Canadian Pacific Ltd. v. A.G. (Can.), [1986] 1 S.C.R. 678

Canadian Pacific Limited Appellant;

and

Attorney General of Canada (Minister of National Revenue) Respondent.

File No.: 18422.

1986: January 30; 1986: May 22.

Present: Dickson C.J. and Beetz, McIntyre, Chouinard, Lamer, Le Dain and La Forest JJ.

on appeal from the federal court of appeal

Unemployment insurance ‑‑ Deduction and payment of premiums ‑‑ Tips received by employer and paid to employees pursuant to agreement ‑‑ Whether such tips should be taken into consideration in calculating unemployment insurance premiums payable by employer ‑‑ Meaning of the expression "insurable earnings" ‑‑ Unemployment Insurance Act, 1971, 1970‑71‑72 (Can.), c. 48 as amended, ss. 66, 68.

By an agreement appended to the collective agreement, appellant agreed to receive tips paid by its customers at banquets held in its establishment and subsequently distribute them to the employees. The tips were paid by customers of their own accord and none of the amounts were included in appellant's income. The Federal Court of Appeal, setting aside a decision by an umpire, held that these amounts should be taken into account in calculating the premiums payable by appellant under the Unemployment Insurance Act, 1971. Appellant challenged this ruling.

Held (Beetz, McIntyre and Chouinard JJ. dissenting): The appeal should be dismissed.

Per Dickson C.J. and Lamer, Le Dain and La Forest JJ.: The amounts paid as tips should be taken into account in calculating the unemployment insurance premiums payable by appellant. It is s. 66 of the Unemployment Insurance Act, 1971, not s. 68, which requires the payment of employer and employee premiums and fixes their amounts. They are fixed at a percentage of the "insurable earnings" of the employee. Section 68 deals only with the manner in which these premiums are to be collected. The expression "insurable earnings" takes in not only the salary paid by the employer but also the tips paid to the employer for distribution to his employees. In choosing the term "earnings" ‑‑ rémunération in the French version ‑‑ and not the commonly used terms "salary" or "wages", Parliament expressed its intention to give the expression "insurable earnings" a broader meaning than just the fixed salary attached to the job. The provisions of the Act and the regulations support this interpretation, which is also consistent with the purpose of the Act.

Per Beetz, McIntyre and Chouinard JJ., dissenting: Section 68(1) of the Unemployment Insurance Act, 1971 provides that "Every employer paying remuneration to a person employed by him . . . shall deduct . . . the employee's premium . . . and remit it together with the employer's premium . . . to the Receiver General". The obligation to deduct and remit premiums, imposed by this subsection, relates to the remuneration paid by the employer, not what the employees may receive from some other source. The provisions of the implementing regulations support this interpretation, which is quite consistent with s. 66 of the Act fixing the amount of premiums. In the case at bar, the disputed amounts were paid not by appellant but by its customers. They therefore could not be taken into account in calculating the unemployment insurance premiums payable by appellant.

Cases Cited

By the majority

Penn v. Spiers & Pond Ltd., [1908] 1 K.B. 766; Great Western Railway Co. v. Helps, [1918] A.C. 141; Association des employés civils v. Minister of National Revenue, NR 1168, March 29, 1983; Skailes v. Blue Anchor Line Ltd., [1911] 1 K.B. 360; Dilworth v. Commissioner of Stamps, [1899] A.C. 99; Robinson v. Local Board of Barton‑Eccles (1883), 8 App. Cas. 798, referred to.

By the minority

Penn v. Spiers & Pond Ltd., [1908] 1 K.B. 766; Great Western Railway Co. v. Helps, [1918] A.C. 141; Association des employés civils v. Minister of National Revenue, NR 1168, March 29, 1983.

Statutes and Regulations Cited

Unemployment Insurance Act, 1971, 1970‑71‑72 (Can.), c. 48, ss. 2(1)(k), 3(1)(a), 24(1) [rep. & repl. 1974‑75‑76 (Can.), c. 80, s. 6; rep. & repl. 1976‑77 (Can.), c. 54, s. 35], 62 [am. 1976‑77 (Can.), c. 54, s. 50], 66 [am. 1974‑75‑76 (Can.), c. 80, s. 24], 68 [am. 1974‑75‑76 (Can.), c. 80, s. 25], 75(2), 90(1)(g), (i).

Unemployment Insurance (Collection of Premiums) Regulations, C.R.C. 1978, c. 1575, ss. 2(2), 3(1), 7, 12.

Authors Cited

Driedger, E. The Composition of Legislation, Ottawa, Queen's Printer, 1957.

Le Petit Robert, Paris, Le Robert, 1984, "rétribution".

Maxwell on Interpretation of Statutes, 12th ed., by P. St. J. Langan, London, Sweet & Maxwell, 1969.

Pigeon, L.‑P. Rédaction et interprétation des lois, Québec, Imprimeur de la Reine, 1965.

APPEAL from a judgment of the Federal Court of Appeal, 1984 FCA 5378, [1984] 1 F.C. 859, which set aside a decision by Dubinsky J., NR 1207, sitting as an umpire pursuant to s. 84 of the Unemployment Insurance Act, 1971. Appeal dismissed, Beetz, McIntyre and Chouinard JJ. dissenting.

