Confédération des syndicats nationaux v. Canada (Attorney General)

Confédération des syndicats nationaux v. Canada (Attorney General)
Collection
Supreme Court Judgments
Date
2008-12-11
Neutral citation
2008 SCC 68
Report
[2008] 3 SCR 511
Case number
31809, 31810
Judges
McLachlin, Beverley; Binnie, William Ian Corneil; LeBel, Louis; Deschamps, Marie; Fish, Morris J.; Abella, Rosalie Silberman; Rothstein, Marshall
On appeal from
Quebec
Subjects
Constitutional law
Notes
SCC Case Information: 31810, 31809
Decision Content
SUPREME COURT OF CANADA
Citation: Confédération des syndicats nationaux v. Canada (Attorney General), [2008] 3 S.C.R. 511, 2008 SCC 68
Date: 20081211
Docket: 31809, 31810
Between:
Confédération des syndicats nationaux
Appellant
and
Attorney General of Canada
Respondent
‑ and ‑
Attorney General of Quebec, Attorney General of
New Brunswick and Canadian Labour Congress
Interveners
and between:
Syndicat national des employés de l’aluminium
d’Arvida Inc., Jean‑Marc Crevier and Marie Langevin
Appellants
and
Attorney General of Canada
Respondent
‑ and ‑
Attorney General of Quebec, Attorney General of
New Brunswick and Canadian Labour Congress
Interveners
Official English Translation
Coram: McLachlin C.J. and Binnie, LeBel, Deschamps, Fish, Abella and Rothstein JJ.
Reasons for Judgment:
(paras. 1 to 96)
LeBel J. (McLachlin C.J. and Binnie, Deschamps, Fish, Abella and Rothstein JJ. concurring)
______________________________
Confédération des syndicats nationaux v. Canada (Attorney General), [2008] 3 S.C.R. 511, 2008 SCC 68
Confédération des syndicats nationaux Appellant
v.
Attorney General of Canada Respondent
and
Attorney General of Quebec, Attorney General of
New Brunswick and Canadian Labour Congress Interveners
- and -
Syndicat national des employés de l’aluminium
d’Arvida inc., Jean‑Marc Crevier and Marie Langevin Appellants
v.
Attorney General of Canada Respondent
and
Attorney General of Quebec, Attorney General of
New Brunswick and Canadian Labour Congress Interveners
Indexed as: Confédération des syndicats nationaux v. Canada (Attorney General)
Neutral citation: 2008 SCC 68.
File Nos.: 31809, 31810.
2008: May 13; 2008: December 11.
Present: McLachlin C.J. and Binnie, LeBel, Deschamps, Fish, Abella and Rothstein JJ.
on appeal from the court of appeal for quebec
Constitutional law — Division of powers — Unemployment insurance — Series of active measures designed to maintain tie between insured persons and labour market — Whether provisions of federal employment insurance legislation relating to employment service, to training and work‑sharing programs and to employment benefits are valid — Constitution Act, 1867, s. 91 (2A) — Employment Insurance Act, S.C. 1996, c. 23, ss. 24 , 25 , 56 to 65.2 , 73 , 75 , 77 , 109 (c), 135(2) .
Constitutional law — Taxation — Delegation of taxing authority — Principle of parliamentary control over collection of taxes — Employment insurance surpluses accumulated in Consolidated Revenue Fund — Power to set premium rates delegated without legislated criteria — Whether employment insurance premiums constitute administrative charge or tax — If they constitute tax, whether they were collected in accordance with principle of parliamentary control and pursuant to valid delegation — Constitution Act, 1867, ss. 53 , 91(3) — Employment Insurance Act, S.C. 1996, c. 23, ss. 66 to 66.3 , 72 .
In 1996, the Employment Insurance Act established the legal framework for a significant restructuring of the unemployment insurance system. In addition to the usual active measures against unemployment, such as an employment service and training and work‑sharing programs (ss. 60 , 25 and 24 ), five types of employment benefits were introduced in this legislation (s. 59 ): wage subsidies, earnings supplements, self‑employment assistance, job creation partnerships and skills loans or grants.
