Digest of Benefit Entitlement Principles Chapter 18 - Section 5

18.5.0 Calculating a claimant penalty

18.5.1 Calculating a claimant penalty

Case law supports the Commission policy of calculating a penalty based on a formula ^{Footnote 1} . This approach creates consistency in determining an appropriate penalty, while providing the adjudicator flexibility to consider mitigating circumstances which may justify a reduction in the final penalty amount.

18.5.2 Mitigating circumstances

18.5.3 Legal validation amount

The legal validation amount, or LVA, means the maximum penalty that can be calculated under the Act. There are two possible calculations. When a claim was established and benefits paid, the maximum penalty is:

3 x benefit rate x the number of false statements ^{Footnote 3} .

When a claim was not established, the maximum penalty is:

3 x maximum benefit rate in effect when the act or omission occurred

x false statements ^{Footnote 4} .

If the penalty based on the net overpayment is more than the legal validation amount, the penalty is reduced so it does not exceed the LVA.

18.5.4 Caps on penalties

Commission policy limits penalties based on the level of misrepresentation. As with the percentage caps, the maximums are defined on the basis of first, second or third infraction. Like repetitive misrepresentation, the penalty cap counts previous infractions only if they occurred within the last 260 weeks. For a misrepresentation exceeding the third level, the third level maximums apply.

The penalty amount cannot exceed the cap. The only consideration in setting the cap is the level of infraction. In most cases this is simple. For instance, if there is a conclusion of misrepresentation on a benefit period, and this is a first incident of misrepresentation the penalty cap is $5,000.00.

For the purposes of the penalty cap, the level of misrepresentation can increase the level of infraction on a subsequent benefit period. For example:

A finding of first level misrepresentation resulted in a penalty cap of $5,000.00 on the first benefit period. There is a determination of a second incident of misrepresentation on a second, benefit period, or claim. Even though this second misrepresentation occurs on a different benefit period the determination of a second level of misrepresentation means that the penalty on the second benefit period can be as high as $8,000.00.

18.5.5 Record of employment: reason for separation altered

A claimant may submit a Record of Employment on which the Reason for Separation was knowingly altered, but the Commission identifies the misrepresentation before any benefits are paid. The claim is established with a benefit rate, but is disqualified-meaning no benefits are paid, so no overpayment occurs. Submitting a Record of Employment, knowing that the reason for separation was altered, even when no benefits were paid is serious enough to warrant a monetary penalty. Since there is no overpayment, the penalty is calculated based on a straightforward application of EIA 38(2)(a) by multiplying:

• 100 / 200 / 300% (level of misrepresentation) by
• the actual benefit rate by
• 2 misrepresentations (one count each for the application and the Record of Employment).

First infractions are subject to a maximum penalty calculated at 100% of the benefit rate per false statement. Subsequent infractions of a similar nature are subject to higher penalty calculations based on 200% for a second misrepresentation, or 300% for a third or greater incident. Mitigating circumstances are considered, and the penalty is reduced by a percentage value if applicable.

Violations are recorded based on the amount of the actual or potential overpayment. No real overpayment will occur if the Commission discovers the misrepresentation before benefits are paid. In this case, the potential overpayment is calculated based on the guidance at Digest 18.10.3.2. The violation is coded based on the potential overpayment. Violations are discussed in detail in section 18.10.

If the Commission allows the reason for separation and sets up the claim free of disqualification, the misrepresentation must still be adjudicated. If the Commission determines a penalty applies, it will issue a warning letter under the provisions of EIA 41.1 and record an unclassified violation.

18.5.6 Claim not established or cancelled retroactively

A benefit period is considered as not established in two cases:

• the claim is set up. Benefits may or may not be paid. The Commission receives or discovers information that means the benefit period should never have been established; or
• the Commission may determine a benefit period cannot be established when completing the initial work on a file. In this case, no claim is ever started, so no benefits are paid.

In either situation, no legal claim exists. Therefore, there can be no benefit rate on which to base a legal validation amount under EIA 38(2)(a). The provisions of EIA 38(2)(c) apply in these cases. The violation is recorded as minor, based on an overpayment value of $0.00 ^{Footnote 5} .