Denis Courcy and Robert Décary, for the appellant.

Alban Garon, Q.C. and Daniel Verdon, for the respondent.

The judgment of Dickson C.J. and Lamer, Le Dain and La Forest was delivered by

[1] La Forest J.‑‑The Unemployment Insurance Act, 1971, 1970‑71‑72 (Can.), c. 48, as the name implies, establishes a scheme that provides for cash payments to persons exercising an insurable employment on the termination of their employment. The necessary monies are derived in part from premiums paid by the employees and their employers. These premiums, fixed each year by the Unemployment Insurance Commission established under the Act, are calculated in terms of a percentage of the "insurable earnings" of the employees in that year. This is effected pursuant to s. 62 of the Act, which reads as follows:

62. (1) In respect of each year, the Commission shall, subject to approval by the Governor in Council, fix the rates of premium that persons employed in insurance employment and the employers of such persons will be required to pay in that year to raise an amount equal to the adjusted basic cost of benefit under this Act in that year as that cost is determined under section 63.

(2) The rates of premium for a year shall be calculated in terms of a percentage of the insurable earnings in that year and the employees' premiums for that year shall be a like percentage for all insured persons.

(3) The percentage of insurable earnings for a year that will constitute the employers' premiums for that year shall be determined in accordance with section 64.

[2] The issue raised in this case relates to the manner in which these premiums are to be calculated. More precisely, as Pratte J. of the Federal Court of Appeal put it, 1984 FCA 5378, [1984] 1 F.C. 859, at p. 860, "in calculating these premiums, is it necessary to take into consideration amounts which an employer paid its employees after receiving them from its customers, who had paid them to the employer of their own accord, to be distributed to the employees as tips?"

[3] The appellant, Canadian Pacific Limited, operates several hotels, including the Château Frontenac in Quebec City. The collective agreement that governed the labour relations of the employees at the Château Frontenac at the relevant time stipulated that it was agreed that when the organizer of a function such as a convention or a banquet leaves tips to the hotel for distribution, eighty percent (80%) of these tips are to be distributed by the hotel to the employees governed by the collective agreement who have worked during these functions.

[4] In compliance with this stipulation, the appellant distributed certain monies to its employees. It is undisputed that these amounts came from clients of the appellant who, without any obligation on their part, paid them to the appellant for distribution to its employees as tips. The Minister of National Revenue took these amounts into consideration in calculating the premiums that the appellant was required to pay for the year 1978.

[5] Following this determination, the appellant, in accordance with s. 75(2) of the Act, asked the Minister to reconsider the matter but the latter confirmed the determination. The appellant then appealed to the umpire, Dubinsky J., who decided that the amounts paid by the appellant's clients for distribution to his employees should not be considered in calculating the amount of premiums payable by the appellant pursuant to the Act. This decision was subsequently reversed by the Federal Court of Appeal. The appellant appeals from the latter decision.

[6] The umpire was of the view that s. 68 of the Act defined the amount of the premiums the employer was required to pay. The Federal Court of Appeal, however, was of the view that the relevant provision was s. 66. For the reasons that follow, I am in complete agreement with the Court of Appeal.

[7] The relevant portions of ss. 66 and 68 read as follows:

66. (1) Every person shall, for every week during which he is employed in insurable employment, pay, by deduction as provided in Part IV, an amount equal to such percentage of his insurable earnings as is fixed by the Commission as the employee's premium for the year in which that week occurs.

(2) Every employer shall, for every week during which a person is employed by him in insurable employment, pay, in respect of that person and in the manner provided in Part IV, an amount equal to such percentage of that person's insurable earnings as is fixed by the Commission as the employer's premium payable by employers or a class of employers of which the employer is a member, as the case may be, for the year in which that week occurs.

68. (1) Every employer paying remuneration to a person employed by him in insurable employment shall deduct from such remuneration an amount equal to the employee's premium payable by that insured person under section 66 for any week or weeks in respect of which such remuneration is paid and remit it together with the employer's premium payable by the employer under section 66 for such week or weeks to the Receiver General at such time and in such manner as is prescribed by the regulations.

[8] My first remarks relate to the scheme of the Act. Section 66 appears in Part III which is entitled "Contributory Premiums". Section 68 appears in Part IV which is entitled "Collection of Premiums". I would note that titles, unlike marginal notes, are an integral part of the Act; see Elmer Driedger, The Composition of Legislation (1957), at p. 103. As one would expect, Part III deals with the substance of the law regarding premiums. In fact, it contains a series of provisions whose object, according to the relevant title, is "determining premiums". These include s. 62 already cited. This section, we saw, provides that the Commission must fix the amount of premiums in terms of a percentage of the insurable earnings of the employee. Section 66, as I have just noted, also appears there.

[9] Even without reference to the scheme of the Act, a mere reading of s. 66, as Pratte J. observes, clearly indicates that it is this provision that requires payment of premiums and fixes their amounts. In addition, it directs us to the part of the law that prescribes the method of collecting them. Section 66(1) deals with employee premiums while s. 66(2) deals with those imposed on employers. They are parallel provisions and I shall restrict my remarks to s. 66(2) which directly applies in this case.