Two events related to the financing of the system laid the groundwork for the new legislation: in 1986, on the recommendation of the Auditor General of Canada, the Employment Insurance Account was consolidated with government revenues as a whole and, in 1990, the government stopped financing the Account out of its general revenues, relying on premiums at an annual rate based, at that time, on the cost over only a few previous years. In the 1996 legislation, Parliament revised the financing of the Account in order to balance the program’s budget over the long term. Section 66 set out guidelines for a system under which premiums were to be set high enough to cover the system’s current expenditures and ensure the gradual accumulation of a reserve so that rates could be stabilized regardless of the constraints of business cycles. In the space of six or seven years, the deficits were absorbed and surpluses totalling more than $40 billion were accumulated. In 2001, Parliament enacted s. 66.1, which, departing from s. 66 , authorized the Governor General in Council to set premium rates directly for 2002 and 2003. For 2004, Parliament set the premium rate in the Act itself. For 2005, it went back, by enacting s. 66.3 , to having the Governor General in Council set the rates.
The appellants brought declaratory actions to challenge the constitutional validity of the “active” measures, the premium‑setting mechanisms, the accumulation of surpluses and the allocation of those surpluses to overall federal expenditures. The Quebec Superior Court and Court of Appeal rejected their arguments.
Held: The appeals should be allowed in part. The versions of ss. 66.1 and 66.3 of the Employment Insurance Act in force in 2001, 2002 and 2005 were unconstitutional. Employers’ and employees’ premiums for those years were collected unlawfully. This declaration is suspended for a period of 12 months from the date of this judgment.
The impugned active measures are valid. The programs provided for in the Employment Insurance Act reflect changes in the economy and the labour market and are part of the “natural evolution” of the unemployment insurance power conferred on the Parliament of Canada. That power must be interpreted generously. Its objectives are not only to remedy the poverty caused by unemployment, but also to maintain the ties between unemployed persons and the labour market. Thus, regulating unemployment insurance does not mean simply taking passive responsibility for paying benefits to Canadian workers during periods when they are not working. It also means taking on a more active role designed to maintain or restore ties between persons who may become or are unemployed and the labour market. Job placement and training programs are initiatives that fell within Parliament’s legislative jurisdiction from the outset. These programs, together with work‑sharing programs, retain a close enough connection with the system’s basic objectives and form to a sufficient extent an integral part of the system. Furthermore, the labour market has changed, and the way the federal power under s. 91 (2A) of the Constitution Act, 1867 is exercised can reflect this. Employment benefits programs illustrate this change, as they are designed to reinforce ties with the labour market or to prepare workers to re‑enter it. For example, job creation partnerships are designed to alleviate some of the consequences of weak labour markets in disadvantaged regions and thus reduce unemployment. Earnings supplements also directly affect ties with the labour market: they temporarily increase the income of workers who would otherwise be more hesitant to accept jobs for less pay. Self‑employment assistance fosters the establishment of businesses and helps insured participants re‑enter the labour market. Wage subsidies paid to employers specifically facilitate entry into the labour market by disadvantaged persons who wish to improve their productivity or gain work experience, and they help establish or maintain the employability of workers who might otherwise be condemned to not working. Skills loans and grants enable insured participants to acquire advanced knowledge, and their purpose is to make it easier for such people to obtain employment. [31] [39] [42‑49]
