HUMA Committee Report

A.             Qualifying for Benefits

        Two important features of the 1996 EI reform were the extension of coverage to the first hour of work and the introduction of an hours-based qualification and benefit entitlement structure. This reform eliminated the notion of minimum insurability, believed to be an important contributor to the “15-hour job trap,” and was designed to provide greater flexibility for workers employed in non-standard jobs (e.g. multiple job holders, long-hour workweeks, etc.).

        Under the EI reform, the 12 to 20 weeks-based qualification requirement was converted to 420 to 700 hours using a 35-hour workweek. The requirement for new entrants and re-entrants was significantly increased from 20 weeks to 910 hours so as to reduce EI dependency and to encourage workers, especially young ones, with a tenuous attachment to the labour force to establish stronger ties with work. The Committee was told that this new rule has had both positive and negative effects. In terms of youths, the Committee was told that UI/EI reforms in the 1990s have had a positive impact on job duration and schooling among individuals 18 to 29 years old in Atlantic Canada. While it is difficult to isolate the factors underlying these trends, the Committee was told that the 1996 EI reform was partly responsible for these positive results. The Committee was also advised that the elimination of experience-rating could undermine these positive trends.

        The Committee was told that it is more difficult for individuals to qualify under the hours-based qualification requirement than the former weeks-based one, leading some to recommend a substantial reduction in the qualification requirement (e.g. a universal minimum qualification requirement of 350 hours). One of the reasons why the hours-based requirement is perceived to be more stringent might be due to the fact that under the former weeks-based qualification requirement a week was insurable if it involved at least 15 hours of insurable work or involved weekly earnings at least equal to 20% of maximum weekly insurable earnings. Another contributor might be the 35-hour workweek used to calculate the hours-based system. In 1996, average actual hours worked in all full-time jobs was 39.2 hours, but only 16.4 hours in all part-time jobs. According to an ongoing study conducted by HRDC, the hours-based qualification requirement did not significantly alter overall eligibility. Despite this general observation, it is important to note that eligibility under the hours-based system has had a different impact on various groups in the labour market; eligibility has increased among men, but declined among women and youths.^[2] Multiple job-holders have also benefited under the hours-based system, as some of these workers were unable to consolidate weekly hours of work prior to the 1996 EI reform.

        Most members of the Committee believe that there is some scope for modifying EI’s qualification requirements, especially in terms of the qualification requirement for new entrants and re-entrants. Many witnesses indicated that the qualification requirement for new entrants and re-entrants under the hours-based system has had a detrimental effect on women’s eligibility. This results mainly from the fact that the incidence of part-time employment is much higher among women than among men and women tend to enter and exit the labour market more frequently than their male counterparts.^[3] It is for this reason, that the government recently reduced the qualification requirement for special benefits from 700 hours to 600 hours (including new entrants/re-entrants) and proposed in Bill C-2 to redefine new entrant/re-entrant by extending the labour force attachment of individuals who collect maternity or parental benefits in the four-year period preceding the current two-year look-back period.

        As noted above, the hours-based qualification requirement has reduced eligibility among women and youths. The Committee believes that this result is primarily due to the 910-hour qualification requirement for new entrants and re-entrants, a threshold that greatly exceeds the former 20-week qualification requirement imposed on this group of workers.* While the policy objective underlying the higher qualification requirement for new entrants/re-entrants is intended to reduce EI dependency, the Committee was informed that fiscal considerations also played a role in establishing its current level. Furthermore, the Committee notes that the current qualification requirement for this group is significantly lower for special benefits than regular benefits. We have concerns with this differential qualification requirement and note that its existence lends itself to inequitable treatment among new entrants and re-entrants qualifying for regular benefits. The reason for this is that when a new entrant/re-entrant qualifies for special benefits, these benefits can be used to determine whether an individual is a new entrant or re-entrant for the purposes of qualifying for regular benefits.

        In view of the growing potential for inequitable treatment among new entrants and re-entrants as well as our belief that the policy to reduce EI dependency extends well beyond the intended target group, the Committee believes that the 910-hour threshold should be lowered. The Committee also believes that the government should re-examine and eliminate any inequities in the existing qualification requirements for regular and special benefits.

