We have 2 recent decisions of the Tax Court of Canada, one of the 3rd May (Monaghan J.) and one of 9 May (Smith J.) coming to opposing results. Both involved someone working outside Canada for a Dutch company (Shell oil) or a Dutch company’s subsidiary (Philips lighting). Gendron worked in the Netherlands. Herta worked in the US. Gendron was found not to be an EI-qualifying employee; Herta was. Both were terminated: Herta end of June 2017, Gendron 01 July 2017 (although he continued 3 months with Shell Canada).
Both appellants contributed to social insurance-like programs. Gendron also had to contribute to an EI-like program even though, apparently, he could not take advantage of it if he became unemployed. Also, he said that if he had stayed in the Netherlands he could not work and so he was not eligible for EI there.
Herta had to leave the US upon being terminated. (The Respondent did not dispute that.) He returned to Canada and claimed EI. He got it. Then Canada claimed it back on the basis that he was not insurable. So he went to the US and tried to claim it there. He was denied on the basis, he was told, that, as he was not living in the US state of Massachusetts where he had worked, he was not eligible to work there.
Although one could make other distinctions on the facts, the major divergence between the 2 judges surrounds the inclusion rule in s. 5 of the EI regulation and, in particular, the test for eligibility that required:
d) the employment is not insurable employment under the laws of the country in which it takes place.”
Justice Monaghan (paras. 28-36) takes the view that there is a distinction between whether the employment is insurable (which she says it was because Mr. Gendron had to contribute to the program) versus whether he was entitled to benefits, which he was not.
Justice Smith took the opposite view. (The Respondent made the exact same argument that Justice Monaghan approved. Herta para. 38.)
Herta: “[40] The Court finds that the Appellant’s employment with the Payer, dependent as it was on his temporary work visa, was not in fact “insurable employment”.
“[42] It follows from the above that the Court attaches little weight to paragraph 7(c)(i) of the Regulations and the reference to the Agreement between Canada and the United States Respecting Unemployment Insurance. It seeks “to avoid a duplication of contributions or benefits” but for reasons aforesaid, there is and was no duplication of contributions or benefits in this instance.
[Contradictorily, we have, possibly a typo:] [43] To conclude, the Court finds that the Appellant’s employment was “insurable employment” during the relevant period and that, while the Appellant was required to make social security contributions and did so as required by state laws, as a resident Canadian and holder of a temporary visa, he was not and would never be entitled to any unemployment benefits from the state of Massachusetts.”
Gendron: “[28] … The focus of the exception in Regulation 5 to the EIA is whether the employment is insurable under the Netherlands unemployment scheme. Entitlement to benefits is a determination that is quite separate from insurability and the obligation to pay premiums. This is quite clear under the EIA.
[35] … I accept that, having terminated his secondment, Denis Gendron may have been obliged to leave the Netherlands and so was unavailable to work there, but the evidence is that the requirement that he be available for work goes to benefit entitlement, not insurability.”
Justice Monaghan seems to capture the legal tests well; while Justice Smith picks up more on the policy intent of the rules.
Herta v. M.N.R. – 2019 TCC 113 (Smith)
Gendron v. M.N.R. – 2019 TCC 100 (Monaghan)