[10] This provision requires, first of all, that every employer shall deduct and pay to the Receiver General an amount equal to the percentage of "insurable earnings" of the employee fixed by the Commission as the employer's premium. It also prescribes the manner in which these premiums are to be collected, namely "in the manner provided in Part IV" in which, it will be remembered, s. 68 appears.

[11] Let us now look more closely at s. 68(1) which constitutes the main provision in Part IV which, we saw, deals with the "collection of premiums". This provision applies to "every employer paying remuneration to a person employed by him in an insurable employment". This obviously includes the appellant. Section 68(1), therefore, requires the appellant to deduct from the remuneration of his employees the premium payable by these employees and to pay them to the Receiver General along with premiums payable by the employer by virtue of s. 66 which, we saw, provides that these premiums are to be equal to certain percentages of the "insurable earnings" of an employee.

[12] What is important to determine, therefore, is the meaning of the expression "insurable earnings" in the English version of the Act, "rémunération assurable" in the French version. These expressions may not be entirely precise, though it seems to me that they would have a broader meaning than, for example, salary. Pratte J. gave them a broad meaning. He relied especially on two English decisions where the expression "earnings" was used, one, Penn v. Spiers & Pond Ltd., [1908] 1 K.B. 766, by the English Court of Appeal and the other, Great Western Railway Co. v. Helps, [1918] A.C. 141, by the House of Lords.

[13] In Penn v. Spiers & Pond Ltd., supra, the English Court of Appeal was faced with a question similar to that in the present case, namely: in calculating compensation payable under the English Workmen's Compensation Act of the time, must one take into consideration tips received by the employee? The relevant provision required that the compensation be calculated in terms of "earnings in the employment". The court decided that tips came within the purview of this expression. Cozens‑Hardy, M.R., giving the judgment of the court, stated (at p. 769):

It has often been pointed out in this Court that the measure of compensation under the Act is not wages, but earnings. This is conceded by the respondents, who admit that the value of the board must be taken into account. It is not every kind of earnings which can be taken into account. They must be earnings in the employment. If the workman by the exercise of his talents during his leisure hours, as, say, a conjurer or a musician, gains money, the money thus gained will increase his income, but not his "earnings", within the Act. "Earnings in the employment" do not always come from the employer. It is common knowledge that there are many classes of employees whose remuneration is derived largely from strangers. A hall porter at an hotel and a driver of a postchaise are sufficient illustrations. It would be absurd to say that the money received from the hotelkeeper or the post‑master alone represents the rate per week at which the workman was being remunerated.

[14] The House of Lords came to the same conclusion in Great Western Railway Co. v. Helps, supra. Here is what Lord Dunedin says of the matter, on p. 145:

The whole point, therefore, is, do these tips fall within the statutory expression of "earnings"? If you were to ask a person in ordinary common parlance what this porter earned, the answer would be: "Well, I will tell you what he gets; he gets so much wages from his employers, and he gets on an average so much in tips".

My Lords, it has been sought in the argument addressed for the appellants to limit the meaning of "earnings", to what the workman gets by what I may call direct contract from his employers. The simple answer is that the statute does not say so; it uses the general term "earnings" instead of the term "wages" or the expression "what he gets from his employer", and as a matter of fact the employer, in a case where there is a known practice of giving tips, obviously gets the man for rather less direct wages than he would if there was not that other source of remuneration to the man when he is in his post.

[15] That Parliament used the word "earnings" in the English version is clearly indicative of its intention having regard to decisions on the meaning of the word in a statute of the same nature, i.e., one dealing with social security. It should be noted that the Unemployment Insurance Act, 1971 also provides that benefits payable to employees who have lost their employment are to be calculated in terms of a percentage of their insurable earnings. Section 24(1), as amended by 1976‑77 (Can.), c. 54, s. 35, reads as follows:

24. (1) The rate of weekly benefit payable to a claimant for a week of unemployment that falls in his benefit period is an amount equal to sixty‑six and two‑thirds per cent of his average weekly insurable earnings in his qualifying weeks.

(Emphasis added.)

[16] In this country, Marceau J., acting as umpire in the case of Association des employés civils v. Minister of National Revenue, NR 1168, March 29, 1983, came to the same conclusion in a case having considerable similarities to the present. He made the following observations:

In choosing the term "remuneration", and not the commonly used terms "salary" or "wages", Parliament certianly wanted to express its intention to cover more than just the fixed salary attached to the job, and this "more than just the salary" can only be the amounts, calculated as a percentage or on some other basis, that an employee receives from his employer, over and above a basic salary, in return for the services he provides. The method chosen by the employer to obtain from his clients the amounts which he is to pay to his employees (a percentage included in the calculation of a total price or added to a basic price), and the fact that the size of the amount remains to be determined, have nothing to do with the question; what matters is that these are amounts payable and promised by the employer in return for the employee's work.

[17] The conclusion I have arrived at is, in my view, strongly supported by other provisions of the Act. Section 3(1) defines insurable employment in the following terms:

3. (1) Insurable employment is employment that is . . .

(a) employment in Canada by one or more employers, under any express or implied contract of service or apprenticeship, written or oral, whether the earnings of the employed person are received from the employer or some other person and whether the earnings are calculated by time or by the piece, or partly by time and partly by the piece, or otherwise;

(Emphasis added.)