As long as s. 66 of the Act applied, the existence of criteria for the setting of employment insurance premium rates ensured the application of a principle of allocation of and stability in the amounts being levied, and this justifies characterizing those amounts, from a constitutional standpoint, as a regulatory charge despite the existence of large surpluses. Because the federal government made a firm policy decision to put an end to deficits in employment insurance, stabilize fluctuating premium rates and strengthen the system by building up an adequate reserve, the 1996 legislation made the Employment Insurance Commission responsible for setting premium rates each year in accordance with the objectives set out in s. 66 : ensuring that there would be enough revenue over a business cycle to pay the amounts charged to the Account, and maintaining relatively stable rate levels throughout the business cycle. During the period in question, from 1996 to 2001, the contributions collected were paid into the Consolidated Revenue Fund, the monies were used like any other part of the revenues in the Consolidated Revenue Fund, and the appropriate accounts were kept; the amounts needed for the system to function were credited or charged to the Employment Insurance Account. The government’s use of them does not, therefore, constitute a misappropriation of employment insurance monies. [59] [66] [73‑74]
When a new rate‑setting mechanism was adopted for 2002, 2003 and 2005, the framework under s. 66 ceased to apply. The Act no longer included criteria to guide the setting of rates, which was now within the discretion of the Governor General in Council. Employment insurance premiums continued to be a part of government revenues, whereas, as a result of the disappearance of the relationship between that levy and the regulatory scheme, premiums were at the same time transformed into a payroll tax. But s. 53 of the Constitution Act, 1867 reflects the ancient, but fundamental, principle of our democratic system that there should be no taxation without representation. Only Parliament may impose a tax ab initio. The delegation of taxing authority is constitutional if the legislation provides expressly and unambiguously for the delegation. The versions of ss. 66.1 and 66.3 that applied in 2002, 2003 and 2005 did not state that Parliament was delegating taxing authority. The delegation they did provide for concerned a charge that had become a levy for general purposes, but it was not specified in the Act that Parliament intended to delegate its taxing authority as such. [60] [70] [75] [82] [87] [92‑93]
Cases Cited
Applied: Reference re Employment Insurance Act (Can.), ss. 22 and 23, [2005] 2 S.C.R. 669, 2005 SCC 56; Eurig Estate (Re), [1998] 2 S.C.R. 565; referred to: Attorney‑General for Canada v. Attorney‑General for Ontario, [1937] A.C. 355, aff’g Reference re The Employment and Social Insurance Act, [1936] S.C.R. 427; Canadian Western Bank v. Alberta, [2007] 2 S.C.R. 3, 2007 SCC 22; Kitkatla Band v. British Columbia (Minister of Small Business, Tourism and Culture), [2002] 2 S.C.R. 146, 2002 SCC 31; YMHA Jewish Community Centre of Winnipeg Inc. v. Brown, [1989] 1 S.C.R. 1532; Westbank First Nation v. British Columbia Hydro and Power Authority, [1999] 3 S.C.R. 134; 620 Connaught Ltd. v. Canada (Attorney General), [2008] 1 S.C.R. 131, 2008 SCC 7; Reference re Agricultural Products Marketing Act, [1978] 2 S.C.R. 1198; Lawson v. Interior Tree Fruit and Vegetable Committee of Direction, [1931] S.C.R. 357; Ontario English Catholic Teachers’ Assn. v. Ontario (Attorney General), [2001] 1 S.C.R. 470, 2001 SCC 15.
Statutes and Regulations Cited
Act to amend the Employment Insurance Act and the Employment Insurance (Fishing) Regulations, S.C. 2001, c. 5, s. 9 .
Budget Implementation Act, 1994, S.C. 1994, c. 18, s. 26.
Budget Implementation Act, 2003, S.C. 2003, c. 15, s. 21 .
Budget Implementation Act, 2004, S.C. 2004, c. 22, s. 25 .
Constitution Act, 1867, ss. 53 , 91 (2A), (3) .
Employment and Immigration Reorganization Act, S.C. 1977, c. 54.
Employment and Social Insurance Act, S.C. 1935, c. 38.
Employment Insurance Act, S.C. 1996, c. 23, ss. 22(1) , 23(1) , 24 , 25 , 56 to 65.2 , 66 to 66.3 , 71 , 72 , 73 , 75 , 77 , 109 (c), 135(2) , Schedule II, s. 12.
Unemployment Insurance Act, S.C. 1955, c. 50, s. 37.
Unemployment Insurance Act, 1940, S.C. 1940, c. 44, ss. 17, 31, First Schedule, Part II, Second Schedule.
Unemployment Insurance Act, 1971, S.C. 1970‑71‑72, c. 48, s. 39, 62, 63.
Authors Cited
Brun, Henri, Guy Tremblay et Eugénie Brouillet. Droit constitutionnel, 5e éd. Cowansville, Qué.: Yvon Blais, 2008.
Canada. House of Commons. House of Commons Debates, vol. 136, 2nd Sess., 36th Parl., November 1, 1999.
Canada. House of Commons. House of Commons Debates, vol. 137, 1st Sess., 37th Parl., March 2, 2001.
Hogg, Peter W. Constitutional Law of Canada, 5th ed. Supp., vol. 1. Scarborough, Ont.: Thomson/Carswell, 2007 (updated 2007, release 2).
