Canada: Employers Appealing EI Decisions: Do So At Your Own Risk

Last Updated: March 10 2016
Article by Jessica R.W. Bungay

Many employers find themselves in a difficult position when they are advised by Service Canada that an employee they terminated for just cause has applied, and been approved, for Employment Insurance ("EI") benefits. A feeling of injustice often resonates and employers are tempted to appeal the EI benefits decision. However, doing so is a risk that may, ultimately, cost the employer.

The decision of Canadian Union of Public Employees, Local 18 v. Saint John (City), 2015 NBCA 35, serves as a cautionary tale. In that case, an employee was terminated from his employment for cause. The employee was a member of a union. Following his termination, the employee took a number of steps:

  1. He filed a complaint with the New Brunswick Human Rights Commission alleging that his termination was discriminatory;
  2. He filed an application with Service Canada for EI benefits; and
  3. The union filed a grievance, on his behalf, alleging that his termination violated the collective agreement in that it was discriminatory and without just cause.

The Human Rights Commission dismissed the employee's complaint as being without merit.

Service Canada granted the employee EI benefits. The employer, who was dissatisfied with this decision, filed an appeal. The matter proceeded before a Board of Referees. The Board of Referees allowed the appeal and concluded that the employee had been terminated for "misconduct" pursuant to the meaning of the EI Act and therefore was not eligible for EI benefits.

Meanwhile, the grievance was scheduled to proceed to arbitration. In light of the decisions of the Human Rights Commission and the Board of Referees, the employer argued that the grievance ought to be dismissed as the matters had already been determined by other administrative tribunals. The Arbitrator held that the issues set out in the grievance, namely whether the termination was discriminatory and for just cause, had been determined by the Human Rights Commission and the Board of Referees, respectively, and therefore there was no reason to proceed with the grievance. This decision was judicially reviewed by the union.

On judicial review, the Court explained that the Human Rights Commission and a labour arbitrator have concurrent jurisdiction over matters relating to discrimination and alleged violations of human rights. Where more than one administrative tribunal has the jurisdiction to decide essentially the same question based on the same facts, it flies in the face of common sense to allow a party to seek redress in both. On that basis, the Court concluded that the arbitrator was correct in his decision to dismiss the portion of the grievance relating to the allegation of discrimination.

With respect to the second matter, the decision of the Board of Referees and the allegation that the termination was without just cause, the Court of Appeal explained that there is no overlapping jurisdiction between the employment insurance regime and the grievance process. The decision of whether an employee has engaged in "misconduct" under the EI Act is a narrower issue than whether an employee has been terminated for just cause under a collective agreement. A finding of termination for misconduct does not necessarily mean there was just cause for termination. Accordingly, the decision of the Board of Referees did not preclude the arbitrator from hearing the grievance as it related to the allegation that the termination was without just cause.

What This Means for Employers

In this case, the employer successfully appealed the decision of Service Canada to grant the employee EI benefits. Despite the employer's success, the employee was permitted to proceed with his grievance alleging the termination was without just cause. The employer, therefore, gained nothing by successfully appealing the decision to grant the employee EI benefits.

If, on the other hand, the employer had been unsuccessful with the appeal, the union could have argued at the grievance arbitration that the employer was precluded from arguing that the employee was terminated for just cause as it had been unable to establish before the Board of Referees that the employee had engaged in "misconduct" which, as explained by the Court of Appeal, is a narrower concept.

The results of this case also apply to a non-unionized employee who is terminated for cause and files both an application for EI benefits and a wrongful dismissal action. Even if the employer is successful in establishing before a Board of Referees that the employee was terminated for "misconduct" under the EI Act, this would not preclude the employee from continuing with his/her wrongful dismissal action.

While an employer should always co-operate when contacted by Service Canada regarding an employee who has applied for EI benefits, the decision of whether to file a formal appeal of a decision granting an employee benefits should be assessed carefully. The stakes are very high for an employer who chooses to appeal a decision to Service Canada. A successful appeal gains the employer nothing but an unsuccessful appeal raises a real risk that the employer will be precluded from defending itself at a grievance arbitration or wrongful dismissal action alleging a termination was without cause.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Jessica R.W. Bungay
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