Digest of Benefit Entitlement Principles - Chapter 18

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CHAPTER 18
POLICY ON PENALTIES

18.7.0

EMPLOYER PENALTIES

18.7.1

Introduction

18.7.2

Defining Third Party Responsibility

18.7.3

Consent

18.7.4

A Claimant and Third Party

18.7.5

Employer and Third Party

18.7.6

Directors and Officers of the Corporation

18.7.0 EMPLOYER PENALTIES

18.7.1 INTRODUCTION

EIA 38 (claimant penalty) and EIA 39 (employer penalty) allow the Commission to impose a penalty on a third party acting on behalf of the individual or corporation. The Commission can also record a violation against a third party when that third party is an insured individual.

A finding of misrepresentation follows the same process as for the claimant or the employer. The penalty is calculated in the same way, taking into account any mitigating circumstances. A third party acting on behalf of a claimant is penalized under EIA 38; a third party acting on behalf of an employer is penalized under EIA 39.

18.7.2 DEFINING THIRD PARTY RESPONSIBILITY

Third parties introduce a new element in the determination of who must repay an overpayment and penalty. The way in which a third party may be involved in a claim can be broadly divided:

• a third party may act on behalf of a claimant or employer, with or without consent or knowledge; or
• a third party may act on his or her own behalf, inappropriately using the information or identity of another individual or organization.

Responsibility determines liability for an overpayment and penalty. If a third party acts entirely without the knowledge and consent of another individual or an employer, the third party is responsible for any repercussions from that action. In an extreme situation, this could be identity theft, or deliberate misrepresentation as an employer.

However, a third party may act only as a channel by which information is communicated. For example, a third party may act as a translator for a claimant who has a language barrier, or complete a Record of Employment as directed by the employer. If the Commission determines the third party recorded the information, believing it was accurate, the third party cannot be held liable for any overpayment and is not subject to penalty. The claimant or employer is responsible for any debt incurred.

Because a third party can be defined as a person who acts on behalf of an interested party, the most important consideration is whether the third party acted with the consent and knowledge of the interested party — in this case, the claimant or the employer. Just as a finding of misrepresentation determines whether a penalty applies on a file, the finding that consent exists determines whether a third party is liable for an overpayment and subject to penalty.

18.7.3 CONSENT

Consent may be express or implied. It can be restricted to a single specific action, or it may be given for a broad range of activity. Consent may be granted by the claimant or employer, or it may be directed through a legal authority (such as the executor of an estate). Black's Law Dictionary¹ defines consent as:

Agreement, approval or permission as to some act or purpose, especially given voluntarily by some competent person.

It further defines the terms:

Express consent: consent that is clearly and unmistakably stated; and
Implied consent: consent inferred from one's conduct rather than from one's direct expression.

These definitions contain three critical components:

• permission must be given;
• that permission must be voluntary; and
• the person giving consent must be competent.

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1. All definitions of consent are from Black's Law Dictionary, Seventh Edition

18.7.3.1 Express Consent

An express consent can be directly demonstrated. In the case of a claimant, this takes the form of a written authorization. This may be a letter, a power of attorney, or authorization to act on behalf of an individual incapacitated, but the evidence shares the characteristic of being an actual document in which the third party is formally and explicitly authorized to act on the claimant's behalf.

There may be similar documentation available for the employer. It is most likely that express consent is captured by the conditions and duties of employment, and particularly through a written job description. An employee acts on an employer's express consent if his or her duties specifically include preparation and communication of payroll information that affects entitlement to Employment Insurance benefits. When considering a third party penalty relative to an employer, the adjudicator must be able to identify how consent exists in the terms and conditions of employment. This may be complicated when there is no written definition of job duties or if the employee's duties do not include the preparation and communication of payroll information. Verbal statements from the interested parties constitute evidence, and are examined to determine if there is one version of events that is more credible than the other(s)¹. When determining responsibility, the adjudicator must reasonably demonstrate that an employee acted with the express consent, or under the specific direction, of the employer.

For either the claimant or the employer, if express consent is not present, the evidence must be examined for the presence of implied consent.

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1. Digest of Benefit Entitlement Principles - Chapter 21 —Evidence or Proof discusses weighing evidence in greater detail.

18.7.3.2 Implied Consent

Implied consent means the evidence on a file supports that a third party was authorized to act on the claimant's or employer's behalf. The standard of proof is the balance of probabilities. This means that it is more, and not less, likely, that the third party was authorized to represent the claimant or the employer.

For example, when a third party submits a claimant report using the claimant's Social Insurance Number and Access Code, the Commission can reasonably conclude that the third party acted with the claimant's consent. Claimants are reminded to keep their Access Codes private, since they are used as an electronic signature and identifier for the purposes of managing electronic data on a claim. A conscious decision to provide that information to a third party concludes the claimant gave that party permission, or consent, to act on his or her behalf. Once the Commission can reasonably conclude consent exists, the onus of proof falls to the claimant to show that such consent was not given for any particular false statement.