Issalys, Pierre, et Denis Lemieux. L’action gouvernementale: Précis de droit des institutions administratives, 2e éd. rev. et augm. Cowansville, Qué.: Yvon Blais, 2002.
Magnet, Joseph Eliot. Constitutional Law of Canada, vol. 1, Federalism / Aboriginal Peoples, 9th ed. Edmonton: Juriliber, 2007.
APPEALS from judgments of the Quebec Court of Appeal (Robert C.J.Q. and Gendreau and Brossard JJ.A.), [2006] R.J.Q. 2672, SOQUIJ AZ-50398096, SOQUIJ AZ‑50398097, [2006] Q.J. No. 12562 (QL), [2006] Q.J. No. 12563 (QL), 2006 CarswellQue 14211, 2006 QCCA 1453, 2006 QCCA 1454, affirming a decision of Gascon J., [2003] R.J.Q. 3188, SOQUIJ AZ‑50206024, [2003] Q.J. No. 15801, 2003 CarswellQue 2667. Appeals allowed in part.
Guy Martin and Jean‑Guy Ouellet, for the appellant Confédération des syndicats nationaux.
Gilles Grenier, Claude Leblanc and Bernard Philion, for the appellants Syndicat national des employés de l’aluminium d’Arvida inc., Jean‑Marc Crevier and Marie Langevin.
James Mabbutt, René LeBlanc, Carole Bureau and Linda Mercier, for the respondent.
Alain Gingras, for the intervener the Attorney General of Quebec.
Gaétan Migneault, for the intervener the Attorney General of New Brunswick.
Steven Barrett and Colleen Bauman, for the intervener the Canadian Labour Congress.
English version of the judgment of the Court delivered by
LeBel J. —
I. Introduction
[1] In these appeals, a set of issues related to Canada’s employment insurance system are once again before this Court. The debate, which was originally political in nature and will no doubt always be partly political, has moved into the judicial realm. The appellants Confédération des syndicats nationaux (“CSN”) and Syndicat national des employés de l’aluminium d’Arvida inc. (“Syndicat”) are contesting important aspects of the federal employment insurance system in separate declaratory actions. They are, first of all, challenging the constitutional validity of a series of “active” measures that are intended to fight unemployment and not simply to compensate unemployed persons. In the appellants’ opinion, those measures do not fall within the legislative authority over unemployment insurance conferred on the Parliament of Canada by s. 91 (2A) of the Constitution Act, 1867 . The appellants are also contesting the method adopted to finance employment insurance, the accumulation of large surpluses in the Employment Insurance Account and the use of those surpluses by the federal government. For the reasons that follow, I conclude that the active measures adopted by Parliament fall within its legislative authority. In addition, it is my opinion that the system adopted to finance employment insurance has remained consistent with constitutional norms, except in 2002, 2003 and 2005. But the premium‑setting mechanism used during those years was inconsistent with the constitutional principles that govern the creation of regulatory charges and the imposition of taxes by Parliament. I would therefore allow the appeals in part.
II. Origin of the Case
[2] This case arose out of efforts by the federal government to stabilize the national system of unemployment insurance or, as it is now called in the legislation, “employment insurance” and to adapt it better to the constraints inherent in changing business cycles. Various reforms were adopted over a period of several years that led to, among other things, the accumulation of large surpluses, political debates over the legitimacy and appropriateness of the surpluses and, finally, court challenges. To fully understand the nature and scope of these challenges, it will be necessary to summarize recent developments in the employment insurance system.
[3] The federal employment insurance system dates back to a constitutional amendment passed in 1940. Various changes were made to the system over time, and after 1980 it began to run a deficit. The federal government had to replenish the system’s account from time to time, which increased the federal deficit. In 1986, the government incorporated the account into the Consolidated Revenue Fund on the recommendation of the Auditor General of Canada. This account subsequently became known as the “Employment Insurance Account” (“Account”). In 1990, the government stopped covering the deficits in the Account. Successive federal governments then tried to restore financial stability to the employment insurance system and to rethink some of its methods and objectives.