Recommendation 1:

The Committee recommends that:

·        the government consider reducing the qualification requirement for new entrants and
      re-entrants from its current level of 910 hours to 700 hours. This would establish a
      qualification requirement based on a 35-hour
      week that is equal to the 20-week requirement that applied to this group prior to the EI reform.*

·        the government consider restructuring the 420 to 700 hours qualification requirement to
      better reflect the unemployment problems experienced by seasonal workers.**

·        the government consider further reducing the qualification requirement for special benefits.***

        The Committee is also concerned with the existing definition of a new entrant and re-entrant, particularly in view of Bill C-2’s proposed redefinition that would exclude individuals who receive maternity/parental benefits in the four-year period preceding the current two-year look-back period. Under the current definition, an individual is a new entrant or re-entrant if in the 52-week period preceding the qualifying period the individual did not obtain 490 (a) hours of insurable employment; (b) hours for which benefits were paid, based on 35 hours for each week of benefits; (c) prescribed hours that relate to employment in the labour force; or (d) any combination of the aforementioned hours.^[6]

        Witnesses generally applauded the government’s proposal to extend the look-back period for women who leave the labour market to raise a family, but questioned why the definition of a re-entrant should be relaxed for family-friendly reasons and not for other workers who can demonstrate a very strong attachment to the labour force. We were told that the existing definition of new entrants and re-entrants does not reflect many of the realities found in today’s labour market. For instance, when older workers with obsolete skills are displaced they often experience long spells of unemployment before securing a new job. Despite years and years of labour force attachment, the time spent unemployed, at least in this context, is not counted as prescribed hours of attachment to the labour force. Growth in non-standard work has also created difficulties for many workers, especially women, employed in part-time jobs, some of whom are unable to escape the definition of a new entrant or re-entrant, despite years of paying premiums.

B.             Benefit Entitlement

        The benefit entitlement structure was also modified under the 1996 reform. In addition to converting entitlement to an hours-based system, the maximum duration of benefits was lowered from 50 to 45 weeks of benefits. Individuals who work long weekly hours qualify for more benefits under the hours-based system than the former weeks-based system, since the latter treated a 15-hour week as the same as a 45-hour week. According to ongoing analysis by HRDC, average entitlement under the hours-based system has remained roughly the same as that under the former entitlement structure. Like that found for the qualification requirement, the hours-based entitlement structure has had a varied impact on different groups in the labour market. For example, HRDC maintains that entitlement has increased among men, who usually work longer hours than women; older workers; and workers in Atlantic Canada where weekly hours of work are higher due to the predominance of seasonal employment. HRDC estimates that seasonal workers work five more hours per week than do non-seasonal workers. Entitlement among women, on the other hand, has declined, due in large measure to this group’s lower attachment to seasonal work and higher incidence of part-time employment.^[7]

        Actual average benefit duration has declined somewhat since the 1996 reform, from 23.3 weeks in 1995-96 to 21 weeks in 1998-99. In addition, only about one in five claimants use all of their regular benefit entitlement (i.e. “exhaust” their benefits), down 14% since the EI reforms. According to HRDC, improved labour market conditions are a significant contributor to the reduction in the average duration of claims during this period.^[8]

        Despite some evidence that average benefit entitlement among seasonal workers increased under the 1996 reform, a significant number of witnesses complained about the “gapper” (more recently called the “black hole”) problem, a situation that arises when a worker is unable to obtain enough weeks of benefits to bridge the period between the end of and the beginning of the work season. Seasonal industries are vital to the Canadian economy and many regions of the country* and the Committee encourages the government to redouble its efforts to work with seasonal industries and their employees to improve employment prospects.

        Another thing we never hear about are the people who fall through the gap in spring. Yet, Madam Chair, in your riding ? or near your riding ? there's a bicycle manufacturing plant. Dozens and dozens of people find themselves in great difficulty because the benefits to which they are entitled simply don't last long enough. Their situation becomes extremely precarious. The employment insurance fund does have enough money to remedy the problem. The CSD firmly believes that the surplus would make it possible to remedy such problems. (Mr. François Vaudreuil, President, Centrale des syndicats démocratiques)^[9]

        Recently, maximum benefit entitlement for maternity/parental benefits was raised from 25 to 50 weeks of benefits, 5 weeks more than the maximum duration of regular benefits. While the increased duration of special benefits was favourably endorsed by most of our witnesses, some called for comparable treatment in terms of maximum entitlement for regular benefits. This should not be surprising given that the maximum duration of regular benefits has historically exceeded special benefits, at least until the beginning of 2001. Moreover, it seems somewhat perverse that maximum benefit entitlement would be less for regular benefits, as these benefits constitute the primary purpose of EI/UI in the first place, that being wage replacement for involuntary unemployment.

Recommendation 3:

 

        Several witnesses indicated that older unemployed workers should be entitled to a longer benefit period, as these workers no longer have access to income support like that provided under the Program for Older Worker Adjustment to bridge the period between unemployment and retirement. This issue was also addressed in a report entitled Looking Ahead: An Interim Report on Older Workers tabled by this Committee in June 1999. Despite its passive nature, income support is really the only alternative for many older, unskilled unemployed workers who reside in areas where employment opportunities are extremely limited. And in the absence of publicly funded job creation measures, many of these workers have no alternative to social assistance.