See also s. 2(1)(k) which defines "insurable earnings" as comprising "the total amount of the earnings from insurable employment".

[18] The regulations adopted under s. 90(1)(i) of the Act also support my view. This section gives the Minister power to make regulations, and in particular:

90. (1) The Minister may . . . make regulations

(g) for defining and determining earnings and pay period;

(i) for calculating and determining the amount of insurable earnings of insured persons and the amount of premiums payable;

[19] By virtue of this provision, the Minister established a regulation that gives greater precision to the meaning of the expression "insurable earnings" in the following manner:

3. (1) The amount from which an insured person's insurable earnings shall be determined is the amount of his remuneration, whether wholly or partly pecuniary, paid by his employer in respect of a pay period, and includes

(a) any amount paid to him by his employer as, on account or in lieu of payment of, or in satisfaction of

(i) a bonus, gratuity, retroactive pay increase, share of profits, accumulative overtime settlement or an award.

(Emphasis added.)

[20] The opening words of this provision raise the question regarding the meaning of the word earnings that has already been discussed. The expression "remuneration . . . paid by his employer" in the English version, "rétribution . . . qui lui est payée par son employeur" in the French version, may also appear equivocal. According to Le Petit Robert (1984), rétribution means "ce que l'on gagne par son travail", a definition that does not give much assistance. But the word "remuneration" in the English version throws more light on the subject. In Skailes v. Blue Anchor Line Ltd., [1911] 1 K.B. 360, the English Court of Appeal interpreted this expression for the purposes of the Workmen's Compensation Act of the time as comprising not only a bonus paid to a purser by his employer, but also the profits from the sale of liquor to passengers on board. If one adopts this approach, it seems to me that the word can also include a tip paid to the employer for distribution to his employees. As to the word "paid", which can equally well mean mere distribution by the employer or payment of a debt owing by him, I would simply observe that if one gives the word "remuneration" a broad meaning, one must also give a broad meaning to the word "paid".

[21] However that may be, the meaning of the word earnings is not restricted to the situations falling squarely within the opening words of s. 3(1). The various paragraphs of the provision enumerate a whole series of benefits that accrue to the employee by reason of his employment. These paragraphs serve to clarify or to add to what is comprised in the opening words. This approach is supported by numerous cases, the effect of which is summarized in the following passage from Maxwell on Interpretation of Statutes (12th ed. 1969) at p. 270:

Sometimes, it is provided that a word shall "mean" what the definition section says it shall mean: in this case, the word is restricted to the scope indicated in the definition section. Sometimes, however, the word "include" is used "in order to enlarge the meaning of words or phrases occurring in the body of the statute; and when it is so used these words or phrases must be construed as comprehending, not only such things as they signify according to their natural import, but also those things which the interpretation clause declares that they shall include." In other words, the word in respect of which "includes" is used bears both its extended statutory meaning and "its ordinary, popular, and natural sense whenever that would be properly applicable."

Maxwell cites the following cases in support of his position: Dilworth v. Commissioner of Stamps, [1899] A.C. 99, Lord Watson at pp. 105‑06; Robinson v. Local Board of Barton‑Eccles (1883), 8 App. Cas. 798, per Earl of Selborne L.C. at p. 801.

[22] Our leading Canadian experts in the field of legislation are of the same view. The late Elmer Driedger in his book, The Composition of Legislation (1957), at p. 48, states the following:

But it is in order in some cases to define a word as meaning one thing and including another.

"securities" means securities of Canada and includes bonds, notes, deposit certificates, non‑interest bearing certificates, debentures, treasury bills, treasury notes and any other security representing part of the public debt of Canada.

This is in reality a double definition. First securities is particularized, and then doubts are removed.

See also at pp. 43‑44 where he indicates that the word "includes" may be used to enlarge or clarify the meaning of a word.

[23] Professor Louis‑Philippe Pigeon, later a member of this Court, expresses the same view in his book entitled Rédaction et interprétation des lois (1965), at p. 21 in the following passage:

[TRANSLATION] "Designates" or "means" indicates a restrictive definition: in other words, a definition which limits the meaning of the word to what is mentioned in the enactment. "Includes", on the other hand, indicates an extensive definition, that is one which adds to the usual meaning.

[24] Section 3(1)(a)(i), therefore, clarifies or expands the meaning of earnings by telling us that it includes "any amount paid to him by his employer ... in satisfaction of ... a ... gratuity" (emphasis added). In my view, that is precisely the situation we have in this case. The word "gratuity" in the english version is the ordinary synonym for tip. The word gratification in the French version certainly includes a tip.

[25] The interpretation I have given to "insurable earnings" is consistent with the purpose of the Act, which is to pay, to persons who have lost their employment, benefits calculated in terms of a percentage of their insurable earnings. Otherwise, an employee who received a good part of his earnings as tips would not benefit to the same degree as his colleagues who receive the whole of their earnings directly from the pocket of their employer. By adding to the definition of remuneration a whole series of benefits an employee receives by reason of his employment, the regulations clearly indicate that the expression should be given a broad interpretation. Moreover, as noted, a law dealing with social security should be interpreted in a manner consistent with its purpose. We are not concerned with a taxation statute. The cases of Penn v. Spiers & Pond Ltd. and Great Western Railway Co. v. Helps, supra, are merely examples of the principle that I have just stated.

