Digest of Benefit Entitlement Principles - Chapter 18
Chapter 18 — Policy on Penalties
Table of Contents
- 18.10.0 Violation
- 18.10.1 Issuing a Record of Violation
- 18.10.2 Determining the Kind of Violation
- 18.10.3 The Classified Violation
- 18.10.4 Subsequent Violations: An Exception in the Classified Violations
- 18.10.5 The Unclassified Violation
- 18.10.6 Impact of a Violation: Increased Entrance Requirement
- 18.10.7 Limitations
- 18.10.8 Violations on Fishing Claims
18.10.1 Issuing a Notice of Violation
A violation constitutes a sanction in addition to a prosecution, monetary penalty or warning letter. When a sanction is imposed on a claim (monetary or non-monetary), the Commission must use its discretionary authority to determine whether the imposition of a violation is warrantedFootnote 1. There may be a violation issued whenever the Commission:
- issues a warning letter; or
- imposes a monetary penalty; or
- is successful in prosecution.
A violation may be recorded when there is any finding of misrepresentation, whether against a claimant, individual employer or third party. The Commission only records a violation against an insured individual.
Once a decision has been made to impose a sanction, the Commission must then determine whether or not to issue a Notice of Violation.
In making the decision to issue a Notice of Violation, mitigating factors must be considered. These factors are similar to those used in the determination of the penalty amount (see 18.5.2).
An additional factor to consider is the overall impact the violation will have on the claimant, including their ability to establish a claim in the future. The adjudicator must consider the likliehood that the claimant will be able to obtain sufficient hours to establish a futur claim, based on the increased entrance requirement that would result if a violation is issued. In order to make that determination, adjudicators must compare the number of insurable hours the claimant accumulated prior to establishing the claim, to the number of hours that were required to qualify.
[ September 2010 ]
18.10.2 Determining the Kind of Violation
When it is determined that a violation is warranted, it will be one of three types:
- A classified violation, in relation to the imposition of a monetary penalty or successful prosecution and coded as minor, serious or very serious based on the net and/or potential overpayment;
- an unclassified violation, in relation to the imposition of a non-monetary penalty, or warning letter under EIA 41.1; and
- a subsequent violation, which occurs when:
- there is a previous classified or unclassified violation recorded against the Social Insurance Number;
- the previous violation was recorded within the 260 weeks immediately preceding; and
- the new violation would otherwise be classified as minor, serious or very serious.
A penalty only triggers the possibility of issuing a violation; a penalty does not directly affect the value and coding of that violation. A violation is coded, or classified, based solely on the net, or potential, overpayment that results from the false statements on the file.
[ September 2010 ]
18.10.3 The Classified Violation
EIA 7.1(6) states the value of a violation derives from the real or potential overpayment resulting from the misrepresentation.
22.214.171.124 The Value of the Violation
The total amount of the net and potential overpayments determines the coding of the violation. Violations are subject to the principle of increased severity for repeated infraction. When a monetary penalty is imposed, the violation is coded based on a combination of net and potential overpayments. The violation is considered:
- Minor, if the overpayment is less than $1,000.00
- Serious, if the overpayment is $1,000.00 or more and less than $5,000.00
- Very Serious, if the overpayment is $5,000.00 or more.
126.96.36.199 Calculating the Net Overpayment
Policy defines the real overpayment as the net overpayment. The net overpayment is the dollar value of all overpayments less the value of any underpayments resulting from misrepresentation.
188.8.131.52 Calculating the Potential Overpayment
A potential overpayment is calculatedFootnote 2 based on the value of benefits that could have been paid to the claimant if he or she had not been disentitled or disqualified or had met the qualifying conditions. The potential overpayment is used only to code the value of a violation when a penalty is assessed for misrepresentation relating to qualifying conditionsFootnote 3 or the presence of disentitling or disqualifyingFootnote 4 conditions that affect payment of benefits. Potential overpayment refers to a monetary value calculated by multiplying the benefit rate by the average number of weeks of regular benefit . A potential overpayment never affects the amount of an overpayment or the penalty calculation.
