Balancing the Budget with EI Premiums? Stare Decisis and Canada v Confédération des syndicats nationaux
In Canada (Attorney General) v Confédération des syndicats nationaux, 2014 SCC 49, the Supreme Court applied principles of stare decisis to dismiss the actions of the Confédération des syndicats nationaux (“the unions”) as being “bound to fail” given the Court’s judgment in a previous similar case. In contrast, the unions argued that provisions of the Employment Insurance Act, SC 1996, c 23 [EIA], were unconstitutional, as they severed the necessary connection between the collection of the EI premiums and the funding of the program.
The unions have a valid point: the EI premiums have been increased 3 times since 2010, leading some to conclude that the conservative government is aiming to balance the budget through these premiums, a form of “tax” that is snuck in under a different name. In addition, it is not clearly documented where the EI revenues are going to, whereas s. 91 of the Constitution Act, 1982, sets out the Federal Government powers to legislate with respect to Employment Insurance (formerly known as Unemployment Insurance).
In addition, the government has introduced initiatives that have made it more difficult for some to continue to receive Employment Insurance, thus further giving the impression that the revenue will be available for other purposes. New provisions of the EI system now require those in receipt of EI benefits to accept work at lower rates of pay and to look for work up to an hour commute away from their residence or risk losing benefits.
As noted, this judgment arises from a similar case, Confédération des syndicats nationaux v Canada (Attorney General),  3 SCR 511 (“CSN v Canada”). (It has been the subject of previous commentary on TheCourt.ca.) In that case, certain premium-setting mechanisms of the EIA were found unconstitutional, while others were allowed to stand. The provisions of the Act allowed for the accumulation of surpluses in the amount of several billion dollars, which the unions believed were being reallocated to the government’s general expenses and thus misappropriated.
The Court found the measures of the 1996 Act to be valid and constitutional, but the provisions of the 2002, 2003 and 2005 Acts to be unconstitutional, as they allowed the Governor in Council to establish a tax without a clear taxing authority to do so. A declaration of invalidity was suspended for 12 months to give Parliament time to enact corrections.
In 2010, the government enacted the Jobs and Economic Growth Act, SC 2010, c 12, which created a new Employment Insurance Operating Account and closed the existing one. However, the 2010 Act did not set out a provision for the transfer of the balance of $57 billion to the new Employment Insurance Operating Account. As a result, the unions brought a motion to have certain provisions of the 2010 Act declared unconstitutional.
In response, the Attorney General argued that these issues had already been decided in the previous case of CSN v Canada, and filed a motion to dismiss the action on the basis that it was unfounded in law, which was granted by the Quebec Superior Court. However, the Quebec Court of Appeal set aside this decision and found that the accounting issues in the closing of the previous account under the 2010 Act had not been settled in the 2008 decision—given the timelines—and determined the new Act to be a valid issue to be settled.
In contrast, the Supreme Court relied on Article 165(4) of the Code of Civil Procedure, CQLR, c C-25, which provides that a court should avoid a trial if an action has no basis in law, in recognition of principles of fairness and efficiency in the courts. However, as the Supreme Court acknowledged at paragraph 17 in this case, dismissing a case before it has even been brought to trial can limit access to justice, and thus should only be done if it is “plain and obvious” that the action lacks a basis in law.
One of the ways that a party may seek to establish that it is “plain and obvious” that an action will fail is by principles of stare decisis, in that “an authoritative decision has already resolved the issue or issues raised in the motion to institute proceedings” (para 22). On the other side of this argument, which the Court recognized in Canada (Attorney General) v Bedford,  3 SCR 1101, is that societal conditions change, and as such, precedents may lose their relevance.
Nevertheless, the Court found that the nature of the action had already been resolved in the 2008 decision. In that decision the following constitutional questions were ruled upon:
1. Do ss. 66 to 66.3 and 72 of the EIA exceed, in whole, in part or through their combined effect, the unemployment insurance power provided for in s. 91(2A) of the Constitution Act, 1867?
2. If the answer to question 1 is affirmative, do ss. 66 to 66.3 and 72 of the EIA exceed, in whole, in part or through their combined effect, the taxation power provided for in s. 91(3) of the Constitution Act, 1867?
3. If the answer to question 2 is negative, do ss. 66 to 66.3 and 72 of the EIA satisfy the requirements of s. 53 of the Constitution Act, 1867?
4. Do ss. 24, 25, 56 to 65.2, 73, 75, 77, 109(c) and 135(2) of the EIA exceed, in whole, in part or through their combined effect, the unemployment insurance power provided for in s. 91(2A) of the Constitution Act, 1867?
5. If the answer to question 4 is affirmative, are ss. 24, 25, 56 to 65.2, 73, 75, 77, 109(c) and 135(2) of the EIA validly based on the federal spending power? (CSN v Canada, at para 17)
In the present case, however, the unions asked the Court to declare that the funds in Employment Insurance account should be used solely to fund the new program. In addition, they argued that the funds from the previous program must not be erased and should be transferred over to the new Employment Insurance program to ensure that the continued availability for those requiring benefits in times of unemployment.
As such, the unions argued that the balance in the Employment Insurance Account is a debt owed by the Consolidated Revenue Fund to the Employment Insurance Account. Further to this, the debt should not be erased without a ruling on the constitutional validity of the sums that have been collected and recorded in the Employment Insurance Account.
Thus, the unions argued that in the previous case of CSN v Canada, the Court had held that the government had not misappropriated the funds since they had been recorded in the EI insurance fund. However, the unions argued that this change in the recording of the funds in the present case was what made it an unconstitutional act and thus raised a genuine issue for trial.
However, the Court was ultimately more persuaded by the argument of the Attorney General that the issues had already been decided in the previous case and that the revenues did not need to be used solely for EI benefits.
With the legal action dismissed, little options remain left to challenge what appears to be an injustice done to those who pay into and receive Employment Insurance benefits, other than political action to change the conditions of this system. As it has been pointed out, the premium amounts required to be paid as a percentage of income cap out at an income level of $47,600. Thus earnings higher than $47,600 are not insured, meaning that a person who makes $60,000 a year will pay the same amount of EI premiums as someone making 100,000 a year or more.
As such, this also means that a person making $30,000 a year will pay a larger share of their earnings than someone in a higher income bracket, thus EI premiums constitute a regressive tax on those least able to afford it. However, as the EI premiums are generally not referred to as “tax” in common parlance this allows the government to claim it is cutting taxes to balance the budget—whereas it is quite likely that it is raising EI premiums to do so.