[26] I would add that if the appellant is obliged to pay premiums solely in relation to the part of the earnings of his employee that comes out of his pocket, then it is in a better situation than other employers who pay these premiums in relation to all the earnings accruing to the employee from his work. The employer obviously benefits from the fact that some of his employees are in a position where they can obtain tips. He is able to retain their services at a better price. It, therefore, appears unjust that he should also be able to divest himself of a part of the obligation that all other employers must carry, or to restrict the amount of benefits of his employees whose earnings come in good part from tips.

[27] It is true that these arguments are in a measure applicable equally to employees who personally receive tips, even though s. 3(1) of the Regulations does not mention these. However, those who drafted the Regulations no doubt concluded that it was necessary to proceed in this way for administrative reasons. See on this issue the case of Association des employés civils v. Minister of National Revenue, supra. It is almost impossible to levy premiums on tips obtained in this manner and it is for that reason that the Regulation does not take them into account. It goes without saying that insurable earnings include many tips collected in ways other than the ones collected in this case. For example, those added when paying a bill by credit card.

[28] For these reasons, I am of the opinion that the appeal should be dismissed with costs.

English version of the reasons of Beetz, McIntyre and Chouinard JJ. were delivered by

[29] Chouinard J. (dissenting)‑‑This case concerns the premiums payable under the Unemployment Insurance Act, 1971, 1970‑71‑72 (Can.), c. 48.

[30] In particular, the question is whether it is necessary to take into consideration amounts which an employer paid its employees after receiving them from its customers, who had paid them to the employer of their own accord, to be distributed to the employees as tips.

[31] At issue are the tips paid by customers at banquets held in the Château Frontenac in Québec.

[32] I should mention that the claim of the Minister of National Revenue should have been made against Canadian Pacific Hotels Limited, which operates the hotel, rather than the appellant. However, the latter did not wish to make an issue of this discrepancy.

[33] By an agreement appended to the collective agreement between the union and the employer, it was agreed that the latter would receive such tips and distribute them to the employees. The union and the employer agreed on this course of action in the interests of efficiency and economy, in view of the number of employees working at banquets and the problems which would result from dividing and distributing tips.

[34] The following facts were not in dispute.

[35] The customers decided whether tips should be left.

[36] The amount of the tips was entirely in the discretion of the customers.

[37] Appellant made no service charge to its customers.

[38] None of the amounts paid by the customers as tips were included in appellant's income.

[39] The total amount of the tips was passed on to the employees.

[40] All appellant did was distribute the tips to the employees in accordance with the agreement.

[41] Respondent added the following information, which was not disputed by appellant:

[TRANSLATION] The tips in question were paid to the Château Frontenac Hotel at banquets or receptions organized by it: at such times the hotel billed the customer for the amount indicated by him (generally 12 to 15 percent) and received the amount in question.

According to the collective agreement with its employees, the hotel then distributed the amounts in question as follows: 80 percent of such tips to employees covered by the collective agreement who had worked at the meetings in question and 20 percent to non‑ unionized employees. The hotel issued a cheque to each employee who had worked at this type of reception, in an amount corresponding to his share of the sum which the customer had agreed to pay the hotel for tips.

Employees working at these banquets also received an hourly wage fixed by the collective agreement.

[42] On May 2, 1980 the Minister of National Revenue sent appellant a notice of assessment claiming the employer and employee premiums for the tips received by appellant and distributed by it to employees during 1978. Appellant asked the Minister to reconsider the reassessment. The Minister affirmed it.

[43] Appellant appealed to an umpire, who concluded that the notice of assessment was in error and allowed the appeal. His reasons were, first, that the tips left at banquets by customers could not be regarded as "remuneration" within the meaning of s. 68(1) of the Act, and secondly, that these amounts were paid not by appellant but by the customers, appellant simply being an intermediary between the customers and the employees.

[44] In a unanimous judgment, 1984 FCA 5378, [1984] 1 F.C. 859, the Federal Court of Appeal set aside the umpire's decision. It cited certain sections of the Unemployment Insurance Act, 1971, to which I will return. At pages 861‑62, it said:

It is clear from reading these provisions that it is section 66 which imposes the obligation to pay premiums and determines their amount. These premiums, on either side, must be paid by the employer, and on either side they are fixed, as provided by section 66, at a percentage of the insurable earnings of the employees in question. In calculating the amount of the premiums, therefore, it is necessary to take into account all insurable earnings of the employees. If the amounts which respondent paid its employees in accordance with the aforementioned provisions of the collective agreement constituted a part of the employees' insurable earnings, they ought to have been taken into account in calculating the premiums; if not, they should not have been.