If a claimant denies consent existed, other evidence may conclude or disprove that consent. For example, when a bi-weekly benefit is directly deposited into a bank account that bears the claimant's name, it raises a presumption that the claimant knew about the payment. This is particularly true if the claimant's name is the only one recorded on the account. Evidence must be examined and a conclusion of consent must be supported by that evidence. Similarly, a denial that consent existed must be supported by the evidence.

If an employee has access to personnel or payroll files from which information is provided, it indicates the employee acted with the employer's consent. When an unauthorized employee is responsible for the misrepresentation, the employer must show what precautions prevent an employee from inappropriately accessing records or documents (such as Records of Employment). If the precautions are inadequate or non-existent, there is a strong presumption of implied consent.

18.7.4 A CLAIMANT AND THIRD PARTY

The legislation provides for imposition of a penalty on only one of the parties — either a claimant or a person representing a claimant.

The claimant is the person who made a claim for benefits, whether in the form of an application or a two week report card. Case law establishes that the claimant does not have to be the person who set up the claim, or the person who owns the Social Insurance Number. The term claimant is defined by the act of claiming. A third party is someone who does, or claims to, represent the claimant¹.

Normally a claimant repays an overpayment and penalty. When it is clear that the third party generated the false statement for which benefits were paid, liability for the overpayment and penalty is assigned to the third party. There may be cases in which there is an appearance of collusion. In this case, the claimant bears the responsibility to repay the overpayment and penalty. However, an adjudicator may also determine that the evidence demonstrates the third party bears greater responsibility for the misrepresentation and exercise discretion in assessing a penalty against the third party instead. The decision must show a judicious consideration of the facts on the file.

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1. Index of Jurisprudence/Penalty/Cards Signed by Third Party

18.7.5 EMPLOYER AND THIRD PARTY

EIA 39 allows for the imposition of multiple penalties in an incident of employer misrepresentation. Adjudication of employer and third party penalties range in complexity. The employer and the company may be the same. The employer may be a multi-national corporation. It may be difficult to say a corporate employer is capable of “knowing” that a misrepresentation was made. However, corporate employers have a responsibility to ensure only designated agents, or employees, can access sensitive documents such as the Record of Employment, and that only authorized employees disclose information that affects Employment Insurance claims. Negligence and carelessness in controlling information can be interpreted as implied consent, and simply being unaware of a misrepresentation does not relieve an employer of responsibility for a penalty. Conversely, a corporation may show appropriate controls are in place and that an employee abused the trust that an employer reasonably placed in that employee's integrity. When the evidence supports a genuine breach in the employer-employee relationship, penalizing the corporation may be inappropriate. The abuse of trust cannot translate to a situation in which the employer consented to their agent's action.

Similarly, an employer may or may not be responsible for a misrepresentation that occurs because an officer or director of the corporation abuses his or her position in the company. If there is no express or implied consent, the penalty is most appropriately assessed against the third party. Although the Commission could impose a penalty against the corporate employer in any case in which abuse occurred, Commission policy restricts that penalty to the responsible party or parties. When the Commission determines the corporate employer is not implicated in the misrepresentation, the Commission will issue a caution letter¹. This does not mean the Commission cannot penalize both the employer and the employer's representative. Rather, the Commission must determine whether responsibility for a false statement lies within the employer's control before determining the degree to which penalties against multiple parties are appropriate.

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1. The caution letter is a pre-formatted letter that reminds an employer of its obligation to prevent abuse of EI related information. The letter is not a penalty, but serves to notify the employer of its responsibility to appropriately manage sensitive documents and information.

18.7.6 DIRECTORS AND OFFICERS OF THE CORPORATION

A director, officer or agent of the employer may be an active or passive party in misrepresenting information to the Commission. These individuals may be employers within the meaning of EIA 39, or may be considered third party representatives, depending on the exact nature of the misrepresentation. The legislation 1 specifies the conditions under which such an individual may be penalized. One or more of the following acts must be proven:

• the person directed/ordered the misrepresentation;

• the person authorised the misrepresentation;
• the person agreed to or accepted that the false statement would be made (i.e., assented to them);
• the person knew about the misrepresentation and silently accepted it (i.e. acquiesced to them); or,
• the person actually participated in the misrepresentation.

In other words, if a representative of the company actively participates in, or passively allows misrepresentation, that representative is subject to a penalty. This penalty may be in addition to any other penalty assessed. The test is whether the Commission can establish express or implied consent from the employer in the representative's actions. If consent can be shown, both the employer and the representative are subject to a penalty. If consent cannot be shown, Commission policy restricts the penalty to the officer, director or agent.

A third party penalty for a corporate representative is calculated in the same way any employer penalty is calculated. Evidence and the standard of proof remain the same.

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1. EIA 39(3)