Penalties and Violation
*This asterisk denotes recent case law.
Questions to Answer
- Was the statement false or misleading?
- Was it made knowingly?
- Did the Commission exercise its discretion properly with respect to the penalty amount? If not, what would the appropriate amount be and why (mitigating circumstances)?
- Time limit met to impose penalty?
Act: sections 7.1 Employment Insurance Act, 38 Employment Insurance Act, 39 Employment Insurance Act, 40 Employment Insurance Act, 41 Employment Insurance Act, 41.1 Employment Insurance Act, Employment Insurance Act. Repayment: 52(5) Employment Insurance Act, 42 46.1 Employment Insurance Act, 47 Employment Insurance Act
Employment Insurance Regulations 56
- For imposition of penalty, the false statement must be made "knowingly": Employment Insurance Act, 38(1) 39(1) Employment Insurance Act of the Act.
- "Knowingly" is determined on the balance of probabilities based on the circumstances of each case or the evidence of each case:
Judgment Of The Federal Court Of Appeal. A-600-94
- Time limit to impose a monetary penalty: within 36 months from date of act or omission. Employment Insurance Act of the Act. 40
- Maximum amount of penalty: Employment Insurance Act, 38(2) 39(2)and 39(4) of the Act. Employment Insurance Act
- In determining the penalty amount and whether or not to issue a notice of violation the Commission must exercise its discretion in a judicial manner
- Example of non-judicial manner:
- an insured person accumulates a violation if the Commission decides to issue a notice of violation to the person because he/she has committed one of the offences described in Subsection 7.1(4) Employment Insurance Act and was imposed a penalty under Section 38 Employment Insurance Act, 39 Employment Insurance Act or 65.1 Employment Insurance Act , or was issued a warning under section 41.1 Employment Insurance Act , or was found guilty of one of the offences under Section 135 Employment Insurance Act or 136 Employment Insurance Act or under the Criminal Code;
- the violation is linked to a penalty/warning letter/prosecution rather than to the notice of violation as such. The notice of violation is simply the means used by the Commission to inform the claimant he/she accumulated a violation;
- subsection 7.1(1) Employment Insurance Act, which provides for an increase in the hours required to qualify for benefits, applies when the Commission decides to issue a notice of violation;
- the 260-week period during which the claimant accumulated a violation, and which precedes an initial claim for benefits, commences on the date the claimant was issued a notice of violation.
Onus of proof
- Commission must show that the claimant, or other person, knowingly made a false or misleading statement or representation.
- Claimant, or other person, must provide a reasonable explanation to show that the statement was not knowingly made.
Key Case Law
Was the statement false or misleading:
Judgment Of The Federal Court Of Appeal, A-600-94 Judgment Of The Federal Court Of Appeal, A-897-90 Judgment Of The Federal Court Of Appeal: The onus of proof that rests on the Commission is to establish on a balance of probabilities, not beyond a reasonable doubt, that the claimant made a statement or representation that he or she knew to be false or misleading. A-743-97
Judgment Of The Federal Court Of Appeal: Evidence presented by the Commission concerning Teledec reporting cards is acceptable, A-83-04 Judgment Of The Federal Court Of Appeal: Commission must provide evidence of the actual Teledec reporting system questions asked and the answers given to discharge the onus of proof. A-211-01
Was the false or misleading statement made knowingly:
Judgment Of The Federal Court Of Appeal: Subjective test applied. A-526-05 Judgment Of The Federal Court Of Appeal, A-171-98 Judgment Of The Federal Court Of Appeal, A-743-97 Judgment Of The Federal Court Of Appeal, A-667-96 Judgment Of The Federal Court Of Appeal, A-784-95 Judgment Of The Federal Court Of Appeal: A-600-94
- A subjective test is required to determine whether the claimant knew the statement was false or misleading. In deciding whether there was subjective knowledge, the Commission or Board may take into account common sense and objective factors.