[45] The Court of Appeal then considered the meaning of "insurable earnings". It cited the definition in s. 2(1)(k) of the Act:

"insurable earnings" means in relation to any period the total amount of the earnings from insurable employment for that period of an insured person or the maximum insurable earnings for that period as prescribed by or under this Act, whichever is the lesser;

[46] The Court of Appeal relied on a judgment of the British Court of Appeal and a decision by the House of Lords, to be discussed below, regarding the meaning of "earnings". In the Unemployment Insurance Act, 1971 the word "earnings" corresponds to the word rémunération in the French version. The Federal Court of Appeal concluded at p. 863:

In the case at bar, I think it is clear that the amounts in question constitute for the employees earnings from their employment: they earned these amounts as a result of their work, and the amounts were paid to them because they were employees. These amounts were accordingly a part of their insurable earnings and, on that account, should be taken into consideration in calculating the premiums payable under section 66 of the Act.

[47] The passages cited above clearly indicate that the Federal Court of Appeal considered that "it is section 66 which imposes the obligation to pay premiums and determines their amount", and that it was principally concerned with determining the meaning of "insurable earnings". This is the position taken by respondent, whose counsel told this Court that his principal proposition was that the tips constituted insurable earnings.

[48] Appellant submitted, on the other hand, that the employer's obligation is defined by s. 68 and by s. 3(1) of the Regulations made pursuant to it.

[49] The relevant portions of ss. 66 and 68, as amended by 1974‑75‑76 (Can.), c. 80, ss. 24 and 25, are as follows:

66. (1) Every person shall, for every week during which he is employed in insurable employment, pay, by deduction as provided in Part IV, an amount equal to such percentage of his insurable earnings as is fixed by the Commission as the employee's premium for the year in which that week occurs.

(2) Every employer shall, for every week during which a person is employed by him in insurable employment, pay, in respect of that person and in the manner provided in Part IV, an amount equal to such percentage of that person's insurable earnings as is fixed by the Commission as the employer's premium payable by employers or a class of employers of which the employer is a member, as the case may be, for the year in which that week occurs.

68. (1) Every employer paying remuneration to a person employed by him in insurable employment shall deduct from such remuneration an amount equal to the employee's premium payable by that insured person under section 66 for any week or weeks in respect of which such remuneration is paid and remit it together with the employer's premium payable by the employer under section 66 for such week or weeks to the Receiver General at such time and in such manner as is prescribed by the regulations.

(2) Subject to subsection (3), every employer who fails to deduct and remit an amount from the remuneration of an insured person as and when required under subsection (1) is liable to pay to Her Majesty the whole amount that should have been deducted and remitted from the time it should have been deducted.

(6) Every employer who fails to remit to the Receiver General the total amount that he was required to remit at the time when he was required to do so is liable to a penalty of ten per cent of the amount that he failed so to remit or ten dollars, whichever is the greater, and to pay interest at a prescribed rate per annum on the amount he failed so to remit from the time when he was required to remit that amount until it is remitted.

[50] In my opinion, appellant was right in saying that s. 68 is what imposes an obligation on the employer, and that the purpose of s. 66, to which s. 68 refers, is to set the amount of the premiums.

[51] Section 68 is contained in Part IV of the Act, entitled "Collection of Premiums", and is preceded by the heading "Payment of Premiums".

[52] Section 66 is contained in Part III, titled "Contributory Premiums", and is under the heading "Determining Premiums".

[53] Subsection (1) of s. 68 states that "Every employer paying remuneration to a person employed by him ... shall deduct ... the employee's premium ... and remit it together with the employer's premium ... to the Receiver General . . . ."

[54] Subsection (2) of s. 68 makes the employer "liable to pay to Her Majesty the whole amount that should have been deducted and remitted from the time it should have been deducted".

[55] Subsection (6) of s. 68 imposes a penalty on the employer for failure to remit.

[56] With respect, it is s. 68 which creates the obligation to deduct and remit, which makes the employer liable for the amounts and which provides a penalty for failure to do so. Section 68 does not determine the amount of the premiums, but refers to s. 66 for this purpose.

[57] While s. 68 simply speaks of "remuneration", the phrase "insurable earnings" is found in s. 66.

[58] The corresponding expression in the French version is "rémunération assurable".

[59] In Penn v. Spiers & Pond Ltd., [1908] 1 K.B. 766, the British Court of Appeal held that, in calculating compensation payable under the Workmen's Compensation Act then in effect in Britain, tips received by an employee should be brought into account because such tips constituted "earnings in the employment". Lord Cozens‑Hardy M.R. wrote for the Court, at p. 769:

It has often been pointed out in this Court that the measure of compensation under the Act is not wages, but earnings. This is conceded by the respondents, who admit that the value of the board must be taken into account. It is not every kind of earnings which can be taken into account. They must be earnings in the employment. If the workman by the exercise of his talents during his leisure hours, as, say, a conjurer or a musician, gains money, the money thus gained will increase his income, but not his "earnings," within the Act. "Earnings in the employment" do not always come from the employer. It is common knowledge that there are many classes of employees whose remuneration is derived largely from strangers. A hall porter at an hotel and a driver of a postchaise are sufficient illustrations. It would be absurd to say that the money received from the hotel‑keeper or the post‑master alone represents the rate per week at which the workman was being remunerated.

[60] The same question was answered by the House of Lords in the same way in Great Western Railway Co. v. Helps, [1918] A.C. 141. Lord Dunedin wrote at p. 145:

The whole point, therefore, is, do these tips fall within the statutory expression of "earnings"? If you were to ask a person in ordinary common parlance what this porter earned, the answer would be: "Well, I will tell you what he gets; he gets so much wages from his employers, and he gets on an average so much in tips".

