Call for Corrections to the 2012 Federal Employment Insurance Reforms

On November 27, 2013, Quebec’s National Employment Insurance Review Commission released its report regarding the impact of the federal government’s 2012 changes to the Employment Insurance (EI) program. The report makes 30 recommendations, with three key recommendations calling for the provincial and federal governments to negotiate an agreement giving Quebec the power to manage its own EI system to meet the needs of the province’s labour market.

Background

In 2012, the federal government made significant changes to the employment insurance system to ensure its efficiency in connecting unemployed Canadians with work. These new rules require unemployed EI recipients to undertake a wider and more aggressive job search, among other things. The changes came into force in 2013 and only apply to Canadians receiving regular and fishing EI benefits. They do not apply to the special EI benefits of maternity, parental, compassionate and sick leave.

The main areas where the program changed are:

• Measures to better connect the EI program and the Temporary Foreign Workers program so that unemployed Canadians are informed of and can apply for vacant jobs before employers are approved to hire temporary foreign workers
• Ensuring that EI recipients receive comprehensive job postings on a daily basis from multiple sources
• Clarifying what are considered a “reasonable job search” and “suitable employment” for EI claimants

Several provinces criticized the federal government for the changes and their impact on workers. The Quebec government established the National Employment Insurance Review Commission in March 2013, with the mandate to:

• Identify and document the impacts of the reform of the federal employment insurance system in Quebec on workers and various economic seasonal sectors (i.e., horticulture, tourism, construction, fishing, culture, education, etc.)
• Document the benefits and problems inherent in the current system and its expectations
• Hold hearings to consult the public, experts and stakeholders in the labour market
• Establish the parameters of an Employment Insurance plan that would be consistent with the current and future needs of the Quebec labour market
• Propose amendments to the federal employment insurance system so that it better meets the current and future needs of the Quebec’s labour market

It is important to note that this is not the first time that Quebec has questioned the federal government’s management of the EI system.

Employment insurance has been a federal responsibility since a 1940 constitutional amendment (made with the agreement of the provinces) that allowed Ottawa to establish a national unemployment insurance program. The EI program is funded by employers and employees, both paying premiums into the EI fund. No federal money is required or deposited. From its inception, the mandate of what is now EI was to provide compensation for temporary unexpected job loss, not for unemployment resulting from other social circumstances such as pregnancy, child-rearing or family care. However, the EI fund has generated substantial surpluses in recent years, which have been used to broaden coverage to encompass non-core benefits, consisting of maternity and parental leave, compassionate care leave and fishers and work-sharing benefits. These non-core benefits now account for approximately one-quarter of all EI payments. Due to mechanisms within the EI program, the federal government is also able to use surplus EI funds to pay down the deficit.

In the mid-1990s, Quebec claimed that the federal government’s parental and maternity leave programs were unconstitutional and that the federal government could not use EI to fund social programs that are supposed to fall under provincial jurisdiction. Quebec wanted to create its own program out of its share of the EI premiums collected by Ottawa. The federal government initially agreed in principle to the concept, but the parties could not agree as to the amount of EI funds to transfer and other transitional issues, and the talks stalled. Both sides continued down different paths toward their goals. In 2000, the federal government changed the EI program to increase parental leave from 10 to 35 weeks, and in 2001, Quebec passed An Act respecting parental insurance, introducing its own parental leave program. In 2002, Quebec took the federal government to court, asking the Quebec Court of Appeal whether the provinces have jurisdiction over maternity and parental leave, and whether offering coverage for these benefits through EI exceeds the federal government’s constitutional authority. In 2004, the Appeal Court ruled in the province’s favour, finding that EI should only be used to replace wages of those who have lost their jobs, not to fund social programs.

Meanwhile, however, the two sides continued to negotiate while waiting for the resolution of the various court proceedings, and an agreement in principle was signed on May 21, 2004. The Canada-Quebec Final Agreement on the Parental Insurance Plan was signed on March 1, 2005. As a result of the agreement, the federal government returns to Quebec for the Parental Insurance Fund approximately $750 million collected under the EI program in the province. In addition, Ottawa agreed to provide approximately $200 million in transition costs for the first year of the program.

As a result, since 2006, Quebec manages its own special insurance benefits, the Quebec Parental Insurance Plan, which provides maternity, parental and adoption benefits to Quebec employees and self-employed persons (who contribute) while they are on maternity, parental and adoption leaves.

