Background
Mélissa Girard-Lortie is a self-employed worker who lost a substantial portion of her clientele and business revenue during the COVID-19 pandemic. To cover her living expenses and keep her business afloat, she took on part-time employment — first at a retail store from June to December 2020, and later at Canada Post from April 2021 to April 2022. She continued operating her self-employment business throughout both periods. She received Canada Emergency Response Benefit (CERB) for five periods from March 15 to August 29, 2020, and Canada Recovery Benefit (CRB) for nineteen periods from September 27, 2020 to October 23, 2021.
On June 13, 2025, a Canada Revenue Agency (CRA) officer determined that Girard-Lortie was ineligible for CERB in periods 4 and 6 (June 7 – July 4, 2020 and August 2 – August 29, 2020) because her employment income exceeded $1,000 during each of those periods — the regulatory ceiling for nominal earnings under the CERB scheme. The officer also denied CRB for fourteen of those nineteen periods on the ground that she had not experienced the required 50% reduction in average weekly income compared to the prior year for COVID-19-related reasons.
Girard-Lortie sought judicial review, arguing principally that (1) her negative self-employment income — that is, periods in which her business expenses exceeded her business revenues — should be deducted from her employment income to arrive at her true net income for eligibility purposes, and (2) for CRB purposes, a month-by-month comparison of her 2019 and claim-period income would more accurately reflect her actual loss than the CRA’s annualized average-weekly-income methodology.
The Court’s Holding
Justice Régimbald granted the application in part, applying the reasonableness standard from Vavilov and Mason v. Canada (Citizenship and Immigration), 2023 SCC 21. On the CERB question, the Court held that the CRA officer’s reasoning was unreasonable. The officer’s sole justification for refusing to allow the deduction of negative self-employment income against employment income was that the Income Tax Act (ITA) operates in a different context from the CERB Act and its Regulation. The Court found this explanation substantively inadequate: the officer engaged in no statutory analysis of the CERB Act’s text, context, or purpose, nor did she explain why the same term “income” — undefined in the Regulation — should carry a meaning incompatible with the ITA’s net-income concept. Given the acknowledged awkwardness of Regulation s. 1 (as previously noted in Shtokal v. Canada (AG), 2025 FC 498 and Matta v. Canada (AG), 2026 FC 612) and the presumption of consistent legislative expression, the decision on CERB ineligibility was remitted to the CRA for redetermination.
The Court also rejected the Crown’s post-hoc attempt to rely on s. 3(2) of the CRB Act — which defines self-employment income as revenue less expenses — as a complete answer. Justice Régimbald noted that (a) the officer never cited that provision or conducted that analysis, and the Crown cannot supplement an administrative decision with its own reasoning (Vavilov, para. 96), and (b) s. 3(2) addresses how to calculate net self-employment income but does not definitively resolve whether a resulting negative figure must be treated as zero or may be offset against employment income. The same analytical gap exists under the CERB Act, which has no equivalent provision.
On the CRB question, however, the Court upheld the CRA’s decision as reasonable. The officer’s methodology — dividing total annual income by the number of weeks in the year to derive an average weekly income, then comparing that figure to the claim-period income — faithfully reflects the ordinary meaning of s. 3(1)(f) of the CRB Act, as confirmed by Justice Duchesne in Brunet v. Canada (AG), 2025 FC 75. While the applicant’s proposed month-by-month comparison was a plausible alternative approach, the existence of multiple reasonable interpretations does not render the CRA’s chosen methodology unreasonable. The Court declined to intervene on this aspect of the decision.
Key Takeaways
- A CRA officer denying CERB or CRB eligibility must engage substantively with the statutory text, context, and purpose of the CERB Act and CRB Act — it is insufficient simply to distinguish those statutes from the Income Tax Act without explaining what in the legislation’s own language compels the officer’s interpretation.
- The question of whether negative self-employment income (i.e., business losses) may be netted against employment income to determine whether a claimant exceeded the $1,000 CERB earnings threshold remains unresolved on the merits; the Federal Court has remitted that issue for a properly reasoned CRA redetermination.
- The CRA’s use of an annualized average weekly income to assess the 50% income-reduction threshold for CRB eligibility has been confirmed as a reasonable interpretive choice; a claimant’s preference for a period-by-period or month-by-month comparison does not render the CRA’s methodology unreasonable.
- Good faith in applying for benefits — and even earning only marginally above the applicable threshold — does not independently establish eligibility, nor does skipping an intermediate benefit period convert a later claim into a “first application” so as to alter the income cap.
Why It Matters
This decision is one of a continuing line of Federal Court rulings scrutinizing the adequacy of CRA reasoning in pandemic-benefit reviews, and it highlights an unresolved statutory question with potentially significant financial consequences for self-employed Canadians who took on supplementary employment during COVID-19. By finding that the interplay between negative self-employment income and the CERB earnings cap requires genuine statutory analysis — not merely an assertion that the ITA is irrelevant — the Court signals that CRA officers must ground their interpretations in the legislation’s own text and purpose, consistent with modern principles of statutory interpretation as required by Vavilov and affirmed by the Federal Court of Appeal in Jennings-Clyde (Vivatas, Inc.) v. Canada (AG), 2025 FCA 225.
The decision also draws a practical distinction between the two benefit programs: while the CRB’s explicit net-income definition for self-employed workers (s. 3(2)) provides some structural guidance, the CERB Act and its Regulation offer no equivalent definition of “income,” leaving an interpretive gap that the CRA must address on remand. The outcome of that redetermination may affect other self-employed claimants who simultaneously operated a business at a loss while earning wages from a secondary job taken solely to weather the pandemic.