My Lords, it has been sought in the argument addressed for the appellants to limit the meaning of "earnings" to what the workman gets by what I may call direct contract from his employers. The simple answer is that the statute does not say so; it uses the general term "earnings" instead of the term "wages" or the expression "what he gets from his employer," and as a matter of fact the employer, in a case where there is a known practice of giving tips, obviously gets the man for rather less direct wages than he would if there was not that other source of remuneration to the man when he is in his post.

[61] Both of these cases involved consideration of the phrase "earnings in the employment of the same employer". It also has to be borne in mind that they related to the compensation to which a workman injured on the job was entitled. Employer's and employee's premiums were not in question.

[62] Finally, as counsel for the appellant pointed out, in the passage cited Lord Dunedin relied on the fact that the Act used the word "earnings" instead of "wages" or the phrase "what he gets from his employer".

[63] In the case at bar s. 68 clearly states that "Every employer paying remuneration ... shall deduct from such remuneration ...." Appellant submitted that the obligation to deduct relates to the remuneration paid by the employer, not what the employees may receive from some other source.

[64] Understandably, the definition of "insurable earnings" includes "the total amount of the earnings from insurable employment ... of an insured person . . . ." An insured person's earnings may come from more than one employment, and under subs. (1) of s. 66, the insured person must pay a premium.

[65] Under subs. (2) of s. 66 the employer, for his part, must "in the manner provided in Part IV", that is in s. 68, pay an amount equal to a percentage of the person's insurable earnings for every week during which a person is employed by him. This subsection is entirely consistent with the interpretation that the employer's obligation relates to the earnings he pays his employees.

[66] This interpretation is also supported, appellant submitted, by the provisions of the applicable Regulations, the Unemployment Insurance (Collection of Premiums) Regulations, C.R.C. 1978, c. 1575.

[67] Section 2(2) of the Regulations defines "employer" as follows:

(2) For the purposes of Parts III and IV of the Act and these Regulations, "employer" includes a person who pays or has paid remuneration or other earnings of an insured person for services performed in insurable employment.

[68] An employer is therefore someone who pays or has paid remuneration or earnings.

[69] The relevant portions of s. 3(1) are as follows:

Calculation of the Amount of Insurable Earnings

3. (1) The amount from which an insured person's insurable earnings shall be determined is the amount of his remuneration, whether wholly or partly pecuniary, paid by his employer in respect of a pay period, and includes

(a) any amount paid to him by his employer as, on account or in lieu of payment of, or in satisfaction of

(i) a bonus, gratuity, retroactive pay increase, share of profits, accumulative overtime settlement or an award,

(ii) vacation pay, sick pay credit, separation pay or other similar pay included in his final payment of remuneration or any payment prior thereto, in contemplation of the termination of his employment,

(b) any amount paid to him by his employer for a period during which the insured person continues to be in insurable employment but is absent

(i) on account of illness, injury or quarantine,

(ii) while he receives payment for a non‑working day or for overtime worked,

(iii) because of dismissal that is followed by reinstatement in employment,

(iv) during any holiday, leave or vacation whether general or not or continuous or not,

(v) while awaiting return to or commencement of work, and

(vi) while the establishment at which he is employed is shut down,

(c) the value of board, lodging and other benefits of any kind whatever received from his employer or enjoyed by an insured person in respect of, in the course of or by virtue of his insurable employment, if the insured person is paid pecuniary remuneration by his employer in addition to the provision of such board, lodging or other benefits, and

(d) the amount of any earnings from insurable employment received by or deemed by these Regulations to be received by or paid to an insured person

[70] As can be seen, the question is clearly one of determining what are insurable earnings for the deduction and payment of employer and employee premiums.

[71] The preamble to s. 3(1) states that the amount used in determining the insurable earnings of an insured person is the amount of his remuneration "paid by his employer". Such remuneration includes "any amount paid to him by his employer . . ." for the purposes indicated in paras. (a) and (b), and under para. (c), "the value of board, lodging and other benefits of any kind whatever received from his employer ... if the insured person is paid pecuniary remuneration by his employer . . . ."

[72] The reference in each case is to remuneration or benefits paid by the employer.

[73] Counsel for the respondent argued, however, that the word "earnings" used again in para. (d) should be given a broader construction or the paragraph would be unnecessary, since earnings are already included.

[74] With respect, I consider that what para. (d) applies to is the many allocations and presumptions established elsewhere in the Regulations, in ss. 7 et seq. Paragraph (d) is worded so as to distinguish between earnings actually received and earnings deemed to be received, and to include the latter in the definition of insurable earnings.

[75] The Regulations thus determine specifically the allocation of insurable earnings and the related premiums payable in the event that the pay period is a pay week or a multiple of a pay week, and in the event that the pay period is semi‑monthly or monthly: s. 7. The Regulations cover several other cases, such as those of railway employees:

Railway employees

12. Notwithstanding subsection 7(2), an insured person who is employed by a railway company as defined in subsection 2(1) of the Railway Act, is paid on a mileage basis and earns in his bi‑weekly pay period an amount not less than the maximum weekly insurable earnings shall be deemed to have earnings throughout the two weeks of that pay period.