[4] In 1996, the Employment Insurance Act, S.C. 1996, c. 23 , established the legal framework for a significant restructuring of the system of unemployment insurance, which has been known since then as employment insurance. The legislation tightened eligibility requirements for unemployment benefits and included measures of a more interventionist nature that were designed to maintain or improve the ability of workers to enter the labour market. At the same time, the Parliament of Canada reviewed the financing of the Account. It established a system under which premiums were to be set high enough to cover the system’s current expenditures and ensure the gradual accumulation of a reserve so that raises in premiums would be unnecessary during periods of economic slowdown and higher unemployment. During the years that followed, Parliament changed the premium‑setting mechanisms frequently. These reforms led to the emergence and the sometimes rapid growth of surpluses in the Account. The surpluses apparently reached or exceeded $40 billion. Over the same period, employment insurance premiums were paid into the Consolidated Revenue Fund pursuant to the policy adopted in 1986.
[5] The emergence of surpluses in the Account has given rise to extensive political debate that falls outside the jurisdiction of the courts. We must consider the appellants’ two court challenges, which were heard and decided together. I will therefore now review the nature and purpose of the appellants’ actions.
[6] The appellants brought separate declaratory actions to challenge what they saw as an abuse of the federal unemployment insurance power; they argued that the limits of that power had been exceeded. In their opinion, s. 91 (2A) of the Constitution Act, 1867 gives the Parliament of Canada the power to establish a scheme to provide compensation to employees during periods of unemployment, but that scheme cannot include active measures to promote employment and is to be financed in accordance with the principle of mutuality. The premiums collected from employees and employers for the operation of the system cannot exceed what is needed to pay current expenditures and establish a reasonable reserve for the system’s activities. Allocating premiums and the surpluses generated by the collection of premiums to other purposes, such as the elimination of the federal budget deficit, violates the Constitution. The appellants also argued that the premium‑setting mechanism is unconstitutional. If that mechanism were justified as an exercise of the federal taxation power, it was implemented in a manner that violated s. 53 of the Constitution Act, 1867 . On the basis of these arguments, which for the most part were common to the two proceedings, the Syndicat requested a finding that several provisions of the Employment Insurance Act are invalid and a declaration that the surpluses in the Account belong to the system’s contributors, namely employers and employees. The CSN sought similar conclusions.
[7] In substance, the primary purpose of the actions was to quash the “active” measures established in the Employment Insurance Act , namely the employment service and employment benefits. The appellants also contested the premium‑setting mechanism, the federal government’s use of premiums and the allocation of the Account’s surpluses. The respondent, the Attorney General of Canada, argued that all the “active” measures challenged by the appellants, the allocation of surpluses in the Account and the premium‑setting mechanisms are valid. The two declaratory actions were joined for hearing. Both the Superior Court and the Quebec Court of Appeal heard them together.
III. Judicial History
A. Superior Court ([2003] R.J.Q. 3188)
[8] Gascon J. dismissed the appellants’ actions in their entirety. He began by finding that the employment service and the active measures, that is, employment benefits and training and work‑sharing programs, fall within the federal unemployment insurance power. Then, in the second part of his decision, he rejected the plaintiffs’ arguments about the setting of premiums and the Employment Insurance Account’s surpluses. In his opinion, the premium‑setting mechanisms are constitutional. Premiums are a regulatory charge tied to the administration and implementation of the employment insurance system. If they were to be regarded as taxes, imposing them constituted a valid exercise of Parliament’s taxation power. Moreover, according to Gascon J., the challenge to the premium rates themselves raised an administrative law issue that fell within the jurisdiction of another court. He added that the plaintiffs had at any rate abandoned this branch of their actions. Finally, the Superior Court held that the federal government had not appropriated the Account’s surpluses. The federal government’s financial statements continued to show a debt owed by the Consolidated Revenue Fund to the Account. In conclusion, Gascon J. refused to assess the political wisdom of the measures and methods that had led to the accumulation of surpluses in the Account.
B. Quebec Court of Appeal ([2006] R.J.Q. 2672, 2006 QCCA 1453, 2006 QCCA 1454)
[9] The Quebec Court of Appeal unanimously dismissed the appellants’ appeals, thus confirming the constitutionality of all the measures and provisions at issue. However, its reasoning differed in some respects from that of the Superior Court. Its decision comprises two sets of reasons. Robert C.J.Q. wrote the reasons on the constitutional challenge to the “active” measures and dealt with the issue whether those measures fell within Parliament’s legislative jurisdiction. Gendreau and Brossard JJ.A. dealt in joint reasons with the setting of premiums and the issue of surplus allocation.
