Digest of Benefit Entitlement Principles - Chapter 18
Chapter 18 — Policy on penalties
Table of Contents
- 18.3.0 Misrepresentation
- 18.3.1 Definitions
- 18.3.2 Onus of proof
- 18.3.3 Discretionary decisions and penalties
- 18.3.4 Voluntary disclosure
- 18.3.5 Non compliance and social insurance number
Misrepresentation — This term means an act, omission, false or misleading statement or information, or representation, or any other synonymous term. For the purposes of the Employment Insurance legislation, misrepresentation means this action is knowingly made and constitutes an action for which a penalty may be imposed.
A finding of misrepresentationFootnote 1decides the applicability of a penalty. Sections 38(1) and 39(1) of the Employment Insurance Act set out the acts for which the Commission may assess a penalty.
There are common elements in each act or omission for which a claimant or employer may be penalized:
- there must be a completed action;
- the action must be false or misleading; and
- the action must be knowingly made.
126.96.36.199 Completed action
It is not enough to believe a claimant or employer intended to submit false information. The action must be executed, or filed, to meet the requirements of the Act. A statement must be made, a document must be submitted, a warrantFootnote 2 must be cashed or an electronic deposit accepted.
A false statement may arise from an intentional, knowing or negligent action, or it may arise from an honest mistake. For example, if a claimant declares earnings of $100.00 and a subsequent investigation shows that he or she actually earned $225.00, the earnings statement of $100.00 is objectively false. This does not confirm whether the claimant made an honest mistake or understood the information was untrue at the time he or she made the declaration.
Because the term knowingly is specifically included in the legislationFootnote 3, false is defined in its simplest meaning of something that is untrue. The presence of a false statement alone does not dictate imposition of a penalty. It must also meet the condition of knowingly made.
Misleading — delusive; calculated to lead astray or to lead into errorFootnote 4.
A misleading statement may be objectively true, or at least not objectively false. It may omit information or contain full information that is presented in a way that leads to a wrong conclusion. Like a false statement, misleading is a neutral term that includes innocent error and intentional actions.
Knowingly — With knowledge: consciously; intelligently; wilfully; intentionallyFootnote 5.
Knowingly means the Commission can reasonably conclude the claimant knew the information provided was untrue when he or she provided or did not declare that information. There is no element of intent in this consideration. It is not necessary to determine a degree of fault. The Commission must only establish that it is more likely the claimant or employer understood the information provided did not accurately portray the facts.
18.3.2 Onus of proof
In a finding of misrepresentation, the onus of proof first rests with the Commission. Once the Commission can reasonably conclude benefits were paid as a result of misrepresentation, the burden of proof shifts to the claimant or the employer to show that the events are open to innocent interpretationFootnote 6.
The claimant or employer must be given an opportunity to respond to an allegation of misrepresentation.
If the claimant or employer fails to respond to a letter, or responds agreeing with the information in the letter, the Commission may proceed based on a presumption or conclusion that the addressee received the letter and agrees with its contents.
The Commission reviews the file for relevant information. When the file contains an adequate and credible explanation showing the false statement was not knowingly made, the Commission establishes an overpayment, but no penalty. If the Commission determines an explanation fails to change a finding of misrepresentation, it must explain why the explanation is inadequateFootnote 7.
188.8.131.52 Evidence and proof: the balance of probabilities
Sometimes evidence on a file is contradictory. In these situations, the Commission must look at all of the facts and decide if the contradictions can be explained; for example, two parties may recite the same series of events, but interpret those events differently. The Commission must decide which evidence is objectively true and which evidence results from interpretation and understanding. When there is no way to resolve the contradictions between two or more statements or bank of facts, the Commission must decide if one version of events is more believable than another.
The standard of proof in establishing misrepresentation is the balance of probabilitiesFootnote 8. A balance of probabilities means that, when all the facts are examined, one conclusion is more likely than the otherFootnote 9. For example, if the likelihood of snow is 51% and the likelihood of clear skies is 49%, then it is more likely it will snow, even though the difference in likelihood is very low. When considering a penalty, the Commission must establish that the evidence more likely concludes misrepresentation than notFootnote 10. It is not sufficient to simply disbelieve a claimant's statement of innocence; the adjudicator must be able to identify evidence that contradicts the claimant's statement and state what facts override the evidence the claimant provides.
To establish a false statement knowingly madeFootnote 11 , the evidence must show:
- an objectively false statement
- that misleads the Commission
- resulting in the real or possible payment of benefits to which the claimant was not entitled and
- at the time of the statement, the claimant knew it did not accurately reflect the facts.
A determination of misrepresentation is a discretionary decision. This means the Commission must consider any information provided and show how it concludes knowingly made and not innocent error. If the Commission considers a fact relevant, it must be able to explain why it is relevant. Similarly, if the Commission considers a fact irrelevant, it must be able to explain why it's irrelevant.
Claimants may admit to misrepresentation, but provide an explanation about why they had no choice but to make a false statement. This is called a mitigating circumstance and is discussed in greater detail in 18.5.2. A mitigating circumstance does not change a finding of misrepresentation, or false statement knowingly made, to a finding of innocent error. A mitigating circumstance may change the amount of the penalty, but not the applicability of a penalty.
184.108.40.206 Resolving equally balanced probabilities
Conclusions that rely on the balance of probabilities rest on a low threshold of likelihood in weighing evidence. There are times when the evidence on a file is too closely balanced to support a conclusion. When the Commission cannot decide whether one explanation is more likely than another, it resolves the file by accepting the claimant's statement as accurate. Employment Insurance legislation refers to similar situations as an application of benefit of the doubtFootnote 12. In this case, benefit of the doubt means that when the evidence is equally balanced and the Commission can neither conclude nor disprove a finding of knowingly made, no penalty is imposed.
