Background
Lori Anne Lockwood sought judicial review of two Canada Revenue Agency second-level decisions finding her ineligible for the Canada Emergency Response Benefit and Canada Recovery Benefit. Both programs required at least $5,000 in qualifying income. Lockwood’s former employer paid her more than $5,000 in 2019 following the termination of her employment in 2018, but her T4 characterized less than $1,000 as employment income and the balance as a non-eligible retiring allowance.
The CRA officer concluded that the retiring allowance did not count as income from employment because it related to Lockwood’s 2018 termination and she was not employed in 2019. Lockwood argued that the officer improperly assumed severance could not qualify, failed to interpret the governing statutes in light of their text and remedial purpose, and did not address information indicating that retiring allowances can include wages in lieu of notice and damages for loss of employment.
The Court’s Holding
Justice Pallotta allowed Lockwood to challenge both decisions in one application and held that the CRA decisions were unreasonable. Although the officer did not need to conduct a formalistic statutory-interpretation exercise, the officer had to explain why the adopted interpretation aligned with the text, context, and purpose of the CERB and CRB legislation. The reasons did not address the statutes’ purpose, adequately consider the nature of the payment, or explain why a retiring allowance could not count toward the income threshold.
The Court also found a breach of procedural fairness because Lockwood was not told why the retiring allowance posed a problem for eligibility and therefore could not know what case she had to meet or what evidence to provide. The Court did not decide that the payment necessarily qualified as employment income. It set aside both decisions, remitted eligibility to a different CRA officer for redetermination, and awarded Lockwood $300 in costs.
Key Takeaways
- A benefits decision maker must justify a restrictive interpretation of qualifying income by reference to the statutory text, context, and purpose.
- Classifying a payment as a retiring allowance for tax purposes does not, without further analysis, determine whether it is income from employment under the CERB and CRB statutes.
- Procedural fairness requires an applicant to understand the decision maker’s concern well enough to respond with relevant submissions and evidence.
Why It Matters
The decision reinforces that CRA officers cannot exclude termination-related payments from pandemic-benefit income thresholds merely by relying on tax-slip labels or the year employment ended. They must confront the payment’s substance, the claimant’s material arguments, and the remedial purposes of the legislation.
The judgment does not establish that all severance or retiring allowances qualify for CERB or CRB. Instead, it requires a properly reasoned and procedurally fair redetermination of whether Lockwood’s particular 2019 payment was income from employment under the governing statutes.