Supreme Court of Canada
Bryden v. Canada Employment and Immigration Commission, [1982] 1 S.C.R. 443
Date: 1982-03-18
Robert Bryden Appellant;
and
The Canada Employment and Immigration Commission Respondent.
File No.: 16233.
1981: April 3; 1982: March 18.
Present: Laskin C.J. and Ritchie, Dickson, Estey and McIntyre JJ.
ON APPEAL FROM THE FEDERAL COURT OF APPEAL
Unemployment insurance—Payments of vacation pay by employer into trust fund on behalf of employees—Appellant’s trust benefits received while collecting unemployment insurance—Trust benefits allocated as earnings—Appellant’s unemployment insurance benefits reduced—Whether payments from trust represented savings or vacation pay—Unemployment Insurance Regulations, SOR Cons. 1955, 2858, as amended, ss. 172(2),173(1),(13),(14),(15),(16),(18) [currently C.R.C. 1978, c. 1576, ss. 57(2),58(14),(13),(14),(15),(16),(18)].
Appellant’s collective agreement provided for the payments by employers of vacation pay into a trust fund on behalf of employees. These payments, representing 9 percent of each employee’s wages after unemployment insurance and income tax deductions, were distributed regularly to the employee beneficiary semi-annually or on an irregular basis if so demanded. Appellant, who was laid off on February 13, 1977, received his accumulated employer payments from the trust fund on November 11, 1977. An unemployment Insurance Officer ruled that those benefits were so allocated as earnings pursuant to s. 173(16) of the Unemployment Insurance Regulations and thus affected appellant’s unemployment insurance benefits. Appellant appealed to the Board of Referees which reversed the decision. Respondent appealed to the Umpire who set aside the decision of the Board and restored the decision of the Unemployment Insurance Officer. Appellant’s application to the Federal Court of Appeal was dismissed.
Held: The appeal should be allowed.
The accumulated trust monies represented a direct savings made by the appellant. When the 9 percent of
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the employee’s wages was paid to the trustees it became subject to the terms of of the trust dealing with disbursement. These circumstances disclose that the appellant had a beneficial interest in these monies capable of being converted into a real interest. National Revenue’s Interpretation Bulletin No. IT-389, para. 8 bears out this interpretation.
APPEAL from a judgment of the Federal Court of Appeal (1980), 1980 CanLII 4349 (FCA), 34 N.R. 228, [1981] 2 F.C. 91, affirming the decision of an Umpire, CUB 5467, which allowed an appeal by the respondent from a decision of the Board of Referees and restored the decision of the Unemployment Insurance Officer. Appeal allowed.
Raymond Koskie, Q.C., and Mark Zigler, for the appellant.
W.I.C. Binnie, Q.C., and Brian Evernden, for the respondent.
The judgment of the Court was delivered by
RITCHIE J.—This is an appeal from a judgment of the Federal Court of Appeal (1980), 1980 CanLII 4349 (FCA), 34 N.R. 228, [1981] 2 F.C. 91, affirming the decision of an Umpire whereby it had been held that money received by the appellant in November 1977 was vacation pay, notwithstanding the fact that it was composed of accumulations paid by his employer to a trust fund. Money so accumulated was made up of payments of 9 percent of the appellant’s wages after deductions had been made for unemployment insurance and income tax.
The judgment of the Federal Court of Appeal dismissed an application under s. 28 of the Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10, to set aside a decision and order made by an Umpire under the Unemployment Insurance Act, 1971, 1970-71-72 (Can.), c. 48 as amended. The decision of the Umpire rendered in February, 1979 allowed an appeal by the respondent from a decision of the Board of Referees under the Unemployment Insurance Act, 1971 in favour of the appellant.
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I find the facts of this case to be very confusing and they are made no clearer by having to be considered against a background of highly technical and specialized legislative draughtsmanship. Happily, however, the facts are not in dispute being set out in the factum of the appellant and accepted as “substantially accurate” by the respondent. In order to consider the question raised by this appeal I think it convenient to set out those facts as the parties have accepted them in the following terms:
The Appellant, Robert Bryden, is and remains a member of the International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmith, Forgers and Helpers, Local 128 (‘the Union’).
At all material times, the Boilermakers Contractors’ Association (Ontario) (‘the Association’) and the Union were party to a collective agreement effective July 1st, 1973 (‘the Collective Agreement’). Article 21.00 of the Collective Agreement provided for the payment of vacation pay into a trust fund on behalf of employees of employers who are members of the Association and on behalf of the employees of any other employer who signs a Participation Agreement.
By an Agreement and Declaration of Trust (‘the Trust Agreement’) between the Union and three trustees (‘the Trustees’), the Boilermakers Vacation Pay Trust Fund—Ontario (‘the Trust Fund’) was established.
