The Divisional Court has upheld the LAT’s interpretation of the term “employed” pursuant to s. 5(1) of the SABS in the recent decision of Kawa Arab v. Unica Insurance, 2022 ONSC 5761.  In this case, the Appellant, Kawa Arab, appealed a preliminary issue decision of Adjudicator Nidhi Punyarthi of the LAT dated January 24, 2020 and the subsequent reconsideration decision of the Tribunal Vice Chair, Avril A. Farlam dated March 31, 2021. The Appellant claimed that the adjudicators misapplied the law and relied on an incorrect interpretation of the word “employed”, thereby preventing him from claiming income replacement benefits.

On September 16, 2016, the Applicant was involved in a motor vehicle accident. The Appellant had been absent from work since February 11, 2016 but was not formally terminated from his employment until November 30, 2016. He received employment insurance benefits until June 12, 2016.

The LAT determined that even though the Applicant’s employment was not officially terminated until following the accident, he was not considered “employed” at the time of the accident as he had not received any wages since February 2016 and was no longer receiving EI. It was also determined that the Applicant worked for only 20 weeks, as opposed to the minimum of 26 weeks in the 52 weeks before the accident.

Writing for a unanimous panel which included Justice Sandra Nishikawa and Justice Breese Davies, Justice Ria Tzimas noted that the LAT did not err in its interpretation and application of section 5(1) of the Schedule:

Section 5(1) is located with Part II of the Schedule, which is entitled Income Replacement, Non-Earner and Caregiver Benefits. This section provides a weekly benefit to income earners, non-income earners and / or caregivers. Section 7 provides for the quantification of the income replacement benefits to be based on the “gross employment income” as defined in section 4(1), which refers to “salary, wages and other remuneration from employment, including fees and other remuneration for holding office, and any benefits received under the Employment Insurance Act (Canada), but excludes any retiring allowance within the meaning of the Income Tax Act (Canada) and severance pay that may be received”.

Although the legislation does not define the term “employed”, when the term is read in its ordinary grammatical sense and considered within the context of Part II of the Schedule it is clear and unambiguous that section 5(1) is not just about the existence of a formal employment relationship. Its purpose is to determine the eligibility to income replacement benefits with reference to the exchange of wages, salary, or other remuneration for services, over a defined period.

As to whether the interpretation of “employed” with reference to sections 4 and 7 of the Schedule produces a fair and just result, the result reflects the minimum requirement of 26 weeks employment out of a 52 week period for income replacement benefits, as contemplated by the legislation. When read in its entirety, Part II of the Schedule intended income earners and non-income earners to be treated differently. It also intended some minimum requirements. The legislature expressly removed the reference to temporary lay-offs. While I appreciate the Appellant’s argument that the Schedule is about consumer protection and the interpretation of “employed” should be interpreted broadly, interpreting the term to capture anyone in an employment relationship independent of their income-earning situation does not accord with the overall parameters of the Schedule.

This decision could have far reaching implications on who may qualify for income replacement benefits, particularly in a post-Covid world, where many employees have been temporarily laid off from their positions and their EI has since run out but they have still not returned to work. The decision also parts from previous LAT jurisprudence where the focus of s.5(1) was on the “employment relationship” including the intention and expectation of the parties, rather than the exchange of remuneration and services.  There will certainly be a lot more claims being scrutinized more closely following Kawa Arub v. Unica Insurance.

Ashley Shmukler is the author of this blog. If you have any questions about this decision or a related file please reach out to Ashley.