Date : 20001005
Docket : A-693-99
CORAM : DÉCARY J.A.
HER MAJESTY THE QUEEN
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Heard at Halifax (Nova Scotia) on Tuesday, September 26, 2000
Judgment delivered at Ottawa (Ontario) on Thursday, October 5, 2000
REASONS FOR JUDGMENT BY: DÉCARY J.A.
CONCURRED IN BY: SHARLOW J.A.
Date : 20001005
Docket : A-693-99
CORAM : DÉCARY J.A.
HER MAJESTY THE QUEEN
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REASONS FOR JUDGMENT
| The issue in this application for judicial review is whether the Umpire erred in fact or law in concluding that settlement monies paid to the claimant after his wrongful dismissal were not "earnings" within the meaning of section 57 of the Unemployment Insurance Regulations ("the Regulations").|
| The facts are not in dispute. The claimant was dismissed in November, 1994. He applied for unemployment insurance benefits on the basis that he had been fired. He then filed a wrongful dismissal complaint with the Nova Scotia Department of Labour, pursuant to subsection 71(2) of the Labour Standards Code of Nova Scotia (R.S.N.S. 1989, c. 246, as amended) ("the Code").|
| In October, 1995, the Director of Labour Standards ("the Director"), pursuant to his authority under section 21 of the Code, issued a ruling comprising two orders. The first order was with respect to the payment of $28,470.09 to be made to the Labour Standard Tribunal for wages lost by the claimant up to October 27, 1995. The second order was with respect to the reinstatement "thereafter" of the claimant "at his regular weekly salary and other related benefits".|
| The employer appealed the Director's ruling before the Nova Scotia Labour Standards Tribunal. On April 15, 1996, the day before the hearing, the claimant and the employer negotiated a settlement in the amount of $35,000.00.|
| In May, 1998, counsel for the claimant advised the Canada Employment Insurance Commission (`the Commission") of the settlement "whereby Mr. Plasse gave up his right to be reinstated in return for a lump sum payment of $35,000.00". Counsel also advised of legal fees in the amount of $10,826. By letter dated June 9, 1998, the Commission informed the claimant that the $35,000.00 (less the legal fees of $10,826.00) constituted earnings and would be deducted from his benefits. The claimant eventually was requested to repay $7,970.00.|
| The claimant appealed to the Board of Referees ("the Board"). The Board allowed the appeal, essentially on the basis of the written statement by his counsel that the monies received were based on the claimant foregoing his right to be reinstated and were not, therefore, earnings under the Regulations. The Commission appealed the Board's decision to an Umpire.|
| The Umpire confirmed the decision of the Board (CUB 46132, September 10, 1999, Forget J.). He held that "[t]he settlement monies in our case is not consideration for present or past work of the claimant but rather in respect to a future right of reinstatement." He concluded as follows:|
|[...] The monies paid were not payable by reason of a lay-off or separation from employment but rather in respect to an order for reinstatement made by the Director of Labour Standards for the Province of Nova Scotia.|
| The Umpire was of the view that the decision of this Court in Canada (Attorney General) v. Vernon (1995), 189 N.R. 308 (F.C.A) had defined "earnings" as consideration for present or past work and that our Court, in the earlier decision of Canada (Attorney General) v. Harnett (1992), 140 N.R. 308 (F.C.A.), had not expressly decided that compensation for giving up a claim or a right to reinstatement constitutes "earnings".|
| There is, in my respectful view, an obvious flaw in the decision of the Board which should have been noted by the Umpire as it appears on the face of the record.|
| The ruling of the Director of Labour Standards was not directed only at the reinstatement of the claimant. It also ordered the employer to pay the claimant a sum of $28,470.09 for wages lost. The Board was wrong to rely solely on the self-serving assertion of counsel to conclude that the settlement (which was not filed) in no way related to the wages lost. The claimant could not satisfy his burden as an appellant before the Board simply by having his counsel invite the Board to ignore the first part of the ruling of the Director. There is simply no evidence in the record that enabled the Board and eventually the Umpire to be satisfied that the settlement monies related only to a future right of reinstatement.|
| The failure to identify what part of the settlement related to lost wages (which are unquestionably "earnings" for the purposes of section 57 of the Regulations) and what part related to the renunciation to the claimant's right to reinstatement, is however an error that warrants referral back for new determination only if our ruling in Harnett can be distinguished or overruled. It would make little sense to allow this matter to go back if Harnett were in any event an unsurmountable obstacle to the success of the claimant's appeal to the umpire.|