- If a claimant claims to be ignorant of something that the whole world knows, the fact finder could rightly disbelieve the claimant and find that there was subjective knowledge, despite the denial.
- Merely disbelieving the applicant's testimony is not a sufficient basis for the Board's conclusion that he knowingly made false or misleading statements.
- There is no requirement to show that there was a mental element, such as the intention to deceive, when concluding that was false statement was knowingly made.
Judgment Of The Federal Court Of Appeal: In assessing the claimant's credibility the Board misapplied Gates. It is not sufficient for a Board of Referees to simply state a claimant's credibility is "in question". A-418-97
Judgment Of The Federal Court Of Appeal: The Board possesses the jurisdiction to assess, de novo, whether a claimant has knowingly made a false or misleading statement. It is the role of the Board to determine whether the claimant subjectively knew that he or she was making a false or misleading statement. A-694-94
Judgment Of The Federal Court Of Appeal: Upholds the Umpire's decision in CUB 29518. The Commission proved the statements were false. The burden shifts to the claimant to demonstrate that they were not made knowingly - to provide a reasonable explanation to this end. None was provided. Counsel stated the claimant was acting on the advice of an accountant. If so, the Umpire concluded that the advice was given with the knowledge of the claimant that it was for the purpose of attempting to avoid the requirements of the UI Act. The Umpire was not convinced that the claimant's statements on his cards were not made knowingly. A-698-95
Judgment Of The Federal Court Of Appeal: The Board and the Umpire were aware of the necessity of knowledge. Their reasons indicate that they simply inferred from the facts that the applicant could not honestly believe that he was not working all those weeks while he was busy setting up his business. A-27-94
Did the Commission exercise its discretionary power to impose a penalty judicially:
Judgment Of The Federal Court Of Appeal : A-525-97
- Confirms the discretion of the Commission to impose a penalty under subsection 33(1) (now subsection 38(1)) of the Act for each false or misleading statement made in respect of a claim for benefits which, pursuant to subsection 40(1) (now subsection 49(1)), must be made for each week of unemployment.
- If the Commission has exercised its discretionary power judicially, neither the Board, the umpire nor the Federal Court of Appeal, is entitled to intervene.
- The Employment Insurance Act is bound not by a context of criminal law but by one of administrative law and the sanctions provided by the Act must be viewed not as a punishment but as a deterrent necessary to protect the whole scheme, whose proper administration rests on the truthfulness of claimants' statements. It is inappropriate to determine penalty amounts assessed under the EI Act in the context of criminal law principles used for setting fines in criminal matters. See also: Judgment Of The Federal Court Of Appeal, A-52-04 Judgment Of The Federal Court Of Appeal, A-45-03 Judgment Of The Federal Court Of Appeal, A-34-03 Judgment Of The Federal Court Of Appeal. A-578-02
- The Commission's practice, in providing guidelines for penalty amounts, are established not as limitations of discretion, but as a means of determining guidelines that will assure some consistency. See also: Judgment Of The Federal Court Of Appeal, A-52-04 Judgment Of The Federal Court Of Appeal, A-34-03 Judgment Of The Federal Court Of Appeal. A-387-99
Jugement de la cour d'appel fédérale, A-341-08 Judgment Of The Federal Court Of Appeal, A-412-02 Judgment Of The Federal Court Of Appeal, A-549-99 Judgment Of The Federal Court Of Appeal, A-387-99 Judgment Of The Federal Court Of Appeal: As long as the Commission exercises its discretion judicially, that is, takes into account all relevant considerations and ignores irrelevant factors, its decisions are unassailable. The Board of Referees is not limited to the facts that were before the Commission. In assessing the manner in which the discretion was exercised, it may have regard to facts that come to its own attention. A-708-95
Judgment Of The Federal Court Of Appeal: If the Commission fails to exercise its discretion judicially, the Board and the Umpire may exercise that discretion itself and vary the amount of the penalty. A-453-95
