Supreme Court of Canada Dismisses EI Case Based on Stare Decisis

The Supreme Court of Canada has released its decision in the case of the unions’ constitutional challenge to the government’s use of employment insurance surpluses. The Court dismissed the appeal by the Confédération des syndicats nationaux and Fédération des travailleurs et travailleuses du Québec because it was clear the action had no reasonable chance of success. The Court already found in 2008 that the measures adopted in the 1996 Employment Insurance Act were valid and constitutional. In its new decision, the Court found that the 2008 ruling was complete, certain and final, and therefore, on the basis of stare decisis, the unions couldn’t revive their action.

Background

In 1996, the premium-setting mechanism of the Employment Insurance Act was amended in a way that made possible the accumulation of surpluses totalling many billions of dollars. A couple of years after the amendments came into force, major Canadian unions took the government to court arguing that the government was reallocating these surpluses from the Employment Insurance Account to its general expenses in the Consolidated Revenue Fund, which constituted a misappropriation of moneys that were supposed to be earmarked for employment insurance.

In 2008, the Supreme Court of Canada decided in Confédération des syndicats nationaux v. Canada (Attorney General), that the premium-setting mechanism in the 1996 Employment Insurance Act was valid—except for 2002, 2003 and 2005. The Court suspended the effect of the declaration of invalidity for 12 months to enable Parliament to rectify the situation. Importantly, the Court also confirmed that the government was not obliged to use the EI surpluses to pay employment insurance benefits.

In response, in 2010, Parliament enacted the Jobs and Economic Growth Act, which closed the Employment Insurance Account and created a new Employment Insurance Operating Account, retroactive to January 1, 2009. Interestingly, the 2010 Act did not specify that the balance of the Employment Insurance Account (over $57 billion at that time) was to be transferred to the new Employment Insurance Operating Account.

The unions responded by bringing a motion to institute proceedings to have certain provisions of the 2010 Act declared unconstitutional. The Attorney General of Canada argued that these issues had already been decided by the Supreme Court in 2008 and moved to dismiss the unions’ motion.

Quebec’s Superior Court granted the attorney general’s motion to dismiss. The court rejected the unions’ arguments because they disregarded the previous ruling on the necessary connection between the premiums being collected and the employment insurance program. The Supreme Court had already decided that the money from the program belonged to the government and not to the contributors. The surpluses form part of government revenues and do not have to be used only for the employment insurance program. The surplus funds did not constitute a debt owed to the program. Since the question had already been addressed in 2008, the action was unfounded and had to be dismissed.

However, the Quebec Court of Appeal set aside the Superior Court’s decision. The Appeal Court found that the unions’ action involved an issue that had not yet been decided. It was not about the use of the surplus that had accumulated in the Employment Insurance Account, but the effects of the Act eliminating the balance of the Employment Insurance Operating Account and the resulting accounting entries that flowed from the 2010 legislative amendment. Since this was a new issue, the Appeal Court decided, the action should proceed.

The Supreme Court of Canada decided to allow the attorney general’s appeal and restore the initial decision to dismiss the action, based on the following reasons:

  • Dismissing an action at a preliminary stage can have very serious consequences, so courts have to exercise caution. An action cannot be dismissed at this point in the proceedings unless it is plain and obvious that it lacks a basis in law. “Plain and obvious” can be ascertained from the allegations set out to institute proceedings and exhibits filed in support of it. Therefore, when trying to decide whether to dismiss an action, the question is whether the allegations of fact set out in the motion to institute proceedings are of such a nature as to open the door to the conclusions being sought by the applicant.
  • When dismissing an action based on stare decisis (an authoritative decision had already resolved the issue, and courts have to follow principles already established), the judge has to be satisfied in light of the record and the alleged facts that the precedent relied on by the applicant concerns the entire dispute that it should normally resolve, and that it provides a complete, certain and final solution to the dispute.
  • That said, the doctrine of stare decisis is flexible; courts can question the precedential value of a previous judgment if new legal issues are raised as a consequence of significant developments in the law or if there is a change in the circumstances or evidence that shifts the parameters of the debate. But where the legal issue remains the same and arises from a similar context, the precedent still represents the law and has to be followed by courts.
  • In this case, it was clear that the unions wanted the money in the account to be allocated exclusively to the payment of EI benefits. According to the union, this money was for the program and had to be used solely to finance the program. According to the union, this matter had not yet been settled. However, the Supreme Court found this action was bound to fail given that the main premise in the unions’ argument was that the balance in the Consolidated Revenue Fund constituted a debt owed to the Employment Insurance Operating Account. The 2008 case settled the law in this regard; the amounts collected as contributions to the employment insurance program form part of the government’s revenues and can be used for purposes other than paying EI benefits.
  • Although the connection between the EI program and the premiums is a factor in determining the nature of the levies, it is not correct to say that the validity of these levies depends on the existence of that connection. Also, no debt of the Consolidated Revenue Fund to the Employment Insurance Account ever existed, since the government cannot be indebted to itself.

Since the action had no reasonable chance of success, the Court had to dismiss it, even at this preliminary stage.

The decision presents a couple of interesting results. One, a law may seem unfair or prejudicial but still be legitimate. Citizens and organizations may seek to change such laws via the courts but there is no guarantee they will succeed. Two, complainants cannot hope to succeed in a case based on essentially the same facts and circumstances they have tried before. The principle of stare decisis binds courts tighter than mere precedent.

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Comments

  1. Excellent summary. Excellent conclusion. Which leads to the following principle (political and legal): The government/state can do whatever it wants with its revenues. So a law may be unfair, prejudicial and illegal but it is law. Do not believe the courts will will change law or the outcome/effects of the law. I guess the Supreme Court issued another banal decision which reinforces the legal wisdom of going before the courts as either a crap shoot or the judges decide based on personal ideological predilections and wrapped up in res or decisis.

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