History of Unemployment Insurance - Developments from 1984 to 1989
1984
Average national unemployment rate: 11.2 per cent
Benefits paid: $9.859 billion
Premium rate: $2.30
Maximum weekly insurable earnings: $425
Cumulative UI Account balance: –$4.546 billion
As much of the year was taken up by a leadership campaign among the governing Liberals and then a federal election won by the Progressive Conservatives as noted in the previous chapter, most of the activity related to ad hoc needs and operational improvements.
Ice conditions in Newfoundland and Labrador and the Lower North Shore region of Quebec prevented the normal start of the fishing season in May. A special compensation package was managed by the Department of Fisheries and Oceans and administered by EIC after seasonal fishing benefits expired.
A series of administrative improvements were implemented. An on-line computer system was completed in CECs. This meant that claims and enquiries could be processed more effectively and quickly, and at less cost. Optical-card-reader technology was installed at regional computer centres. This permitted faster and less costly processing of the report cards submitted every two weeks by claimants. After a successful pilot test, claimants living more than 80 kilometres from one of the 98 Boards of Referees’ centres were given the option of have their UI appeals heard by telephone. As 1984 ended, the regulation on premium reductions for employers with wage loss plans was modified to make the provision easier to understand and administer.
The ongoing earnings-on-separation issue produced a new Federal Court of Appeal decision in the Daigle case. There, the court ruled that the distinct legal and administrative structure governing construction worker vacations in Quebec created a situation in which payments from that vacation pay trust fund should be treated as earnings on separation. This created different treatment of those funds when in Quebec than for those in other provinces and territories until the rules were changed in 1985.
1985
Average national unemployment rate: 10.5 per cent
Benefits paid: $10.118 billion
Premium rate: $2.35
Maximum weekly insurable earnings: $460
Cumulative UI Account balance: –$4.445 billion
The direction of the new government’s UI policy had been suggested toward the end of 1984. The Minister of Finance, the Hon. Michael Wilson, made an economic statement on November 8. Among the UI changes, effective March 31, 1985, earnings paid on separation such as severance pay, wages in lieu of notice, accumulated sick leave credits, etc., were once again to be taken into account for benefit purposes. The only exception was a delay where there were existing, formal arrangements between workers and employers, such as severance payments arising out of a collective agreement. Elements of the new regulations were written in an attempt to overcome the Bryden decision of 1982 on vacation pay trust funds. However, in its 1987 Vennari decision, the Federal Court of Appeal rejected that attempt. In doing so, it also returned to different treatment for these funds in Quebec from those in the rest of Canada. That anomaly was finally eliminated when the Federal Court reversed its decision on Quebec funds in the Giroux case. With that, payments from vacation pay trust funds were no longer deemed to be earnings in any part of Canada.
Another change concerned income from retirement pensions arising from employment. The traditional view of the Commission was that this money was not considered deductible earnings, but rather was closer to savings in nature. Under the regulation that took effect on January 5, 1986, such income was to be considered earnings for benefit purposes. This change was modified somewhat in 1987 by Bill C-50 and regulatory changes.
There were also changes in regulations concerning developmental-use programs to reduce extension of the benefit period provided to participants at the end of those programs, from a six-week period to a three-week period.
Bill C-52, which became effective on June 2, 1985, extended the application of the variable entrance requirement for a further 19 months to the end of December 1986. It also froze the employee premium rate for 1986 at the 1985 level of $2.35
As in 1984, a special compensation package was provided to fishermen affected by late ice conditions.
1986
Average national unemployment rate: 9.5 per cent
Benefits paid: $9.207 billion
Premium rate: $2.35
Maximum weekly insurable earnings: $495
Cumulative UI Account balance: –$3.792 billion
1986’s Bill C-16 once again extended the variable entrance requirements to the end of 1987.
Another indication of the significance of UI to the economy arose when an American fishery-industry group sought higher barriers for Canadian fish exports to the United States. They argued, among other things, that fishing benefits under UI represented an unfair subsidy for the Canadian fishing industry. The U.S. Commerce Department rejected that claim.