The federal Employment Insurance program still administers EI benefits due to job loss or temporary job loss, sickness and compassionate care leave for Quebec employees, resulting in two premium rates: one for Quebec and one for the rest of Canada. Quebec employees receive a reduction in the federal EI premium resulting from the elimination of the maternity, adoption and parental leave benefits.

The Supreme Court of Canada eventually confirmed the federal government’s right to provide maternity and parental benefits to workers under the federal Employment Insurance program, and overturned the 2004 ruling where in the Quebec Court of Appeal ruled that the federal government’s special EI benefits program was unconstitutional.

So it is not surprising that Quebec would object and act on the 2012 federal EI reforms.

Back to the report and its corrective recommendations

As stated before, the report’s key recommendations (PDF) would see the Quebec and federal governments negotiate an agreement that permits Quebec to manage its own EI system. However, the federal government would retain responsibility for setting the contribution rates and program eligibility criteria.

The report also recommends that the federal government contribute financially to the EI program and create an independent trust account for EI funds to prevent the funds from being used for other purposes, such as reducing the national deficit.

As for the 2012 changes, the report makes the following findings and recommendations.

The government should eliminate the distinction between long-tenured workers, frequent users and occasional users, who have different requirements for job searches.

The changes established by the 2012 reform negatively impact seasonal workers who receive benefits from Employment Insurance. Some 40 percent of seasonal workers in the country are concentrated in Quebec. In this regard, the report makes two recommendations: first, that seasonal workers who take secondary employment during their low season be able to leave these jobs without penalty at the resumption of their seasonal employment; second, that more training activities be made available to seasonal workers receiving EI during the low season.

The reform requires that those actively seeking employment take jobs within an hour’s drive from their place of residence and accept lower-paying jobs. The report asks that the federal government clarify the criteria of travel time to get to work for a suitable job.

The report recommends that when an unemployed worker faces a dire financial situation, the federal government take into account the worker’s best 14 weeks in the last 52 weeks, to calculate the rate of benefits available.

The Quebec government agrees that the federal government should apply the corrections proposed by the report and is calling on other provinces to support its demand for immediate changes to employment insurance measures. Federal Employment Minister, Jason Kenney, however, responded to the filing of the report arguing that “it is clear that the commission was a political exercise…whose only interest was to scare Quebecers.” [Translated]

With the help of Statistics Canada, Kenney submitted figures showing that the reform does not have any negative impact on workers, stating that about 698,000 applications across Canada for EI benefits were declined for the first seven months of 2013, and only 380 were due to the new requirements. In Quebec, 160 of 187,000 applications were refused.

I wonder whether the report will have any influence on the federal government and if Quebec taxpayers will get any value from the $1.3 million the province spent on the commission.

It is not only Quebec that thinks the 2012 EI reforms negatively affect workers

The week before the Quebec report on EI reforms was released, Statistics Canada published a study that indicated the number of EI beneficiaries was down 1.4 percent in September. The agency attributed this change to notable declines in Ontario and British Columbia and smaller drops in Saskatchewan and Alberta, while claims went up in Quebec, Manitoba and the Atlantic provinces.

Immediately following Statistics Canada’s report, the Canadian Taxpayers Federation released Unmasking Employment Insurance: How EI Increases Unemployment and Steals Billions from Working Canadians . The report indicates that the federal government’s 2012 reforms of the EI program actually do very little to alter the fundamentally unfair aspects of EI as a vehicle that redistributes wealth to certain regions and industries.

The federation called for an overhaul of the current EI program under which, workers would keep the money deducted for EI premiums in a personal unemployment account, instead of going into government coffers. Under the federation’s plan, a person could access their EI contributions if she or he became unemployed. Funds that go unused could contribute to the employee’s retirement.

That type of change might appear to coincide with the Conservative government’s interests, but given that the government has just recently introduced these fairly significant reforms to EI, and is not prone to make great policy leaps, I don’t imagine we’ll be seeing much more discussion in Parliament on any of these recommendations. Surely, it will take some time to really get a sense of how the reforms are affecting labour markets across the country anyway. Quebec will likely continue to push for its demands, regardless of what the numbers say, but will anyone else take action or continue to complain? We’ll see.