[10] Robert C.J.Q. carefully and thoroughly reviewed the statutory provisions and programs at issue to determine whether they are constitutional. He first concluded that the employment service, the work‑sharing program and the training measures are perfectly consistent with an approach designed to reduce the risk of unemployment. They therefore fall within the federal unemployment insurance power.
[11] According to Robert C.J.Q., employment benefits programs are more problematic. This category of benefits includes five different programs established under s. 59 of the Employment Insurance Act : wage subsidies paid to employers as a springboard to possible regular employment (s. 59 (a)), earnings supplements for employees interested in low‑paid jobs (s. 59 (b)), self‑employment assistance to encourage the creation of small businesses (s. 59 (c)), job creation partnerships involving businesses and community organizations in areas with high unemployment rates (s. 59 (d)), and skills loans or grants for workers seeking to obtain advanced skills (s. 59 (e)).
[12] Robert C.J.Q. found on the basis of the principles laid down by the Supreme Court of Canada in Reference re Employment Insurance Act (Can.), ss. 22 and 23, [2005] 2 S.C.R. 669, 2005 SCC 56 (“Reference”), that some of these programs do not fall within Parliament’s jurisdiction over the public employment insurance system. He placed the programs in two categories: income replacement benefits and initiative promotion. According to Robert C.J.Q., the first category includes wage subsidies, earnings supplements and job creation partnerships. In his view, these programs are consistent with the purpose of insurance and meet the tests established in the Reference. They therefore fall within the federal unemployment insurance power.
[13] However, Robert C.J.Q. did not clearly decide whether the initiative promotion programs, namely self‑employment assistance and skills loans or grants, fall within the federal unemployment insurance power. Instead, he concluded that they had been validly adopted pursuant to the federal spending power. He also noted that these programs are not intended to regulate matters within provincial jurisdiction and that the Parliament of Canada had expressly made them subject to provincial consent.
[14] In their joint reasons, Gendreau and Brossard JJ.A. rejected the appellants’ arguments that the mechanisms for financing employment insurance and the appropriation of the Account’s surpluses are unconstitutional. With regard to the premium‑setting mechanism, they found that the distinction between regulatory charges and taxes is of little relevance in this case. Ultimately, the system for setting premiums resulted from a valid exercise of the federal taxation power. Moreover, according to Gendreau and Brossard JJ.A., the accumulation of surpluses in the Account is not problematic from a constitutional standpoint. All amounts collected by the federal government had to be paid into the Consolidated Revenue Fund. The way those amounts were recorded did not affect the claim that the Account continued to have against the Consolidated Revenue Fund.
[15] After their case was dismissed by the Quebec Court of Appeal, the appellants appealed to this Court. Their appeals raise the same issues as in the courts below.
IV. Analysis
A. General Nature of the Issues
[16] In this Court, the appellants first challenge the constitutional validity of the active measures incorporated into the Employment Insurance Act to address unemployment. This branch of the appeals concerns the interpretation of s. 91 (2A) of the Constitution Act, 1867 and thus the scope of Parliament’s unemployment insurance power. A second branch focuses on the constitutionality of the system adopted to finance employment insurance, the accumulation of surpluses through the collection of premiums from employers and employees, and the allocation of those surpluses to purposes other than compensating unemployed persons.
[17] Before turning to the parties’ arguments, I note that the Chief Justice of this Court stated the following constitutional questions in an order dated October 17, 2007:
1. Do ss. 66 to 66.3 and 72 of the Employment Insurance Act, S.C. 1996, c. 23 , 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 Employment Insurance Act, S.C. 1996, c. 23 , 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 Employment Insurance Act, S.C. 1996, c. 23 , 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 Employment Insurance Act, S.C. 1996, c. 23 , 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 Employment Insurance Act, S.C. 1996, c. 23 , validly based on the federal spending power?
[18] The principal statutory provisions mentioned in these questions are appended to these reasons. I will return to them in the course of my analysis.