| Harnett, in my view, can be distinguished. It dealt with the settlement of an action for wrongful dismissal commenced in the Courts of Nova Scotia. The action was subsequently amended to include a claim for reinstatement under the Labour Standards Code of Nova Scotia. (Counsel for the claimant suggested at the hearing that the amendment made in Harnett was not permissible, because a claim for reinstatement can only be granted by the Director of Labour Standards. This suggestion appears to have some merit, but I prefer to rest my analysis on other grounds.).|
| The action by Mr. Harnett was settled out of court prior to the hearing of the case. Mr. Harnett repeatedly had offered to split the reinstatement claim from the balance of the claims. The employer had refused. In the end, therefore, the claim for reinstatement disappeared with the other claims. It was never determined whether his claim for reinstatement had any merit.|
| It is well established that there is no reinstatement right in common law. As noted by Marceau J.A. in Atomic Energy of Canada Ltd. v. Sheikholeslami,  3 F.C. 349 at 357 (C.A.), the unfair dismissal provisions found in various labour statutes whereby adjudicators or other labour authorities are given the power to order the reinstatement of an employee "no doubt represent a statutory modification of the traditional rule that an employment contract will never be specifically enforced". It follows, in my view, that the statutory right to be reinstated is independent from the right to be compensated for wrongful dismissal.|
| In the case at bar, the settlement relates not to speculative claims in a lawsuit, but to actual orders made by an appropriate authority after the hearing of the claims. The claimant had a distinct, negotiable right to be reinstated and the employer had no choice but to put a tag price on that right. We are not dealing here with the same type of settlement as in Harnett.|
| The decision of this Court in Canada (Attorney General) v. Tetreault and Joyal (1986), 69 N.R. 231, can also be distinguished on the basis that no right to reinstatement was in issue.|
| Furthermore, it seems to me that Harnett has been overshadowed by Vernon because of the narrow definition given to the word "earnings" in Vernon. It cannot now be said that an amount paid to an 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.|
| If a settlement encompasses both an acceptation of lost wages and a renunciation of a right to reinstatement granted by the appropriate authority, only the former constitutes "earnings" and only the value attributable to the former is allocated pursuant to section 57 of the Regulations. It would of course be open to the Commission in any given case to make sure that a purported settlement is not a mere sham to circumvent the unemployment insurance scheme by disguising compensation for lost wages as something else. Such questions of fact may be raised to give proper effect to the legislation, the object of which has been described as follows by Pratte J.A. in Attorney General of Canada v. Walford,  1 F.C. 768 at 772 (C.A.):|
|The Unemployment Insurance Act, 1971 sets up an insurance scheme under which the beneficiaries are protected against the loss of income resulting from unemployment. The purpose of the scheme is obviously to compensate unemployed persons for a loss; it is not to pay benefits to those who have not suffered any loss. Now, in my view, the unemployed person who has been compensated by his former employer for the loss of his wages cannot be said to suffer any loss. A loss which has been compensated no longer exists. The Act and Regulations must, therefore, in so far as possible, be interpreted so as to prevent those who have not suffered any loss of income from claiming benefits under the Act.|
| Ultimately, it may be that, in most instances, the amount of the overpayment due to the Commission by a claimant will be such as to be covered by that portion of a settlement which would fall under "earnings".|
| The claimant, in the instant case, was cavalier in submitting so little evidence with respect to the legal character of the settlement payment. It was his burden to show that the payment he received was not earnings (see Mayor v. Minister of Employment and Immigration (1989), 97 N.R. 353 (F.C.A.)). In the circumstances, however, the claimant has succeeded in distinguishing Harnett and the interests of justice would be better served if he were given the possibility of starting afresh.|
| Therefore, even though I would allow the application for judicial review filed by Her Majesty the Queen and set aside the decision of the Umpire, I would refer the matter back to the Chief Umpire or his designate with the direction that the decision of the Board of Referees should be set aside and that the matter should be referred back to the Board for a new hearing and determination in accordance with these reasons. I would make no order as to costs.|
Karen R. Sharlow J.A."
Brian Malone J.A."