Pursuant to the provisions of the Collective Agreement and in accordance with the terms and conditions of the Trust Agreement, an employer was required to pay Nine (9) percent of each employee’s wages to the Trustees, having first made certain deductions from each employee’s gross earnings, including deductions for Income Tax and Unemployment Insurance premiums. Such payments by employers to the Trust Fund, defined as ‘contributions’ under the Trust Agreement, are ‘… received by the Trust Fund on behalf of such emloyee from contributing Individual Employers…’. These employer payments on behalf of each employee beneficiary of the Trust Fund such as the Appellant, are accumulated in the Trust Fund and are distributed regularly to the employee beneficiary semi-annually on or about June 15 and November 15 of each year. In addition, at any one occasion during the fiscal year of the Trust Fund, an employee may make application to the Trustees to have vacation pay paid to him on an irregular basis.
On or about February 13, 1977, the Appellant was terminated by his employer, Sombra Welding, by whom
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the Appellant was employed pursuant to the terms of the Collective Agreement at an average weekly rate of pay of Five Hundred and Nine ($509.00) Dollars per week. The Appellant was terminated due to a lay-off because of the reduction of the work force.
The Appellant completed an Application for Benefit dated February 14th, 1977 for Unemployment Insurance Benefits.
On or about November 11th, 1977, the Appellant received his accumulated employer payments or contributions from the Trust Fund in the amount of Eight Hundred and Seventy-six Dollars and Sixty-two ($876.62) Cents.
On April 7th, 1978, an Insurance Officer of the Canada Employment and Immigration Commission ruled that benefits paid to the Appellant from the Trust Fund were to be allocated as earnings in the amounts of Five Hundred and Nine ($509.00) Dollars for the week commencing November 6th, 1977 and Two Hundred and Sixty-eight ($268.00) Dollars for the week commencing November 13th, 1977, pursuant to Section 173(16) of the Unemployment Insurance Regulations, P.C. 1954-2064, S.O.R. Consolidation, 1955, p. 2858, as amended, (‘the Regulations’) (presently Section 58(16) of the Regulations, C.R.C. amounts from benefits payable pursuant to Section 172(2) of the Regulations (presently Section 57(2) of the Regulations).
On April 14th, 1978, the Appellant appealed the Decision of the Insurance Officer to the Board of Referees.
On May 29th, 1978, the Board of Referees reversed the Decision of the Insurance Officer, allowed the appeal of the Appellant and stated as follows:
‘… It was explained that the Nine (9%) percent designated as vacation pay was actually a direct saving by the employees which was paid to a trust fund distributed to each employee twice a year. These monies had already been taxed for income tax as shown on the T-4 form and also deductions for Unemployment Insurance premiums had been made. Therefore, in no way was it vacation pay as designated by the Unemployment Insurance Act. The Board was unanimous in their conclusion that the determination of earnings as shown in Exhibit #3 was not properly made as those earnings were strictly part of the employees’ savings and any amounts claimed as vacation pay were strictly savings. We are applying Paragraph 173(18) and we are agreed that the allocation of the amount should be allocated to the pay period ending September 30th, 1977.’
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On June 15th, 1978, the Respondent appealed the decision of the Board of Referees to the Umpire.
The Umpire, by decision dated February 20th, 1979, allowed the appeal of the Respondent, set aside the decision of the Board of Referees and restored the decision of the Insurance Officer.
In reversing the Board of Referees, the Umpire held that the payment from the Trust Fund to the Appellant was a payment of vacation pay and not accumulated savings despite finding that:
‘… by remitting vacation pay to the Trustees for the purposes of the fund the employer has done all that he will ever be called upon to do to comply with the law with respect to vacation pay…’
By Originating Notice dated November 21, 1979, the Appellant made Application under Section 28 of the Federal Court Act to review and set aside the decision of the Umpire. The said Application was heard by the Court of Appeal at Toronto on March 13, 1980 and a Judgment was delivered on June 23, 1980 dismissing the Application.
(Emphasis is mine.)
In the course of his reasons for judgment rendered on behalf of the Federal Court of Appeal, Mr. Justice Ryan adopted the following passages from the decision of the Umpire:
There is no doubt that the money paid in this case was income arising out of his employment and earnings to be taken into account for the purpose of determining whether an interruption of earnings had occurred and the amount to be deducted from benefits payable (Section 172(2) of the Regulations).
The situation we are dealing with fits exactly into the provisions of subsection 16. The money was paid to the claimant between November 4 and 15, 1977. His average weekly earnings had been $509.00. The Insurance Officer allocated $509.00 to the week beginning November 6 and the balance to the following week. Subsection (18) therefore is irrelevant, as it is expressly applicable where subsections (1) to (17) do not apply.