C.             Average Weekly Earnings and the Divisor

        As a way of encouraging individuals to work beyond the minimum qualification requirement, the 1996 reform implemented a new method for calculating weekly benefits. Prior to this, weekly insurable earnings were averaged over the number of “qualifying weeks” (i.e. the minimum weekly qualification requirement). Today, weekly insurable earnings are averaged over the larger of the following two divisors: the number of weeks in which a claimant had earnings in the last 26 weeks of the qualifying period (also called maximum rate calculation period) or the divisor (i.e. 14 to 22 depending on the regional rate of unemployment). In essence, the divisor is equal to the weekly equivalent of the minimum hourly qualification requirement (based on 35 hours per week) plus two. The purpose of this reform is to encourage individuals to work longer than the minimum qualification requirement. Shortly after its implementation, it was found that there were work disincentives inherent in the new approach for determining average weekly earnings. In response to this, the government implemented two types of pilot projects to determine the best way to treat earnings in “small” weeks exceeding the divisor. These projects were extended in 1998 and are supposed to end in November 2001. Although only a few witnesses commented on these pilot projects, there seems to be some support for permanently adopting the “exclusion method.” This method only includes those weeks of insurable employment for which weekly earnings are highest.

According to HRDC data, only about 2% of claimants nationally fail to get the full two weeks of work over the minimum entrance requirement to maximize the benefits for which they are eligible.^[10] While these data are not readily available by region, we know that the proportion of claims established with short spells of employment is relatively higher in regions with higher unemployment.^[11] Many witnesses objected to the divisor as this program feature is viewed as unfair and punitive, since it penalizes workers who meet the minimum qualification requirement by further lowering weekly benefits that have already been reduced through other program reforms such as the reduction in maximum weekly insurable earnings. Moreover, the divisor undermines the hours-based approach that is touted as being beneficial to workers whose employment involves concentrated workweeks. For example, even though a worker may amass 490 or more hours of insurable employment in a 12-week period, this worker’s earnings would be averaged using a divisor of 14 (assuming a regional rate of unemployment above 13%), despite the fact that the weekly equivalent of the hours actually worked (based on a 35-hour workweek) is equal to or greater than 14.

        The Committee was also apprised of a drawback associated with the current period ? the maximum rate calculation period ? for averaging earnings for the purposes of determining weekly EI benefits. Under this program feature, only the last 26 weeks of the qualifying period are considered for this purpose. Hence, workers who work the same hours and receive the same total earnings over the same qualifying period may end up with vastly different weekly benefits. This arises, for example, if a worker has relatively higher (lower) earnings in the first (second) half of the worker’s qualifying period, compared to another worker who has relatively lower (higher) earnings in the first (latter) half of the qualifying period.*

       

D.             Benefit Rate

        Prior to the 1996 EI reforms, a two-tier benefit rate was applied to average weekly insurable earnings to calculate weekly benefits. One benefit rate, 55%, was applicable to most claimants. The other, 60%, was the benefit rate for claimants with low insurable earnings and with dependants. Under the 1996 EI reforms, the latter benefit rate became a better targeted payment called the Family Supplement. Unlike its predecessor, the Family Supplement is based on yearly family income, and considers the number of children in a claimant’s family. Moreover, this top-up provides a much higher effective benefit rate than its predecessor, reaching its maximum level of 80% of average weekly insurable earnings in 2000.

        While many witnesses called for an increase in the benefit rate ? ranging from 60% to 66%* ? the Committee was also told that it is necessary to strike a balance between meeting the income needs of eligible unemployed workers and the incentive to work.

        According to the most recent data available, the Family Supplement increased average weekly benefits among eligible claimants by $43 per week in 1999-00. With this top-up, average weekly benefits for claimants entitled to the Family Supplement were $254 in 1999-00, roughly 38% higher than they were before EI was introduced.^[13] In addition, HRDC data also indicate that only about 12% of those who become unemployed witness a drop in household consumer spending one year later, a figure that an HRDC official suggested was an important measure of whether the level of EI benefits is sufficient or not.

       

        Members of the Committee have mixed views regarding the existing benefit rate; some do not support an increase in benefit rate at this time, while others would like the government to study the possibility of increasing the rate to 60%.

E.             Coverage

1.             Coverage for Individuals with Low Earnings

        Prior to the 1996 reform, individuals who worked fewer than 15 hours in insurable work or earned less than 20% of maximum weekly insurable earnings were not covered under UI. As noted above, the first hour of work is covered under EI, but in order to reduce the impact of this on low-income individuals, those who earn less than $2,000 a year are entitled to a full premium refund. This refund is considered by some to be too low as it fails to capture many individuals (e.g. students) who earn more than $2,000 per year, but are unable to obtain enough hours of insurable employment to access EI.

