Beverly Axworthy v. The Corporation of the Town of Caledon, 2013 HRTO 638

HUMAN RIGHTS TRIBUNAL OF ONTARIO

B E T W E E N:

Beverly Axworthy

Applicant

-and-

The Corporation of the Town of Caledon

Respondent

DECISION

Adjudicator: Naomi Overend

Date: April 17, 2013

Citation: 2013 HRTO 638

Indexed as: Axworthy v. Caledon (Town)

APPEARANCES

Beverly Axworthy, Applicant

Bay Ryley, Counsel

The Corporation of the Town of Caledon, Respondent

Judy Porter, Representative

Introduction

1The applicant filed an Application (2011-08098-I) on May 17, 2011 alleging discrimination in employment on the basis of age and disability (the "original Application"). On November 7, 2011, the parties settled this Application on their own for a lump sum payment. The applicant alleges that the respondent breached that original settlement when it withheld 30% of the funds to remit to the Receiver General. To that end, she filed this Application for Contravention of Settlement under s. 45.9(3) of the Human Rights Code, R.S.O. 1990, c. H.19, as amended (the "Code").

2The respondent states that it did not contravene the original Application because the Minutes specifically stated that the payment was "subject to the usual statutory deductions required by law." It received advice that this would be treated by Revenue Canada as a retiring allowance, and was subject to a 30% withholding tax.

3For the reasons set out below, I cannot find that the respondent contravened the settlement of the original Application.

Facts

4The facts are largely not disputed by the parties. Shortly after the original Application and Response were filed, the Tribunal scheduled a mediation that was to have taken place on November 29, 2011. Doug Barnes, the respondent's Chief Administrative Officer, phoned the applicant in early November to ask what the applicant was looking for to settle her Application. She reiterated the specific figure set out in her original Application, namely $22,582.77.

5This number is found in section 10 of the original Application, in which the applicant specifies the monetary compensation she is seeking. The applicant is very specific with respect to how this number was reached: 65 weeks of pay, minus the payment she was not making to OMERS (her pension plan), plus an additional $14 as a token amount for "pain and suffering." The $14 was calculated by the applicant as representing one dollar for every year she worked for the respondent. The applicant did not have the benefit of legal representation when she filed her Application.

6In the above-referenced call, Mr. Barnes offered the applicant $20,000.00, which she accepted via a second call a couple of days later. The respondent drafted the Minutes of Settlement (the "Minutes"), which it sent to the applicant via email. The applicant made one small (and, for the purposes of this Application, irrelevant) change to the Minutes, printed it out, signed the copy and hand-delivered the executed copy to the respondent's offices.

7Paragraph 3 of these Minutes specifies the following:

Within 14 days of receiving executed copies of both the above referenced Form 25 and these Minutes of Settlement, the Respondent will provide the Applicant with a one time payment of $20,000. This payment will be subject to the usual statutory deductions required by law.

8The Minutes of Settlement were executed on November 7, 2011. The mediation scheduled for November 29, 2011 was cancelled. Upon receipt of the Form 25, confirming settlement, the Tribunal closed the file with respect to this Application.

9I heard no testimony from the respondent with respect to whether it had received any legal advice or assistance in the preparation of the Minutes. The applicant was unrepresented. She had an appointment with the Human Rights Legal Support Centre ("Legal Support Centre") later that month with respect to the upcoming mediation, but did not consult with anyone from the Legal Support Centre prior to executing the Minutes.

10It would appear from the email trail and testimony of the respondent's witnesses that the applicant spoke with counsel at the Legal Support Centre after she had executed the Minutes, but prior to receiving the money from the respondent. Counsel then spoke with Peggy Tollett, the Manager of Revenue for the respondent prior to the payment being made. Although I heard no testimony from counsel, the emails from her make it clear that counsel took the position that the payment was not income and, therefore, non-taxable.

11The respondent then consulted with an auditor at an accounting firm, who offered the opinion that the payment should be regarded as a retiring allowance, which would be subject to withholding tax. As the amount was higher than $15,000, it was subject to withholding tax at the 30% rate. The auditor responsible testified at the hearing concerning the basis for her opinion.

12The payment was deposited into the applicant's account on November 24, 2011 and a deposit slip mailed to the applicant, making it clear that the one-time payment was subject to a $6,000.00 deduction being the withholding tax at the 30% rate.

13The applicant states she was not aware of what the "usual statutory deductions" para. 3 referred to, but assumed that she would get the full amount when she negotiated the settlement. She testified that "in hindsight" she wished she had waited until the Tribunal mediation, where she might have had the benefit of assistance from the Legal Support Centre and information from the Tribunal mediator.

Decision and Analysis

14Counsel for the applicant submits that the respondent's position that the payment is a retiring allowance "is completely at odds with CRA [Canada Revenue Agency] technical interpretations, Tribunal case law and practises, labour arbitration cases, and the views of practising lawyers."