B. Issues Related to Parliament’s Unemployment Insurance Power
[19] In this branch of their appeals, the appellants challenge the constitutional validity of the “active” measures to address unemployment. They argue, first of all, that an employment service (s. 60) should not even exist. They also object to the existence of work‑sharing programs (s. 24 ) and benefits associated with participation in training activities. The appellants also contend that the employment benefits programs and support measures established under ss. 57 and 59 are unconstitutional, and thus ultra vires Parliament. In substance, according to the appellants, the power conferred on Parliament by the Constitution is limited to paying compensation during periods of unemployment, and Parliament may not exercise it to take action to prevent or limit unemployment; nor may Parliament exercise the federal spending power to intervene in matters under provincial legislative jurisdiction. On this last point concerning the spending power, the Attorney General of Quebec supports the appellants’ position.
[20] The Attorney General of Canada disagrees with all the appellants’ arguments, submitting that they are inconsistent with the judicial decisions in which the principles for interpreting the federal legislative power in this area were defined. In those decisions, he contends, and in the Reference in particular, Parliament’s power was held to be broad and flexible, even where measures to prevent unemployment are concerned. In the respondent’s view, the spending power need not therefore be considered.
C. Issues Related to the Financing of the Employment Insurance System and to the System’s Surpluses
[21] A second branch of the appeals concerns a set of issues related to the financing of the employment insurance system and the allocation of the surpluses accumulated since 1996 through the collection of premiums from employers and employees. According to the appellants, the statutory provisions applied since 1996 to set premium rates exceed the federal unemployment insurance power, as Parliament’s authority to require the payment of premiums is limited to the amounts needed for the system to function properly and for reasonable reserves to be accumulated. In their view, the provisions in question — ss. 66 , 66.1 and 66.3 — contravene this fundamental principle. Moreover, the appellants contend that the premium‑setting mechanisms no longer have any connection with the regulatory framework of the employment insurance system and that they represent an unlawful exercise of the federal taxing power because the procedure followed is not consistent with the principle of parliamentary control over taxation provided for in s. 53 of the Constitution Act, 1867 . Finally, the appellants argue that the accumulation of surpluses and the allocation of those surpluses to overall federal expenditures, including public debt reduction, are contrary to the principles that determine the constitutional framework for collecting and using employment insurance premiums.
[22] According to the respondent, the setting and use of premiums have remained consistent with constitutional requirements. First, the statutory provisions in question are consistent with the principle that there must be a sufficient connection with the regulatory scheme for employment insurance. If not, the federal taxation power was validly exercised pursuant to a clear and sufficiently complete delegation of authority by Parliament. Finally, the respondent contends that the premiums were used and accounted for in accordance with the rules governing the Consolidated Revenue Fund and that the rights of contributors were not violated.
D. Parliament’s Unemployment Insurance Power
[23] In their arguments, the appellants and the Attorney General of Canada display conflicting visions of the scope of Parliament’s unemployment insurance power. The appellants take the position that this power is essentially limited to the payment of benefits during periods of unemployment and the collection of money to pay those benefits. They stress that a close relationship must be maintained between the premiums imposed on employers and employees and the system those premiums are used to finance. According to the respondent’s interpretation, the Parliament of Canada may adopt active measures to prevent unemployment or alleviate its consequences.
[24] In light of this fundamental disagreement, it will be necessary to consider the origin of the federal unemployment insurance power, its nature, how it should be interpreted and the constitutional principles governing it. These questions were recently considered by my colleague Deschamps J. in the Reference. Her analysis remains valid and must guide the application of s. 91 (2A) in the appeals now before the Court.
[25] The current employment insurance system originated in the economic and social problems caused by the Depression in the 1930s. In 1937, the Privy Council affirmed a decision of the Supreme Court of Canada that a first federal unemployment insurance statute, the Employment and Social Insurance Act, S.C. 1935, c. 38, was invalid (Attorney‑General for Canada v. Attorney‑General for Ontario, [1937] A.C. 355 (P.C.), aff’g Reference re The Employment and Social Insurance Act, [1936] S.C.R. 427). The Privy Council held that the legislation affected property and civil rights in the provinces — employer‑employee relations in particular — and was therefore ultra vires the Parliament of Canada, at pp. 365 and 367.
[26] Following that setback, the federal government entered into negotiations with the provinces. The discussions led to an agreement on a constitutional amendment that resulted in s. 91 (2A). As Deschamps J. noted, that amendment conferred a new legislative power on Parliament that had been detached from the provinces’ general jurisdiction over property and civil rights:
This means that when the Constitution was amended, a portion of the jurisdiction over property and civil rights was detached so that the aspects relating to unemployment insurance could be assigned to Parliament.