18.5.7 Counting the false statements: the impact of a false ROE or ROE containing false information

18.5.8 Claimant reports and payments

The link between claimant reports, benefits paid and misrepresentation is subject to special consideration. A claimant may submit an ROE and application that constitute misrepresentation and claimant reports that accurately declare no work or earnings. Therefore, the simple submission of claimant reports cannot be considered misrepresentative. However, the Commission can reasonably conclude that claimants who file a claim with false information know they have no right to receive benefits. Under EIA 38(1)(e) accepting or cashing benefits is an offence for which a penalty may be imposed. When counting incidents of misrepresentation, the Commission does not include any claimant reports submitted ^{Footnote 6} . The Commission must include every payment made and accepted, whether by warrant or electronic deposit as a misrepresentation.

As an example, a claimant submits:

• an application declaring a loss of employment due to shortage of work;
• a Record of Employment altered from a quit to a lay-off;
• three claimant reports accurately declaring no work and no earnings for which the claimant accepts three payments.

The application and Record of Employment are two counts of misrepresentation. The claimant reports are not misrepresentation. Keeping each of the three payments constitutes three counts of misrepresentation. Therefore, legal validation amount would be based on five counts of misrepresentation.

As long as the claimant report is accurately declared, the two week waiting period cannot be counted as misrepresentative because no warrant, or payment, was issued. However, if a claimant makes a false statement on the claimant report, a penalty may be considered for that false statement. Only one penalty can be assessed in respect of any two week period, whether it is considered because of misrepresentation on the claimant report or negotiating the payment.

18.5.9 The penalty calculation under EIA 38(2)(c)

When a claim is cancelled, there is no legal benefit rate. Therefore, no net overpayment can be calculated. This means a penalty cannot be calculated based on 50, 100 or 150% of the overpayment. For a cancelled claim, the Commission calculates the penalty based on EIA 38(2)(c).

In this case, the penalty is limited to no more than three times the maximum benefit rate ^{Footnote 7} that existed when the act or omission occurred per misrepresentation. The policy respects the principle of increased penalty for repetitive misrepresentation:

The Commission considers mitigating circumstances and applies a percentage reduction to the calculation. For example, if the adjudicator considers the mitigating circumstances warrant a 30% reduction in a first instance of misrepresentation, the calculation would look like this:

maximum rate x 70% x number of misrepresentations.

Because this is a first infraction, the final penalty calculation is subject to the policy caps of $5,000.00. Repetitive misrepresentation is subject to penalty caps of $8,000.00 and $10,000.00 as described above.

18.5.10 Violation

A violation may be issued when a penalty is imposed, but coded based on the amount of the overpayment. The Commission may not set up a claim if the misrepresentation is discovered before paying benefits. In this case, the overpayment, at $0.00, is less than $1,000.00, and therefore, the violation may be coded as minor. Violations are discussed in detail in section 18.10.

[ September 2010 ]

18.5.11 Subsequent investigation for the same period

There are cases when benefits are reconsidered, an overpayment and penalty established and violation recorded. A second investigation reveals other misrepresentations on the file that, were it not for the previous decision, would result in an overpayment, penalty and violation. The overpayment will not increase in this case. However, there are additional misrepresentations on the file. The legal validation amount is re-calculated and the penalty adjusted, if appropriate, to reflect the new LVA. As an example:

• Investigation #1 results in the retroactive imposition of a disqualification for quitting a job;
• an overpayment is raised for all the weeks paid after the quit;
• there is one false statement arising from the failure to declare the quit;
• because there is only one false statement, the penalty is reduced to the legal validation amount;
• Investigation #2 reveals that the claimant failed to declare work and earnings on four claimant reports after quitting the previous work;
• no new overpayment arises, since the previous disqualification cancelled all payment;
• the count of false statements increases from one to five;
• the Commission re-calculates the legal validation amount based on five, rather than one misrepresentation;
• the Commission tests the new legal validation amount against the penalty arising from the net overpayment;
• the penalty amount may be increased from the initial penalty amount to the lesser amount of:
  • 50-100-150% of the net overpayment,
  • the legal validation amount, or
  • the penalty cap of $5000.00, $8000.00 or $10,000.00;
  • a subsequent violation may also be issued.