The only real dispute in this case has been whether the money received by him in November 1977 was vacation pay or whether it was really savings of his own money, having been converted from vacation pay to savings when on successive pay days it was paid to the
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Trustees. As indicated above, in my view, the money continued to be vacation pay throughout.
I see no reason to disagree with the Umpire’s conclusion that ‘… the money continued to be vacation pay throughout’.
An understanding of these passages requires a consideration of the Unemployment Insurance Regulations, C.R.C. 1978, c. 1576, to which the Umpire made reference. The relevant regulations read as follows:
S. 172(2) (Currently Section 57(2)): Subject to this section, the earnings to be taken into account for the purpose of determining whether an interruption of earnings has occurred and the amount to be deducted from benefits payable, under section 26, subsection 29(4) and subsection 30(5) of the Act and for all other purposes related to the payment of benefit under Part II of the Act, are
(a) the entire income of a claimant arising out of any employment;
S. 173(1) (Currently Section 58(1)): The earnings of a claimant as determined under section 172 shall be allocated to weeks in the manner described in this section and for the purposes mentioned in subsection 172(2) shall be the earnings of the claimant for those weeks.
S. 173(13), (14), (15), (16), (18) (Currently Section 58(13), (14), (15), (16), (18)):
(13) Holiday pay or vacation pay of a claimant shall be allocated to such number of consecutive weeks, beginning with the first week that is wholly or partly within his holiday period, as will ensure that the claimant’s earnings in each of those weeks, except the last, are equal to the weekly rate of his normal earnings from his employer or former employer.
(14) Notwithstanding subsection (13), holiday pay or vacation pay, other than for a day referred to in subsection (12),
(a) that is paid or payable to a claimant at the time of his lay-off or separation from employment or prior thereto in contemplation of the lay-off or separation, and
(b) that is not allocated to any specific weeks of holidays or vacation that occurred prior to the lay-off or separation
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shall be allocated to such number of consecutive weeks, beginning with the first week in which the lay-off or separation occurs, as will ensure that the claimant’s earnings in each of those weeks, except the last, are equal to the weekly rate of his normal earnings from his employer or former employer.
(15) Notwithstanding subsection (14), where a general continuous holiday period occurs at the place where a claimant is employed and that holiday period commences within six weeks after the claimant’s lay-off or separation, holiday pay or vacation pay described in subsection (14) shall be allocated to weeks as described in that subsection beginning with the first week of the continuous holiday period.
(16) Where the earnings described in subsections (9) and (14) are paid after a claimant’s lay-off or separation occurs and have not been allocated pursuant to subsections (9), (10), (13), (14) or (15), those earnings shall be allocated to such number of consecutive weeks, beginning with the week in which those earnings are paid, as will ensure that the claimant’s earnings in each of those weeks, except the last, are equal to the weekly rate of his normal earnings from his employer or former employer.
(18) Where a claimant has earnings to which subsections (1) to (16) do not apply, those earnings shall be allocated,
(a) if they arise from the performance of services, to the period in which the services were performed; and
(b) if they arise from a transaction, to the week in which the transaction occurred.
In my opinion, when the 9 percent of the employee’s wages was paid to the trustees by the employer, it gave rise to a beneficial interest in the employee and this payment, having been made after deduction of income tax and unemployment insurance premiums, became subject to the terms of the trust requiring disbursement by the trustees on two fixed dates in the year and also payment to the employee on an irregular basis if he so demanded. In my opinion it is these circumstances which disclose that the appellant had a beneficial interest in these monies capable of being converted into a real interest. The trust monies so accumulated in the hands of the trustees represented savings
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made by the appellant. In reaching the conclusion that the fund was not made up of vacation pay, I am in agreement with the reasons for the decision reached by the Board of Referees to which I have already referred and I would adopt that portion of those reasons where it is stated that: “… the 9% designated as vacation pay was actually a direct savings by the employees which was paid into a trust fund distributed to each employee twice a year.”
This interpretation is borne out by the terms of paragraph 8 of Interpretation Bulletin No. IT‑389 issued by the Department of National Revenue and entitled “Vacation-with-Pay Plans established under Collective Agreements” which reads as follows:
- An employer’s contributions to the trust in respect of vacation credits of a particular employee are included in the employee’s income in the year during which the contribution is made. The contribution is subject to income tax withholding as though the amount had been paid directly to the employee. Subsequent payments to him by the trust out of those contributions are received by him free of tax.
Having regard to all the above I would allow this appeal and restore the decision of the Board of Referees. The appellant is entitled to the costs of this appeal.
Appeal allowed with costs.
Solicitors for the appellant: Robins and Partners, Toronto.
Solicitor for the respondent: R. Tassé, Ottawa.