(Reference, at para. 37)
[27] Deschamps J. then resolved a first issue: whether this new federal jurisdiction was immutable. One argument that had been made in the Reference was that the content of the jurisdiction corresponded to the content of the Unemployment Insurance Act, 1940, S.C. 1940, c. 44, First Schedule, Part II (“1940 Act”). According to this argument, the 1940 Act essentially restated the provisions of the 1935 legislation that the Privy Council had held to be invalid and that the government had sought to revive through the constitutional amendment. The parameters of the application of s. 91 (2A) therefore had to be found in that Act. The Court rejected this argument and concluded that the 1940 Act was merely one way of exercising the new power and did not determine its content:
The question is therefore not the way in which Parliament initially exercised its jurisdiction, but the scope of its jurisdiction over unemployment insurance.
(Reference, at para. 39)
[28] To determine the content of the power transferred to Parliament, this Court considered the circumstances of the transfer and its objectives. Relying in particular on the correspondence between the federal government and the provinces that led up to the constitutional amendment, the Court noted that the purpose of the 1940 Act had been not only to remedy the destitution caused by unemployment, but also to put an end to unemployment by creating return‑to‑work mechanisms, including a national employment service (Reference, at para. 42). Deschamps J. defined the purpose of the transfer of jurisdiction as follows:
In essence, the purpose of the transfer of jurisdiction was to equip Canada with the tools it needed to mitigate the effects of anticipated unemployment by providing certain classes of unemployed persons with benefits and by setting up job search centres. The transfer of jurisdiction was to be a tool for internal organization involving both short‑term relief measures, namely benefits, and medium‑term measures, namely job placement services for the unemployed.
(Reference, at para. 43)
[29] This is the context in which s. 91 (2A) became part of the Canadian Constitution. This provision must nonetheless be interpreted in the same way as other provisions relating to the division of powers between Parliament and the provincial legislatures. It is necessary to identify the essential elements of the power and determine whether the adopted measures are “consistent with the natural evolution of that power” (Reference, at para. 44).
[30] In this analysis of the content of legislative powers, changes in the way such powers are exercised and in the interplay of the powers assigned to the two levels of government often raise difficult problems. The solutions that must be applied when exercising powers change where new problems must be addressed. However, the evolution of society cannot serve as a pretext for changing the nature of the division of powers, which is a fundamental component of the Canadian federal system. The power in question must be interpreted generously, but in a manner consistent with its legal context, having regard to relevant historical elements (Reference, at paras. 45‑46; H. Brun, G. Tremblay and E. Brouillet, Droit constitutionnel (5th ed. 2008), at pp. 201‑2).
[31] Thus, according to this Court’s decision in the Reference, the federal unemployment insurance power must be interpreted generously. Its objectives are to remedy the poverty caused by unemployment and maintain the ties between unemployed persons and the labour market. On this basis, the Court identified four characteristics of unemployment insurance plans under s. 91 (2A):
With these principles and objectives in mind, four characteristics that are essential to a public unemployment insurance plan can be identified:
(1) It is a public insurance program based on the concept of social risk
(2) the purpose of which is to preserve workers’ economic security and ensure their re‑entry into the labour market
(3) by paying temporary income replacement benefits
(4) in the event of an interruption of employment.
(Reference, at para. 48)
[32] To determine whether the impugned measures fall within the power, the constitutional doctrines governing the division of powers must also be applied. The interplay between legislative powers often becomes complex. A given problem may have various aspects that can relate to different powers assigned to the two levels of government (Canadian Western Bank v. Alberta, [2007] 2 S.C.R. 3, 2007 SCC 22, at paras. 23‑24; Reference, at para. 8).
[33] The first step is to identify the pith and substance of the legislation in question (Canadian Western Bank, at para. 25; Kitkatla Band v. British Columbia (Minister of Small Business, Tourism and Culture), [2002] 2 S.C.R. 146, 2002 SCC 31). To do this, two facets of the legislation must be examined: its purpose and its legal effect. This analysis requires that the true purpose of the legislation be ascertained (Canadian Western Ban