        According to the most recent available data, more than 1.2 million individuals were eligible for a premium refund in 1998. However, only 838,620 individuals applied to have their premiums refunded.^[15] The fact that almost one-third of those eligible for a premium refund failed to do so concerns us; it is virtually impossible for individuals earning less than $2,000 to qualify for EI. To reduce administrative complexity and to ensure that all individuals, not just those who apply for a premium refund by filing an income tax return, are treated equally, it was suggested that the government introduce a yearly basic EI premium exemption on the first $2,000 of earnings. This approach is not only fairer to workers with low earnings, but also to employers who are currently required to pay premiums on behalf of workers who receive a premium refund. This latter issue is addressed in recommendation 12.

2.          Self-employment

        Several witnesses expressed concern about the recent rapid growth in self-employment and the fact that a growing number of self-employed workers are denied the protection afforded by EI. Except for self-employed fishermen, self-employed workers are not insurable under the Employment Insurance Act.^[17] The primary reason for this is the “moral hazard” problem that arises from the fact that self-employed workers can control whether they accept work or create the conditions necessary for unemployment. Thus, program administrators would face the challenge of distinguishing between involuntary and voluntary unemployment among self-employed workers. The moral hazard problem is considered to be less serious in the case of special benefits, since the conditions triggering these benefits provide program administrators with greater control over access to them.

        Another issue pertaining to self-employment that was raised during our hearings on Bill C-2 relates to the problem created by what some refer to as dual-earner status (i.e. individuals who are self-employed, but who work in paid employment at various points throughout the year). In many instances, these workers are unable to access EI when paid employment is lost, because they are self-employed and therefore unable to demonstrate that they are unemployed, a necessary condition for receiving EI benefits.

        Given the extremely low salaries earned by most in the cultural sector through their cultural work alone (the average income in the cultural sector hovers around the $13,000 per annum mark) many turn to other sources of income. Symphony musicians might teach, actors work as bartenders, etc. There continues to be ambiguity over the ability of self-employed artists and cultural workers to access social benefits, such as employment insurance, even when obliged to pay premiums through deductions from work carried out in an employment situation. In addition there is no compensatory system for reimbursement to self-employed individuals for any EI premiums paid. (Ms. Philippa Borgal, Associate Director, Canadian Conference of the Arts)^[18]

F.          Part II Training

        There is little doubt that having the right skills in today’s labour market is becoming increasingly important. This reality was recognized in the recent Speech from the Throne as evidenced by the emphasis afforded skills and learning.

        Building a skilled work force must be a national effort. The Government of Canada will work with provinces and territories and with non-governmental organizations to ensure that all Canadians, young and old, can achieve their learning goals. Canada must see at least one million more adults pursue learning opportunities during the next five years.^[19]

        The Committee was told that the 1996 EI reforms helped to strengthen incentives to invest in training, especially among youths residing in areas that are highly dependent on seasonal work. Others who appeared before the Committee did not share this view, however, and suggested that some of the policy changes accompanying the transfer of labour market training to the provinces and territories were wanting, especially in terms of eligibility for Part II training and funding for apprentices during their two-week waiting period.

1.             Access to Part II Training

        Under the 1996 EI reforms, the government established what is commonly referred to as Part II benefits (formerly UI developmental uses). Part II benefits are designed to help eligible individuals adjust to unemployment through active measures such as wage subsidies, skills training or self-employment assistance. Under the Employment Insurance Act, only “insured participants” (i.e. those who have established a benefit period, those whose benefit period has ended within the previous 36 months, and those who have received maternity/parental benefits in the past 60 months) are eligible to receive Part II benefits. Several witnesses indicated that this definition fails to address the adjustment needs of many unemployed individuals and should be broadened.

               As of the beginning of 2001, EI offers a combined total of 50 weeks of maternity and parental benefits. Most witnesses supported this policy decision, although some disagreed with using EI as the means for delivering it. Furthermore, the Committee was told that the long benefit period currently associated with maternity/parental benefits is expected to create problems for employers in maintaining a skilled workforce. To address this potential problem, it was suggested that employers who face difficulties finding workers to replace those receiving maternity/parental benefits be given some financial assistance under Part II to ensure that their skill needs are met.

        We surveyed our members on pregnancy and parental leave benefits. There was a strong belief that if parents and their children can spend considerable time together to bond and establish their relationship early in life, it is truly beneficial. There was also real concern on the part of employers about the loss of an employee for up to a year. There was concern about training a replacement and then having to retrain their regular employee when he or she returns. Most small businesses are experiencing a tight bottom line and do not have additional funds for training. (Ms. J. Arsenault, President, Greater Summerside Chamber of Commerce)^[22]

2.             Apprenticeship Training: The Two-week Waiting Period

        Several witnesses discussed the issue of non-funding during the two-week waiting period served by apprentices enrolled in classroom training. Unlike the past, apprentices no longer receive federal training allowances during the first two weeks of classroom training, otherwise known as their two-week waiting period. The Committee was told that this gap in income support entails a significant disincentive for individuals to pursue this avenue of skill development. Moreover, it was noted that the current policy is contrary to the importance given to skills and learning in the recent Speech from the Throne.