1987
Average national unemployment rate: 8.8 per cent
Benefits paid: $10.326 billion
Premium rate: $2.35
Maximum weekly insurable earnings: $530
Cumulative UI Account balance:–$2.368 billion
The 1986 changes concerning the treatment of pension
income had successfully withstood court challenges. The Federal Court of Appeal in a 1986 decision (Côté) agreed that the Commission had the power to enlarge its definition of earnings as long as the money related to employment. Nonetheless, the government decided to respond to two specific criticisms. The first was that the changes dealt unfairly with persons who had been induced or forced to retire in their 40s from organizations such as the armed forces or the police and whose pensions might limit access to UI, even if laid off from a new job.
In response, new regulations introduced the notion of “subsequent employment,” insurable work accumulated after a worker had retired from one job. Starting April 5, 1987, UI claimants no longer had pension income deducted from their UI benefits for claims based on insurable work from this subsequent employment.
At the same time, the government changed the regulations to close a loophole that had allowed some workers to receive separation pay and UI at the same time. The issue arose in Ontario as certain employers and employees began amending their collective agreements so that separation pay would be treated in a way that could have allowed workers to take advantage of the loophole. The Ontario government had also introduced legislation which allocated all severance payments to individuals upon termination of employment to two weeks only.
The UI change ensured that, for all separations after April 4, 1987, UI benefits would not become payable until separation payments had been used up at the rate of the claimant’s normal weekly earnings from the last week worked. A transitional clause was included in the regulatory change to honour all written labour-management agreements and written policies exiting before April 5, 1987 that had been made because of plant closures and work force reductions. This action saved the Account an estimated $60 million in 1987-1988.
The second criticism of the pension changes the government decided to address was that the pension rule changes had not respected the unwritten, but traditional, UI practice of “old claims/old rules.” Traditionally, claims filed before a change were assessed under the rules in effect at the time of the filing.
The government responded to this complaint through Bill C-50. It allowed the Commission to treat all claims for UI benefits filed before January 5, 1986 under the rules in effect at that time. The Commission could make retroactive payment to those who filed before that date, and whose benefits had been reduced as a result. Some $139 million was paid out in these retroactive payments.
The bill also allowed the Commission to make retroactive payments to pensioner-claimants who had set up claims from January 5, 1986 to April 4, 1987 based on insurable employment accumulated after the start of their pension income. At the same time, the regulations concerning pensions were changed so that those pensioner-claimants who had insurable employment accumulated after the start of their pension income, would not have their benefits reduced by their pension income from prior employment. The estimated cost of this change in the 1987-1988 fiscal year was $105 million.
Finally, C-50 included provisions to complement the regulatory change on separation payments to reinforce the principle that all money paid or payable on separation would be allocated at the rate of normal weekly earnings from the last day of work. To ensure equity and fairness in the treatment of separation payments, C-50 gave the Commission authority to extend either the qualifying or benefit period of any claim when a separation payment had prevented the payment of UI benefits or had delayed the start of a UI claim. The estimated costs were $15 million for fiscal year 1987-1988 and $20 million for 1988-1989.
Administrative Improvements
When Minister Bouchard announced there would be no major changes to UI in response to the studies of the previous years, he proposed three sets of changes to the administration of UI that were designed to respond to criticisms of the administration of the program and to deter abuse.
Sensitivity to clients: 28 UI Enquiry Units were being set up in major centres to handle telephone enquiries more efficiently; a Claimant Services Officer (CSO) position was established to offer personalized assistance to claimants and to deliver public awareness sessions on the UI program. CSOs had been appointed in 117 CECs. Two umbrella brochures explaining the UI program had been rewritten to make them easier to understand. EIC was also reviewing overpayment policy to ensure fair treatment.
Simplification, streamlining and automation: an internal review team had proposed 109 recommendations to improve local office work-flow and service to claimants. EIC also planned to automate certain routine functions over the following 24 months. A simplified Record of Employment form had been endorsed by employer groups. These improvements were expected to come into effect on January 1, 1989.
Deterrence against abuse: EIC planned to increase the use of technology to detect abuse and to implement a public information strategy to deter abuse of the UI program.
In November, Mr. Bouchard announced that there would be no change in premiums for 1988. He also introduced Bill C-90, given Royal Assent on December 17, that extended the variable entrance requirements for a further 12 months, from January 4, 1988 to January 3, 1989.
1988
Average national unemployment rate: 7.8 per cent
Benefits paid: $10.716 billion
Premium rate: $2.35
Maximum weekly insurable earnings: $565
Cumulative UI Account balance: +$356 million
Although changes to UI usually occur after much debate, that is not always so. In late 1987, an Ontario woman was clinically dead shortly before the expected birth of her child. She was kept on a life support system until the birth. Her husband, John McInnis, left work to care for the baby but was denied benefits because he fit into no existing type of accepted unemployment.