15The applicant's authorities are clear that an award of general damages (described in the Code as compensation for injury to dignity, feelings and self-respect) can be made by Tribunal adjudicators and labour arbitrators with respect to human rights violations. These awards are not subject to tax. Likewise, parties to a dispute can settle for an amount for general damages, which, if regarded as legitimate by the CRA, is also not taxable.

16However, simply because awards and settlements are sometimes structured in this manner, does not mean that awards and settlements can only compensate for the intangible losses associated with a human rights violation. As is clear in s. 45 (2) of the Code, after finding an infringement, the Tribunal can award compensation for any loss arising from the infringement, including, but not limited to injury to dignity, feelings and self-respect. Human rights awards have often included damages for wage loss arising from the cessation of employment. Likewise, settlements can and do include compensation for the loss of employment income.

17Counsel for the applicant submits that the payment agreed to by the parties is more properly characterized as general damages, whereas the respondent submits that it is more properly characterized as a retiring allowance. I would note that the words "general damages," "injury to dignity, feeling and self-respect" or "pain and suffering" are not used in para. 3 of the Minutes. Moreover, the inclusion of the phrase "subject to the usual statutory deductions" in para. 3 implies the opposite since, as noted above, general damages are not subject to statutory deductions.

18Given the lack of precision in the wording of para. 3, one has to look to the intent of the parties to the settlement. While the applicant's submissions focus on what she asserts are the erroneous assumptions found in the testimony of the auditor, this individual was retained by the respondent after the fact and cannot shed much light on what was in the minds of the parties at the time the payment was negotiated. To ascertain intention, one needs to look to the testimony of the persons who negotiated the settlement, not those brought in afterwards.

19Doug Barnes briefly testified for the respondent. The full extent of his testimony was that there was no discussion of a non-taxable payment. He was not cross-examined on this point.

20The applicant's testimony on the settlement negotiations is consistent with that of Mr. Barnes. Although she states she believed that the amount agreed to would not be subject to withholding tax, she does not assert that she said anything to that effect in the negotiations. Moreover, she was unable to articulate the basis for this belief, which she acknowledges is "naïve." She did not suggest at any point in her testimony that she thought she was negotiating general damages or damages for pain and suffering.

21Indeed, the applicant admits that in answering the question posed by Mr. Barnes about what she was looking for, her opening position in the negotiations was for the relief requested in the original Application. That document actually acknowledges that only $14 of the total amount requested ($22,582.77) was for her intangible losses, and the rest was for 65 weeks of lost employment income. Moreover, in the original Application the applicant acknowledges that the requested amount would be subject to income tax deductions by use of the words "with income tax to be deducted accordingly."

22In her Reply submissions, counsel for the applicant takes the position that the respondent's interpretation of this one-time payment as a retiring allowance is incorrect. The term "retiring allowance" is defined in s. 248 (1) of the Income Tax Act as:

(a) on or after retirement of a taxpayer from an office or employment in recognition of the taxpayer's long service, or

(b) in respect of a loss of office or employment of a taxpayer, whether or not received as, on account or in lieu of payment of, damages or pursuant to an order or judgment of a competent tribunal.

23Revenue Canada's Income Tax Interpretation Bulletin on Retiring Allowances (IT-337R4 (Consolidated)) states at para. 5 and 6:

A retiring allowance includes an amount received in respect of a loss of office or employment. In this context, the words "in respect of" have been held by the Courts to imply a connection between the loss of employment and the subsequent receipt, where the primary purpose of the receipt was compensation for the loss of employment. ….

A loss of office or employment usually refers to elimination or expiration of a particular office or employment …. However, a loss of office or employment may also refer to the loss of an income source of an employee who is released from an office or employment whether unilaterally or not. …

24I do not concur with the applicant's position that the one-time payment was not a retiring allowance. Indeed, I cannot see how it could otherwise be characterized.

25In any event, the auditor whom the respondent consulted explained in her testimony that as a "withholding agent" of the CRA the respondent is obliged to remit to CRA that which it understands it is required to withhold. This aspect of her testimony was not challenged, nor was her testimony that that the amount remitted to the Receiver General (i.e., the $6,000.00) was done so on behalf of the applicant. When filing her taxes, it is up to the applicant to apply for a refund of any over-payment made by her employer.

26In summary, the payment negotiated by the applicant and respondent did not appear to be for her intangible losses arising from the alleged human rights violations, but rather for the loss of her earnings in the period following what she submits was her involuntary retirement. On the information before me, I do not think that the respondent was in error in characterizing this as a retiring allowance for which it was obliged to withhold 30%. In light of these findings, there is no basis for concluding that the respondent contravened the settlement it reached with the applicant of the original Application.

Order

27The Application for Contravention of Settlement is, accordingly, dismissed.