        When apprentices start the classroom portion of their apprenticeship training they are officially laid off so as to allow them to establish a claim for EI benefits. Prior to the 1996 EI reforms, training allowances were paid to apprentices, under the National Training Act, during their two-week waiting period. However, when the Employment Insurance Act was passed in 1996, the National Training Act was repealed. Moreover, section 16 of the Employment Insurance Regulations now treat training allowances paid to claimants attending a course or program of instruction or training (to which a referral by the Commission has not been made) as earnings and therefore deductible from EI benefits.

        While members of the Committee are uncertain as to the impact of the current policy on the supply of apprentices across the country, we do recognize the importance of apprenticeship training in this country and its contribution to supplying many important skills needed in the workplace. Given the potential deleterious effect on decisions to engage in apprenticeship training, the Committee believes that the current policy regarding apprentices and the treatment of income received by them during their waiting period must be re-examined.

G.        EI Governance and Financing

    Virtually every witness who appeared before the Committee during our hearings on Bill C-2 expressed dissatisfaction with the way in which the government is using EI revenues. Many, including the Auditor General of Canada, voiced concerns about the excessive size of the so-called EI reserve. Some called for a separate and more autonomous EI fund (i.e. something that would operate outside of the Consolidated Revenue Fund and at arm’s length from the government). Many also suggested that the current premium rate is too high, particularly in view of the somewhat smaller and less costly EI program that exists today and recent growth in payroll taxes.

    Pursuant to section 66 of the Employment Insurance Act, the Canada Employment Insurance Commission is, to the extent possible, supposed to set premiums at a level that would cover program costs over a business cycle and provide for premium rate stability over the same period. Since the inception of the Employment Insurance Act, premium levels have generated year-end surpluses to the extent that the “reserve” in the EI Account is expected to exceed $35 billion by the end of 2000-01. This cumulative surplus is more than twice the upper limit of the “reserve” deemed necessary by EI’s Chief Actuary to meet the premium rate-setting objectives set out in the Act. In fact, the Auditor General of Canada told the Committee that given the current size of the reserve he would be “hard pressed to conclude that the intent of the law has been respected.”^[25]

    Despite the fact that section 3(1) of the Employment Insurance Act requires the Commission to examine how individuals, communities and the economy are adjusting to the Employment Insurance Act, the “reserve” and the level of EI premiums have not garnered a great deal of attention in the Commission’s monitoring and assessment reports. Given the fiscal significance of EI’s specified purpose tax, the Commission’s annual assessment of EI reform (i.e. the monitoring and assessment reports) should consider the impact of EI premiums on program contributors and the economy generally. In addition to this shortcoming, some members of the Committee believe that the content in these reports generally could be greatly improved.

    In view of the size of the EI reserve, many witnesses suggested that EI premiums be lowered. Others suggested that EI expenditures be increased to a level that is commensurate with the reserve in the EI Account. And virtually all witnesses who spoke to this issue were dissatisfied with the government’s decision to use EI contributions for non-EI purposes. Many felt that the government does not have the authority to do this. And, in fact, we were told that there are legal proceedings underway challenging the constitutional authority of the federal government to use EI contributions for purposes other than unemployment insurance.^[26]

    The Committee was also told that the “reserve” is a notional one. As this money is part of the Consolidated Revenue Fund it has been allocated according to the government’s fiscal plan. Some witnesses acknowledged that this money has been spent, but wanted some assurance that EI premiums will not increase if Canada has an economic downturn.

        Other witnesses maintained that the EI reserve represents a liability to EI contributors. This view, however, was not supported by the Auditor General who told the Committee that the reserve did not represent a debt obligation on the part of the government to EI contributors,^[29] despite the fact that optional, albeit notional, interest is paid on the reserve in the EI Account. While the Auditor General welcomed the government’s decision to review the premium rate-setting process, this decision did not address his and many others’ concerns regarding future growth in the EI reserve. As Bill C-2 would allow the government to set EI premiums in 2002 and 2003, any rate that generates more revenues than expenditures will cause the reserve to grow.

