant has succeeded in rebutting the presumption that the settlement is "earnings". As Marceau J.A. stated in A.G. Canada A-34-91:

"...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."

In the present case, the claimant had established that part of the monies he received was in regard to unpaid overtime. This was stated by his lawyer in correspondence which is referred to above. Counsel has clearly stated that the intention was that 15 weeks of salary was considered as severance payout of the settlement moneys received. Based on the evidence establishing that the claimant had received $3,600.00 for five weeks of salary as severance pay, that is $720.00 per week, the portion of the amount of $14,050.00 received by the claimant, which should have been considered as severance pay should have been 15 x $720.00, that is $10,800.00. The Board should have taken this into consideration in determining what portion of the amount received by the claimant was to be allocated pursuant to subsection 36(9) of the Regulations from the end of his employment. The rest of the settlement monies, that is $3,250.00, should have been considered as payment for unpaid overtime as stated by the claimant's lawyer in his letters. These moneys were therefore to be allocated to the period when they were earned, that is prior to the establishment of the benefit period.

I therefore find that the Board erred in its decision in regard to the allocation of the monies received by the claimant. I also find that the evidence is sufficiently clear to allow me to enter the decision the Board should have made.

Accordingly, the Board's decision is set aside and the claimant's appeal is allowed to the extent that the allocation of the $14,050.00 he received is to be allocated in accordance with my findings as stated above.

Guy Goulard

UMPIRE

OTTAWA, Ontario
October 26, 2007