A potential overpayment can be calculated when:
- there are still weeks of regular benefits payable on the claim;
- a benefit rate is established;
- the misrepresentation is discovered while the claim is active, or may be re-activated;
- the misrepresentation affects entitlement, qualification or qualifying conditions.
It is important to remember that a potential overpayment only exists when the misrepresentation is discovered in time to prevent further payment on a claim. There must also be the possibility of further payment following the disqualifying or disentitling event. Thus, a disqualifying event discovered after a claim has exhausted the 52 week window of duration cannot have a potential overpayment, as there is no possibility of payment on a claim that has ended.
EIR 13 creates the legislative framework by which the term average number of weeks of regular benefits is defined. It says the average number of weeks is calculated by:
- taking the number of weeks of regular benefits that were calculated as payable under EIA 12(2) or EIR (Fishing) 8;
- subtracting any weeks in which benefits were actually paid; and
- dividing the result in half.
A week of regular benefits restricts the calculation by excluding any weeks of sickness, maternity, parental, compassionate care or parents of critically ill children benefits that may be payable in the benefit period under review. The term regular benefits refer to the weeks of benefit that directly result from the claim calculation. This is an arithmetical calculation that considers hours of insured employment and the regional rate of unemployment. Entitlement, or the right to receive the benefits calculated, depends on a claimant being ready, willing and able to seek and accept work. This differs from special benefits in which a claimant may meet a threshold requirement and be entitled to the maximum weeks of payment allowed for that kind of benefitFootnote 5.
[ October 2013 ]
184.108.40.206 When the File Has Net (Actual) and Potential Overpayments
The actual overpayment is calculated based on benefits that should not have been paid. The net overpayment is calculated as described in 220.127.116.11. The penalty is calculated based on the net overpayment only. The violation is triggered by the penalty and coded based on the total of the net and potential overpayments.
18.10.4 Subsequent Violations: An Exception in the Classified Violations
As with other classified violations, a subsequent violation may be triggered by the imposition of a monetary penalty. A subsequent violation is exceptional in the classified violations, because it is not coded based on the value of the overpayment. A subsequent violation is coded if a previous violation has been recorded in the past 260 weeks. The important condition is that the notice is issued. Case law confirms that notification of, or the claimant's knowledge of a previous violation is irrelevant in coding a subsequent violation.
When issued, a violation is sent with a notice of penalty,Footnote 6 this previous violation may be the result of either a monetary penalty or a warning letter. The simple presence of any previous violation, classified or unclassified, within the legally defined time limitations, will determine classification of a current violation as subsequent.
Please note: There is no provision in the legislation for relief from a subsequent violation. Even if the claimant has qualified for 2 new benefit periods since the previous violation was imposed, the violation will be coded as subsequent if there is a classified violation recorded within the preceding 260 weeks.
[ September 2010 ]
18.10.5 The Unclassified Violation
A violation may be issued when a warning letter is issued under EIA 41.1, but does not specify a valueFootnote 7. This is called an unclassified violation. It is special because it does not impact subsequent claims unless there is a subsequent finding of misrepresentation resulting in a classified violation. For example, a file may have one, ten or an indeterminate number of warnings issued under EIA 7.1, and this will not affect subsequent claims. However, any classified violation issued within 260 weeks of the warning letter shall result in a record of subsequent violation.
[ September 2010 ]
18.10.6 Impact of a Violation: Increased Entrance Requirement
A record of a classified violation means a claimant needs more hours to qualify for subsequent claims. This is called the increased entrance requirement. These provisions establish a progressively higher threshold to qualify for benefits, based on the value of the violation – the more serious the violation, the more hours needed to start a claim:
- a minor violation requires 25% more hours;
- a serious violation requires 50% more hours;
- a very serious violation requires 75% more hours; and
- a subsequent violation requires 100% more hours capped at a maximum of 1400 hours.