        The size of the EI reserve, the premium rate and the use of EI funds for non-EI purposes have all contributed to the desire expressed by many witnesses for greater control over EI. Many would like to see an EI fund created outside of the Consolidated Revenue Fund with more input from program contributors as to how premium rates are set and revenues spent. While all members of the Committee understand the factors underlying this sentiment, many of us believe that establishing an arm’s length relationship between EI and the government with greater control afforded EI contributors is fraught with potential problems. To many of us, the scope for conflict between program contributors is too great and this was evident in the disparate views expressed by witnesses regarding the direction of future EI reforms. Moreover, most of us agree with the Auditor General that EI’s proper place is within the accounts of Canada as long as this program remains within the federal government’s domain. While the Committee supports a more influential role for program contributors in terms of EI governance, it is reluctant to recommend that employers and employees be solely responsible for policy and administrative matters.

        The Committee acknowledges that over the next two years the government intends to review the premium rate-setting process and, pursuant to adopting Bill C-2, would set the premium rate in the years 2002 and 2003. In view of the size of the current notional reserve, the Committee believes that the government should exercise greater caution in setting premium rates during this period so as to limit, to the greatest extent possible, further increases in the EI reserve.

        Another EI financing issue that arose during our hearings on Bill C-2 pertains to the higher premium rate paid by employers compared to employees. Section 68 of the Employment Insurance Act requires employers to pay 1.4 time the employee premium rate. Presumably, the reason for this higher rate is that employers have greater control over layoffs and, in this event, should bear a higher overall share of program costs. While the Committee fully accepts the fact that layoff decisions rest with employers, in many instances EI benefits are used as a means of keeping workers and firms attached during a layoff period. Since workers in these instances normally stay with the same employer despite employment instability, one might conclude that workers reluctantly share in the layoff decisions. In these cases, it is difficult to argue that the employers should bear a higher premium cost. In addition, in recent years EI benefits unrelated to layoffs (i.e. special benefits) have contributed to higher program costs and, as pointed out by some witnesses, there is little justification for requiring employers to pay more for these benefits than that paid by workers.

        While most agreed that it is important to provide income support to those on maternity and parental leave, some witnesses questioned whether EI was the appropriate vehicle for meeting this policy objective. As this is the only program that currently provides wage replacement to workers who are pregnant and/or caring for newborn or adoptive children, most members of the Committee believe that EI is the best existing program to satisfy this policy objective. In a related matter, it was suggested that the government compensate small and medium-sized enterprises for providing extended parental leave by exempting the employer portion of EI premiums paid in respect of replacement employees. Many members of the Committee find it difficult to support this proposal, as small and medium-sized enterprises would have paid premiums on behalf of workers on leave had they decided to remain in the workplace.

H.             Administrative Matters

1.          EI Economic Regions

        Subsection 18(2) of the Employment Insurance Regulations requires the Commission to review EI regional boundaries at least once every five years. The most recent review was completed in 2000 and the new boundaries came into effect on 9 July 2000. Today, there are 58 EI economic regions, up from the 54 regions that existed prior to the middle of 2000. These new boundaries are intended to better reflect recent changes in regional labour markets across the country. Of primary significance, the intent of this five-year review is to ensure that existing boundaries accurately reflect prevailing unemployment conditions in regional labour markets. The reason this is so important is that the unemployment rate estimates that Statistics Canada produces for these regions are used to determine qualification requirements and benefit entitlement.

        During our hearings on Bill C-2, several witnesses objected to the current boundary configurations and the way some of the new boundaries are being implemented. In terms of the former, for example, the Committee was told that there is a large discrepancy between labour market conditions in Aboriginal communities and those in surrounding areas within the same EI economic region.

        The Committee was also told that following the implementation of the new EI economic regions, the government decided to introduce new measures to gradually phase in changes to the new boundaries in Bas-St-Laurent—Côte Nord and Madawaska—Charlotte. As a consequence of these changes, claimants who filed before the announcement to phase in the new boundaries are being treated differently from those who filed their claims after the announcement.

        I can tell you about my own case. There are two of us who work for the same maple-growing business. We had each worked for the same length of time, that is, 15 weeks; we had the same number of hours; we travelled together. Therefore, our situation was identical. I applied for employment insurance benefits two weeks before him because I was owed some time from the previous year. I had 15 weeks of unemployment. Since I applied two weeks earlier, I was given 23 weeks of EI. My divisor was set before the 17th while that of my friend, here, was determined after September 17th. For the same number of weeks and the same hours, he was entitled to 32 weeks of employment insurance benefits. My benefits ran out in January, but he still has some left. There is nothing left for me. (Mr. Yvan Lebrun, Regroupement des exclus de l’été 2000)^[33]

2.             Investigations and Related Matters

        When the Auditor General of Canada appeared before the Committee during our hearings on Bill C-2, he raised an important issue regarding cases where EI benefits were fraudulently obtained as a result of employers issuing false Record of Employment (ROE) forms to employees. For many years, both HRDC and the Canada Customs and Revenue Agency (CCRA) have been aware of this problem. Yet, the problem persists. The Auditor General identified several reasons for this, including among others, a lack of legislative guidance on rulings and appeals, delays in processing and completing suspected fraudulent EI claims, inadequate training and a lack of prosecutions.^[34] A solution to this problem must be found soon.