Similarly, there were cases, such as that of Melanie Williams, in which mothers whose newborn children had been confined to hospital for a long time after birth were denied maternity benefits because the babies’ arrival home fell after the maternity benefit period.
Because these cases showed the existing rules caused unintended and unnecessary hardship, Minister Bouchard introduced Bill C-116 on March 16. The bill extended maternity or adoption benefits to fathers who had to leave work to become the primary caregiver to a newborn child because of the death or disability of the mother. It also made the time limits for receipt of benefits more flexible to allow for cases in which a child was hospitalized. The bill passed quickly and was made retroactive to March 29, 1987 to cover most of the high-profile cases that had led to it.
In August 1988, the government announced it would be undertaking a comprehensive review of the economic regions used in the administration of the UI program. The review would examine regional boundaries in the light of the demographic and economic changes that had taken place in the 12 years since the last review.
As in other years, the variable entrance requirement was extended. Bill C158 extended it to January 6, 1990.
The strong employment growth of the late 1980s had rapidly erased the deficit built up during the early part of the decade. In 1988, an annual surplus of $2.72 billion moved the account to a cumulative surplus position for the first time since 1981. That led to a 17 per cent reduction in UI premiums for 1989.
Judicial Decisions
The increasing emphasis on human rights issues affected a series of issues that were the subject of judicial decisions in 1988. In August, Mr. Justice Strayer of the Federal Court, Trial Division, ruled in the Schachter case that the UI Act was discriminatory in that it did not give natural parents the parental benefits that adoptive parents received. However, he went beyond that to indicate the remedy the Commission was expected to provide, one not covered in the Act. Even though the government would provide a more generous remedy through Bill C-21 the following year, it appealed the case on the grounds that judges could not take on the power of legislatures in order to impose remedies. The Supreme Court of Canada eventually agreed with that perspective.
Another case concerned benefits to people 65 and older. In September, the Federal Court of Canada struck down the provisions of the UI Act that stopped benefits at age 65, except for the special severance benefit, in the Tétreault-Gadoury case. The government obtained a stay-order suspending the judgement pending a Supreme Court review. At the same time, the Commission arranged to track all claims of persons over 65 from September 23, 1988, in case the Supreme Court upheld the Federal Court decision.
In June 1991, the Supreme Court of Canada confirmed the decision. By that time, Bill C-21 had provided coverage for persons age 65 or over on the same basis as for other persons effective September 23, 1988. The tracking of claims allowed the Commission to adjust benefits retroactively. Overpayments created by the negation of the three-week lump-sum provision were either credited to benefits retroactively payable or written off. Revenue Canada, Taxation had decided not to assess UI premiums for these workers from September 1988 to January 1990.
A third case, Hills, continued the Supreme Court of Canada liberalization of jurisprudence. Traditionally, workers who had been laid off due to a labour dispute in which they were not directly involved, had been denied benefits if they were members of the same union and contributing to a common strike fund. Using the same line of reasoning as in the Abrahams decision of 1982, the Court ruled that benefits should be granted since these workers were not involved in the dispute in any significant manner.
1989
Average national unemployment rate: 7.5 per cent
Benefits paid: $11.373 billion
Premium rate: $1.95
Maximum weekly insurable earnings: $605
Cumulative UI Account balance: +$1.113 billion
The continuing impact of human rights imperatives was evident in the Druken case which used the Canadian Human Rights Act to challenge the UI treatment of spouses employed by self-employed persons. On March 13, the Supreme Court of Canada denied the government’s request to appeal on this issue, implicitly ending the blanket prohibition against claims by these people. The legislative response to this and similar successful Charter challenges formed part of Bill C-21 which is covered in the next chapter.
The government established a new advisory body, the Canadian Labour Market and Productivity Centre (CLMPC). Seven task forces were established to seek out the views of business, labour, social advocacy groups and educators on a range of labour market issues. The CLMPC task forces met through the summer and fall of 1989 and presented their findings in a series of symposia in November and December 1989. More than 500 persons representing a range of organizations put forward their concerns at these symposia and more than 90 written briefs were submitted. The CLMPC presented its findings and recommendations in the Report of the CLMPC Task Forces on the Labour Force Development Strategy in March 1990.