Increased entrance requirements affect all subsequent claims, including claims for medical, maternity, parental, compassionate care and parents of critically ill children benefits. The alternate access provisions for special benefits do not apply to claims affected by a violationFootnote 8. This means, an individual applying for special benefitsFootnote 9 will need the same increased hours he or she would need for a regular claimFootnote 10.
Once a claimant has the increased hours needed to establish a claim, the violation does not affect any other calculation on the claim: a violation does not change the benefit rate or the number of weeks of entitlement.
A record of unclassified violation does not trigger an increased hours requirement. However, a subsequent, classified violation recorded within the 260 week timeframe described below, will trigger the increased hours required under the provisions for a subsequent violation.
[ October 2013 ]
Violations are subject to a time limitation of 260 weeks. The 260 week count starts based on the date on which the violation was entered into the computer system. When a previous violation was recorded more than 260 weeks prior to a finding of misrepresentation, any new violation will be classified by the monetary value of the overpayment (minor, serious or very serious) and not as subsequent. Additionally, claimants who establish two claims for benefits after the violation was recorded are not subject to the increased entrance requirements triggered by that violation.
Finally, a subsequent violation remains a subsequent violation for the 260 weeks or two benefit periods established, regardless of the date on which the previous violation was recorded. A subsequent violation never reverts to a minor, serious or very serious violation.
18.10.8 Violations on Fishing Claims
EIR (Fishing) state that fishers are subject to the Act and Regulations except when a specific issue is modified in the fishing regulationsFootnote 11. There are no special provisions to re-define a false statement knowingly made, the calculation of the net overpayment, consideration of mitigating circumstances or the final penalty amount. Fishing claims are subject to the same legislative and policy considerations as any other claim. However, fishing claims are qualified based on insured earnings from employment as a fisher. This differs from a regular claim, which is set up based on insured hours of employment. The fishing regulations re-frame qualifying conditions from hours to earnings. As a result, the increased entrance requirements must also be changed, for fishing claims, from hours to earnings.
A violation is coded as unclassified, minor, serious, very serious or subsequent like any violation. As with a regular claim, an unclassified violation alone does not demand higher gross earnings to qualify for a fishing claim. EIR (Fishing) 11(1) sets out the increased earnings required to establish a fishing claim when a classified or subsequent violation is recorded. EIR (Fishing) 11(2) sets out the increased earnings required when a violation affects a claim. As with regular claims, violations affect no more than two claims on which the individual qualifies for benefits, and are limited to a period of 260 weeks.
Similarly, if there is no net overpayment, because no benefits were paid, but a penalty and violation are applicable, EIR (Fishing) 11(4)(b) directs that a potential overpayment be calculated under EIR 13.
- Footnote 1
- Footnote 2
- Footnote 3
Generally, qualifying conditions are found on the Record of Employment and application, and relate to hours of insured employment and insured earnings. Also see Digest of Benefit Entitlement Principles — Chapter 1 — Basic Concepts.
- Footnote 4
Disqualifying conditions most often relate to the reason for leaving work — for example, quitting a job or dismissal for misconduct can result in a refusal of regular benefits on a claim. Also see Digest of Benefit Entitlement Principles — Chapter 6 — Voluntarily Leaving Employment and Chapter 7 — Misconduct
- Footnote 5
Special benefits include sickness, maternity, parental, compassionate care and parents of critically ill children benefits. See also Digest of Benefit Entitlement Principles — Chapter 11 — Sickness Benefits, Chapter 12 — Maternity Benefits, Chapter 13 — Parental Benefits, Chapter 22 — Benefits for Parents of Critically Ill Children and Chapter 23 — Compassionate Care Benefits
- Footnote 6
- Footnote 7
- Footnote 8
- Footnote 9
Special benefits are sickness, maternity, parental, compassionate care and parents of critically ill children.
- Footnote 10
- Footnote 11
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