Benefit of the doubt requires an assessment of the claimant's understandingFootnote 13. The main factors to consider include, but are not restricted to:
- the claimant's experience with Employment Insurance;
- the credibility of claimant's explanations—both within the context of the other evidence and the simple believability of any statement provided;
- the length of time over which the discrepancies occurred;
- the amount of the overpayment;
- previous penalties; and
- any other factor that speaks to an error based on misunderstanding or inexperience.
18.3.3 Discretionary decisions and penalties
Case law says the Commission has the sole right to impose and decide the value of a penalty. Case law also supports creating a policy to maintain consistency in calculating penalties. The Commission must exercise its discretion judiciously and show that it considered all information and explanations available. The Commission must show it considered all mitigating circumstances before imposing a penalty.
An adjudicator looks at the individual file, reviews all the evidence, and ensures that all relevant factors are considered. The adjudicator establishes that there is misrepresentation and that a penalty is appropriate. Commission policy sets maximum penalty amounts, tests for compliance with the law and directs consideration of mitigating circumstances and the benefit of the doubt. The adjudicator ensures the penalty accurately reflects the seriousness of the misrepresentation, and that the final penalty amount is not harsh or excessive
18.3.4 Voluntary disclosure
The Commission has a longstanding policy encouraging individuals to come forward and voluntarily disclose any misrepresentations. Under this policy a voluntary disclosure is a person's admission that he or she knowingly made a false statement or misrepresentation.
220.127.116.11 Voluntary disclosure policy
A voluntary disclosure must meet two conditions:
- the admission must be authentic and there must be no investigation initiated or underway in relation to the voluntary disclosure; and
- the offence would have resulted in a penalty, a warning letter or prosecution had there been no voluntary disclosure.
An authentic admission means that the responsible party comes forward with the sole purpose of righting a wrong. He or she is aware that misinformation resulted in an inappropriate payment of benefits, and submits information to correct the situation. If any investigation is underway, it raises a question as to whether the disclosure is given freely or presented in an attempt to avoid the consequence of an investigation. Therefore, a finding of voluntary disclosure also depends on the absence of an investigation initiated or underway in relation to the voluntary disclosure. As well, case law confirms that when information is submitted for the purpose of gaining a benefit, it is not a voluntary disclosure. For example, the following would not be considered a voluntary disclosure:
A claimant works while on claim but does not declare the work or earnings on their claimant report. The claim ends and the claimant submits the Record of Employment from the undeclared work to establish a new claim. The claimant advises they did not declare the work and earnings previously.
In this case, the claimant does not submit the ROE for the purpose of correcting the undeclared earnings. The claimant submits the ROE to obtain Employment Insurance benefits. This is not considered an authentic voluntary disclosure.
The second condition is that the original information must constitute a misrepresentation for which a penalty would be imposed if the Voluntary Disclosure Policy did not exist.
For example, if a person voluntarily discloses a deliberate failure to declare vacation pay with other earnings on a claimant report, the Commission would normally impose a penalty for failing to declare earnings. Because the claimant came forward without other considerations, no penalty is imposed. This differs from an error correction, discussed below.
The Commission does not impose a penalty when the voluntary disclosure policy is applied Footnote 14. This means there is no monetary penalty, no warning letter, no violation, no interest charged on the debt arising from the overpayment and the misrepresentation is not used to determine if a repetitive misrepresentation occurs. The Commission provides a written notification when a disclosure is found to meet the conditions of the Voluntary Disclosure Policy.
There is no time restriction on voluntary disclosure. There are no limits on the number of times a claimant, employer or third party may take advantage of the voluntary disclosure policy. Any disclosure that meets the policy requirements will not be penalized and no violation will be recorded.
Please note: An overpayment arising from a voluntary disclosure cannot be written off. Because the debt occurs because of a false statement, it does not meet the conditions for write off set out in EIA 56.
18.104.22.168 Error correction and voluntary disclosure
An error correction is an administrative procedure. It is a no fault process, non-discretionary and technical in nature. As long as a claimant, employer or third party advises within six weeks of the original declaration that wrong information was submitted, the error will be considered an innocent mistake. In these cases, the Commission makes the required corrections without any further investigation.
A claimant, employer or third party who comes in to correct misinformation more than six weeks after the original declaration is subject to the Voluntary Disclosure Policy. In these cases, the Commission must investigate and determine whether the declaration meets the conditions set out in the Voluntary Disclosure Policy. If the conditions are not met, the information is adjudicated to determine whether there is misrepresentation on the file and if a penalty should be assessed.
18.3.5 Non-compliance and social insurance number
There is no provision for an administrative penalty in instances of non-compliance or Social Insurance Number offenceFootnote 15. For instance, if someone misuses a SIN, but does not use it to apply for EI benefits, no penalty may be imposed. The Commission's primary avenue of recourse in these situations is prosecution under EIA 136 and 141 respectively.
- Footnote 1
- Footnote 2
The term warrant references the hard copy or electronic payment issued to a claimant. While many people reference this as a cheque, the term warrant is more technically accurate.
- Footnote 3
- Footnote 4
Black's Law Dictionary, 5th edition, 1979;
Index of Jurisprudence/Penalty/Knowingly
- Footnote 5
Black's Law Dictionary, 5th edition, 1979
- Footnote 6
- Footnote 7
- Footnote 8
- Footnote 9
- Footnote 10
Digest of Benefit Entitlement Principle - Chapter 21 - evidence or proof.
- Footnote 11
- Footnote 12
- Footnote 13
- Footnote 14
- Footnote 15
This means misuse of a Social Insurance Number when there is no claim for benefits.
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