Unions wanted surplus to go towards EI but funds were part of general government revenues
The Supreme Court of Canada has dismissed an appeal by two Quebec unions to force the federal government to transfer $57 billion raised through employment insurance (EI) premiums into a new fund.
Following the federal government’s reform of the EI program in 1996 by enacting a new Employment Insurance Act, two Quebec unions challenged the constitutionality of some of the provisions in the act, which allowed annual EI surpluses to be reallocated by the federal government to cover its general expenses. The unions argued this was a misappropriation of funds meant for EI.
The Supreme Court of Canada ruled on Dec. 11, 2008, that the 1996 act was constitutional, except for provisions applied in 2002, 2003 and 2005, when the premiums were set by the Governor in Council — who didn’t have tax-delegating authority. The court suspended a declaration of invalidity for 12 months to allow Parliament to amend the act.
In the meantime, enough money was raised through EI premiums to accumulate a $57 billion surplus in the EI account by Jan. 1, 2009.
In 2010, Parliament enacted the Jobs and Economic Growth Act, which provided for the closure of the EI account and the creation of a new EI operating account. There was no specification that the money in the EI account was to be transferred to the new EI operating account, and as a result the $57 billion surplus was absorbed into the federal government’s general revenues.
Two more Quebec unions — the Conféderation des syndicats nationaux and the Fédération des travailleurs et travailleuses du Québec — filed a motion demanding the new 2010 act be declared unconstitutional because of the failure to maintain the surplus funds from the EI program for EI purposes. The unions sought a declaration that any change in the mechanism for setting premium rates may not disregard the sums collected in the EI account and that the balance in the account may not be erased and allocated.
The Quebec Superior Court dismissed the motion, finding EI premiums were either a payroll tax or regulatory charge that, once collected, were part of the federal government’s revenues and “not a debt owed to the (EI) program.” Therefore, they did not have to be used for the EI program, said the court.
The unions appealed to the Quebec Court of Appeal, which set aside the lower court’s decision. The appeal court found the unions’ challenge of the 2010 act was more concerned with the actual elimination of the EI surplus, rather than for what the government used it.
The federal government appealed to Canada’s top court, on the basis that the issue was covered in the Supreme Court’s 2008 decision that allowed surpluses to be reallocated, though the specific surplus at issue didn’t yet exist. It also argued the EI account was “merely an accounting tool” that recorded EI amounts. All actual transactions, such as EI premium payments or distribution of benefits, were conducted through the government’s consolidated revenue fund, not the EI account, said the government.
The Supreme Court noted that the unions’ underlying premise was that “a balance in the EI account is a debt owed by the consolidated revenue fund to the EI account” and the constitutional validity of the act depended on the transfer of that debt to the new operating account established under the 2010 act.
The Supreme Court found that, as established in an earlier decision, the EI account was not a trust fund, but rather “forms part of Canada’s government accounting, and premiums form part of the government’s revenues.” The top court agreed with the Quebec Superior Court that “as government revenues, the amounts collected as contributions to the EI program can therefore be used for purposes other than paying benefits.” The consolidated revenue fund from which actual EI transactions were made did not have any debt to the EI account, and the Quebec Court of Appeal erred in finding there was a direct debt, said the Supreme Court.
“(In earlier decision CSN v. Canada), the court held that the connection between the program and the premiums is a factor that can be considered in determining the nature of the levies,” said the Supreme Court. “But it is wrong to say that the validity of these levies depends on the existence of that connection.”Because the underlying premise of the motion was based on a debt to the new EI account which the court found did not exist, the Supreme Court determined the action had no reasonable chance of success and dismissed it. See Canada (Attorney General) v. Confédération des syndicats nationeaux, 2014 SCC 49 (S.C.C.).