Judgment Of The Federal Court Of Appeal:There was no new fact to warrant the intervention of the Board of Referees, as there must be, and the Board could not substitute its opinion for that of the Commission. A-52-04 Judgment Of The Federal Court Of Appeal: There was no new fact brought before the Board of Referees that would warrant its intervention. Under these circumstances, it did not have the authority to substitute its opinion for that of the Commission. A-34-03
Judgment Of The Federal Court Of Appeal:The Commission is entitled to test apparent discrepancies by seeking timely information from claimants; and it should and does afford claimants a timely opportunity to present relevant information, including information relevant to the question of penalty. In the absence of a response, the Commission is entitled to make its penalty assessment on the existing record. A-45-03
Judgment Of The Federal Court Of Appeal: The Umpire was correct to conclude that financial difficulties at the time that he misrepresented his earnings do not exonerate him from any penalty for knowingly misrepresenting his income. Assessing an appropriate penalty is very much a matter for the exercise of the Commission's discretion. The Commission may not accept that payment would cause the claimant real hardship, or it may conclude that, in all the circumstances, a reduced penalty would be an insufficient deterrent. A-578-02
Judgment Of The Federal Court Of Appeal: A penalty imposed by the Commission that is reduced to zero by the Board of Referees amounts to no penalty at all and, in realty, is a usurpation of power that resides exclusively in the Commission under subsection 38(1). Where, however, mitigating circumstances are shown to the Board of Referees, the Board may reduce the quantum of the penalty to an amount that it considers commensurate with those circumstances. A-353-01
Judgment Of The Federal Court Of Appeal: A-46-03
- Mitigating circumstances are those that lessen the seriousness of the offence due to unusual or out of the ordinary events existing at the time of the offence.
- The Board may consider circumstances that did not exist at the time the false statements were knowingly made and that occurred only after a penalty was imposed. The Board also has the authority to consider whether “inability to pay” or financial hardship is a mitigating factor that merits a reduction in penalty when this position is raised before it.
- When mitigating circumstances come to the attention of the Commission, it has a duty to consider the particular circumstances of the claimant. It follows that any penalty that is imposed must reflect those circumstances.
- This may be done by a percentage adjustment.
- Mitigating circumstances are those present before or at the time the penalty is imposed.
- Admission of guilty conduct on being confronted with the offence by the Commission Board is not, in and of itself, a mitigating factor. To admit that an offence has been committed is not to explain why one has committed it. The penalty being "a deterrent necessary to protect the whole Scheme", it would be too easy for a claimant who has not come forward with an admission to avoid or reduce a penalty simply by co-operating with the Commission once he was caught by repaying the benefits.
Judgment Of The Federal Court Of Appeal: The Court concluded that the Commission does have discretion to determine whether or not to issue a notice of violation. A notice of violation is not mandatory or automatic under subsection 7.1(4). The Court also corrected its previous decisions in A-483-09 Geoffroy Judgment Of The Federal Court Of Appeal, Limosi Judgment Of The Federal Court Of Appeal, Piovesan Judgment Of The Federal Court Of Appeal, Kaur Judgment Of The Federal Court Of Appeal and Patry Judgment Of The Federal Court Of Appeal, they should not be followed on this point of law and concludes that the Board of Referees do have the jurisdiction to set aside the notice of violation.
Judgment Of The Federal Court Of Appeal, A-463-05 Judgment Of The Federal Court Of Appeal: The issuance of a warning is a “penalty” for the purposes of the invoking of a violation pursuant to A-559-05 paragraph 7.1(4)(a) Employment Insurance Act.
Judgment Of The Federal Court Of Appeal: The increase in insured hours provided for in subsection 7.1(1) is based on the claimant's liability for the violation and not on the knowledge of having a notice of violation. A-546-05
Judgment Of The Federal Court Of Appeal: The EI Act has no provision to suspend or stay a violation pending the final disposition of any outstanding appeal. A-773-00
Judgment Of The Federal Court Of Appeal, A-396-04 Judgment Of The Federal Court Of Appeal: The classification of a violation is based on the amount of the overpayment. A-336-04
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