      Several witnesses also expressed concern about the behaviour of some HRDC agents conducting EI investigations. These witnesses indicated that they were treated as though they were guilty even though they had done nothing wrong. In certain instances, witnesses characterized the behaviour of some agents as harassment.

        The total disqualification that is currently imposed on claimants who voluntarily leave employment without “just cause” also surfaced during the Committee’s hearings on Bill C-2. We realize that there is a vast amount of jurisprudence dealing with “just cause”. However, on a practical level, the process that must be pursued by claimants to substantiate ”just cause” can be problematic for some, especially in cases involving sexual harassment. Many members of the Committee are also concerned that a total disqualification is imposed on a claimant who voluntarily leaves employment, even though the claimant has enough hours of insurable employment from an unrelated employment to establish a claim.

3.             Insurability of Family Members Employed in Family Owned Businesses

        Prior to 1990, employment of a spouse or a dependent was not treated as insurable employment. This provision was found to be discriminatory and in 1990 the Unemployment Insurance Act was amended to allow the Minister of Revenue to insure workers not employed at arm’s length, provided the conditions of the employment were similar to those found in arm’s length employment.*

        While the 1996 EI reforms did not alter section 5(3) of the Employment Insurance Act, this section continues to be problematic for some workers. The burden of proof continues to rest with those employed in a family business and the legislation itself is written in such a way as to suggest that workers in non-arm’s length employment are guilty until proven innocent. Most members of the Committee recognize the importance of discouraging fraudulent employer-employee relationships. However, the approach taken in determining the validity of employer-employee relationships involving non-arm’s length employment appears to have some room for improvement, starting with the tone of the legislation itself.

 

4.             Treatment of Undeclared Earnings

        Under the 1996 EI reforms, changes were made to the way unreported earnings were to be deducted from benefits. Under this approach, unreported earnings were assigned to “a period of employment” instead of calendar weeks, as was the case prior to the change in 1996. As a consequence of this change, benefit overpayments could occur for a week of layoff in which a claimant had no work or earnings. This approach was eventually considered unfair and the Employment Insurance Regulations were amended in December 1999 to redefine a period of employment. Under the new definition, a period of employment does not include weeks of layoff. Nevertheless, this approach continues to irritate many claimants, as evidenced by the dissatisfaction expressed by several witnesses regarding the allocation of earnings over a period of employment instead of the preferred calendar week allocation that existed prior to the 1996 EI reform.

 

 

5.             Improving Service to Claimants

    Throughout our hearings, some witnesses expressed the need for better service. Of particular note, was the desire for HRDC to improve the speed with which EI claims are processed and benefit payments received. According to HRDC’s Main Estimates for 2001-02, the Department tries to provide EI payments within 28 days of when an individual’s benefit period is to begin. In the vast majority of cases this target is met. However, the Committee is mindful of the fact that some claimants wait much longer than this to receive their first EI payment. The Committee was also told that some HRDC staff could provide a more professional and courteous service and, in this context, the Committee supports HRDC’s efforts to implement a more comprehensive quality improvement strategy, particularly in terms of identifying training priorities for staff.

Recommendation 17: The Committee recommends that HRDC improve its service to Canadians, especially in terms of providing more timely, accurate and client-friendly EI services.

 

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[1]      HRDP, Evidence, Meeting No. 5 (15:40), 28 February 2001.

[2]      CEIC, p. 15.

[3]      This issue was raised in a recent Canadian Umpire Board Decision (CUB 51142) pertaining to an appeal by a registered nurse named Kelly Lesiuk. This ruling suggested that the differentiated qualification requirement for special and regular benefits was unfair to women who must work part-time because they are primary caregivers.

*      The NDP considers that the requirement for new entrants and re-entrants should be 350 hours.

[4]      HRDP, Evidence, Meeting No. 12 (15:45), 15 March 2001.

[5]      HRDP, Evidence, Meeting No. 15 (17:00), 21 March 2001.

*      Although the Bloc Québécois believes that reducing the number of hours from 910 hours to 700 hours is a step in the right direction, it maintains that the concept of “new entrant or re-entrant” should be completely abolished in order to thereby  eliminate discrimination in areas of high unemployment.

**     The Bloc Québécois believes that a separate category should be created for seasonal workers and that a special 420-hour eligibility threshold should be established for this class of workers.

***   The Canadian Alliance feels strongly that a complete review of the financial impact on the EI fund, employers’ premiums and employees’ premiums must be undertaken before this recommendation can be implemented.