[76] Accordingly, what the implementing Regulations mean by "insurable earnings" is what the employer pays his employee, and the Regulations support the proposed interpretation of s. 68, namely that the employer's obligation to deduct and pay premiums applies to earnings paid by the employer.

[77] In Association des employés civils v. Minister of National Revenue, NR 1168, March 29, 1983, Marceau J., now of the Federal Court of Appeal but then a judge of the Trial Division and sitting as an umpire, had occasion to consider the provisions in question.

[78] Marceau J. summarized the facts as follows:

The Appellant, among its activities, has for a number of years been operating a reception hall where it organizes, prepares and serves banquets at the request of clients. In 1979 it had adopted the policy of including, in the accounts presented to its clients, a 15 per cent service charge, the proceeds of which it then distributed monthly, in accordance with an internal agreement, to all those of its employees ‑‑ cooks, waiters, waitresses, house stewards, assistant managers ‑‑ who were involved in the holding of the banquets. The Appellant did not consider it necessary to add to the regular basic salaries of its employees these amounts which it thus paid to them out of the service charges billed to its clients, and it had therefore not taken them into account in calculating its unemployment insurance premiums. In his notices of assessment the Minister claimed retroactively both the employer's and the employees' premiums for all these amounts paid monthly to the employees.

[79] Regarding the source of the employer's obligation, Marceau J. wrote:

The obligation placed on the employer concerning the payment of unemployment insurance premiums, and on which the Minister's power to assess is based, is defined in subsection 68(1) of the Unemployment Insurance Act ....

Marceau J. went on to say:

In choosing the term "remuneration", and not the commonly used terms "salary" or "wages", Parliament certainly wanted to express its intention to cover more than just the fixed salary attached to the job, and this "more than just the salary" can only be the amounts, calculated as a percentage or on some other basis, that an employee receives from his employer, over and above a basic salary, in return for the services he provides. The method chosen by the employer to obtain from his clients the amounts which he is to pay to his employees (a percentage included in the calculation of a total price or added to a basic price), and the fact that the size of the amount remains to be determined, have nothing to do with the question; what matters is that these are amounts payable and promised by the employer in return for the employee's work.

Marceau J. continued:

The Appellant's representatives were surprised that the Minister should want to handle differently the service charges added to bills by an employer and then distributed to the employees, as in this case, and gratuities which restaurant clients place on their tables when they leave or else add to their charge slips. However, I do not think there is any reason to be surprised, because these two situations differ precisely in that in one case the employer is the one who is required to pay, and who does in fact pay his employee, with no legal tie arising between the client and the employee, whereas in the other case it is the client who, theoretically of his own free will, remunerates his waiter directly. In the latter case the employer is not involved, unless it is to receive for the employee the proceeds of the charge slip.

[80] In that case Marceau J. concluded that the service charges were part of the employees' remuneration, but he clearly indicated the distinction to be made depending on whether the employer has an obligation to his employees.

[81] This distinction answers the argument of counsel for the respondent, who wrote in his submission:

[TRANSLATION] Respondent further submits that, even if s. 3(1) of the Regulations is interpreted as requiring payment of the amounts mentioned therein by the employer, that provision is still applicable since there was in fact and in law a payment by appellant to its employees.

[82] Relying on the definitions of the verb "to pay" given by French and English dictionaries, in which the first meaning is "give or disburse a sum of money", he submitted that appellant had in fact paid these amounts to its employees.

[83] Counsel for the respondent added:

[TRANSLATION] Further, if one takes the legal meaning of the word "to pay", the conclusion that the hotel paid the sums at issue would be the same, since it carried out an obligation imposed on it by the collective agreement.

[84] I cannot agree with the propositions of counsel for the respondent. Of course, payment is a method of extinguishing obligations: but there has to be an obligation. In the case at bar, the employer's obligation is at most that of an agent. If it receives amounts for its employees from customers, it is obliged to pass them on. However, if it receives nothing from the customers it does not owe its employees anything.

[85] Finally, counsel for the respondent relied on s. 3(1)(a) of the Act, which defines insurable employment:

3. (1) Insurable employment is employment that is not included in excepted employment and is

(a) employment in Canada by one or more employers, under any express or implied contract of service or apprenticeship, written or oral, whether the earnings of the employed person are received from the employer or some other person and whether the earnings are calculated by time or by the piece, or partly by time and partly by the piece, or otherwise;

[86] The words "received from the employer or some other person" will have been noted. There is no need in these reasons to analyse the effects of this definition of insurable employment on the other sections of the Act or the Regulations. Suffice it to say that, in my opinion, this definition does not have the effect of altering the obligation imposed on the employer by s. 68 of the Act, and confirmed by s. 3(1) of the Regulations, to deduct and pay premiums, with reference to the remuneration paid by the employer: "Every employer paying remuneration ... shall deduct from such remuneration ...."

[87] For these reasons I would allow the appeal, reverse the judgment of the Court of Appeal and restore the decision of the umpire, with costs in all courts.

Appeal dismissed with costs, Beetz, McIntyre and Chouinard JJ. dissenting.

Solicitors for the appellant: Wendlandt, Bennett & Paré, Montréal.

Solicitor for the respondent: Roger Tassé, Ottawa.