[6]      According to section 12 of the Employment Insurance Regulations, prescribed hours include, among others, a week in which workers’ compensation payments were received, a week in which an income support grant payment was received under the Atlantic Groundfish Strategy (excluding early retirement), a week attending a training course to which a referral was made by the Commission, and a week of unemployment due to a labour dispute.

[7]      CEIC, p. 16.

[8]      Ibid., p. 17.

*      The NDP deplores the fact that the government does not recognize seasonal work and the impact of this type of economic activity. The NDP contends that the government should increase the number of weeks of benefits and thereby recognize the men and women who work in these seasonal industries.

[9]      HRDP, Evidence, Meeting No. 11 (12:55), 15 March 2001.

*      The Canadian Alliance believes that the solution for older displaced workers lies in the area of increased access to training rather than in prolonged benefits.  By increasing the benefit period for older workers, the EI system moves further into the realm of being a social program, rather than an insurance system which we believe it should be.

[10]    CEIC, p. 15.

[11]    “Short” spells of employment refer to claims based on insured employment not exceeding two weeks above the minimum qualification requirement. See CEIC, Annex 2, p. 2.5.

*      The NDP contends that this calculation is unfair.  According to the NDP, the number of hours required for eligibility for employment insurance benefits should be the hours in the best weeks during a 52-week period.

[12]    HRDP, Evidence, Meeting No. 14, (16:20), 20 March 2001.

*      The NDP supports the idea of a benefit rate of 66%.

[13]    CEIC, p. 10.

[14]    HRDP, Evidence, Meeting No. 19, (12:05), 24 April 2001.

[15]    CEIC, p. 37.

[16]    HRDP, Evidence, Meeting No. 4 (11:35), 27 February 2001.

[17]    The extension of UI coverage to self-employed fishermen in 1956 was intended as a temporary measure. Coverage was supposed to end when a plan that was being developed to protect fishermen’s incomes against uncertainty in the fishing industry was ready for implementation (see G. Dingledine, A Chronology of Response: The Evolution of Unemployment Insurance from 1940 to 1980, prepared for Employment and Immigration Canada, Minister of Supply and Services Canada, 1981, p. 60).

[18]    HRDP, Evidence, Meeting No. 10 (17:55), 14 March 2001.

*      The Canadian Alliance believes the recommendations pertaining to self-employment require further study. The notion of including the self-employed in the system is sound on its surface, but the structure of how that would fit into the existing system requires careful planning and a full analysis of the financial implications.

[19]    Speech from the Throne, 30 January 2001, page 7 of 26.

[20]    HRDP, Evidence, Meeting No. 7 (10:35), 13 March 2001.

[21]    HRDP, Evidence, Meeting No. 7 (11:50), 13 March 2001.

[22]    HRDP, Evidence, Meeting No. 13 (11:45), 20 March 2001.

[23]    According to information provided in HRDC’s most recent Report on Plans and Priorities the government intends to spend $2.2 billion on Employment Benefits and Support Measures in 2001-02, 0.62% of total estimated insurable earnings of $356.7 billion.

[24]    HRDP, Evidence, Meeting No. 3 (11:40), 22 February 2001.

[25]    HRDP, Evidence, Meeting No. 15 (15:35), 21 March 2001.

[26]    HRDP, Evidence, Meeting No. 11 (13:20), 15 March 2001.

[27]    HRDP, Evidence, Meeting No. 6 (11:40), 1 March 2001.

[28]    HRDP, Evidence, Meeting No. 4 (11:25), 27 February 2001.

[29]    HRDP, Evidence, Meeting No. 15 (16:10), 21 March 2001.

[30]    HRDP, Evidence, Meeting No. 6 (11:25), 1 March 2001.

*      The Bloc Québécois believes that the following points should also be considered: increasing the mean benefit rate from 55% to 60%, abolishing the waiting period, making the elimination of the intensity rule retroactive to 1 January 1997, and allowing all claimants to take advantage of the 25% allowable earnings exemption.

[31]    HRDP, Evidence, Meeting No. 13 (12:45), 20 March 2001.

[32]    HRDP, Evidence, Meeting No. 11 (11:35), 15 March 2001.

[33]    HRDP, Evidence, Meeting No. 14 (15:25), 20 March 2001.

[34]    Report of the Auditor General of Canada, Chapter 34, December 2000, paragraphs 34.25 to 34.44

*      The NDP maintains that this section of the Employment Insurance Act is still discriminatory. The files of people who are related are forwarded directly to the Canada Customs and Revenue Agency (CCRA) for review. The NDP is of the view that this attitude appears to indicate that the government considers them to be abusers of the system even before this has been proven.

[35]    HRDP, Evidence, Meeting No. 8 (15:45), 13 March 2001.

[36]    HRDP, Evidence, Meeting No. 14 (16:15), 20 March 2001.

[37]    HRDP, Evidence, Meeting No. 11 (11:45), 15 March 2001.