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Digest of Benefit Entitlement Principles Chapter 18 - Section 7

18.7.0 Third party penalties

18.7.1 Introduction

EIA 38 (claimant penalty) and EIA 39 (employer penalty) allow the Commission to impose a penalty on a third party acting on behalf of the individual or corporation. The Commission can also record a violation against a third party when that third party is an insured individual.

A finding of misrepresentation follows the same process as for the claimant or the employer. The penalty is calculated in the same way, taking into account any mitigating circumstances. A third party acting on behalf of a claimant is penalized under EIA 38; a third party acting on behalf of an employer is penalized under EIA 39.

18.7.2 Defining third party responsibility

Third parties introduce a new element in the determination of who must repay an overpayment and penalty. The way in which a third party may be involved in a claim can be broadly divided:

  • a third party may act on behalf of a claimant or employer, with or without consent or knowledge; or
  • a third party may act on his or her own behalf, inappropriately using the information or identity of another individual or organization.

Responsibility determines liability for an overpayment and penalty. If a third party acts entirely without the knowledge and consent of another individual or an employer, the third party is responsible for any repercussions from that action. In an extreme situation, this could be identity theft, or deliberate misrepresentation as an employer.

However, a third party may act only as a channel by which information is communicated. For example, a third party may act as a translator for a claimant who has a language barrier, or complete a Record of Employment as directed by the employer. If the Commission determines the third party recorded the information, believing it was accurate, the third party cannot be held liable for any overpayment and is not subject to penalty. The claimant or employer is responsible for any debt incurred.

Because a third party can be defined as a person who acts on behalf of an interested party, the most important consideration is whether the third party acted with the consent and knowledge of the interested party - in this case, the claimant or the employer. Just as a finding of misrepresentation determines whether a penalty applies on a file, the finding that consent exists determines whether a third party is liable for an overpayment and subject to penalty.

18.7.3 Consent

Consent may be express or implied. It can be restricted to a single specific action, or it may be given for a broad range of activity. Consent may be granted by the claimant or employer, or it may be directed through a legal authority (such as the executor of an estate). Black's Law Dictionary Footnote 1 defines consent as:

Agreement, approval or permission as to some act or purpose, especially given voluntarily by some competent person.

It further defines the terms:

Express consent: consent that is clearly and unmistakably stated; and

Implied consent: consent inferred from one's conduct rather than from one's direct expression.

These definitions contain three critical components:

  • permission must be given;
  • that permission must be voluntary; and
  • the person giving consent must be competent.

18.7.3.1 Express consent

An express consent can be directly demonstrated. In the case of a claimant, this takes the form of a written authorization. This may be a letter, a power of attorney, or authorization to act on behalf of an individual incapacitated, but the evidence shares the characteristic of being an actual document in which the third party is formally and explicitly authorized to act on the claimant's behalf.

There may be similar documentation available for the employer. It is most likely that express consent is captured by the conditions and duties of employment, and particularly through a written job description. An employee acts on an employer's express consent if his or her duties specifically include preparation and communication of payroll information that affects entitlement to Employment Insurance benefits. When considering a third party penalty relative to an employer, the adjudicator must be able to identify how consent exists in the terms and conditions of employment. This may be complicated when there is no written definition of job duties or if the employee's duties do not include the preparation and communication of payroll information. Verbal statements from the interested parties constitute evidence, and are examined to determine if there is one version of events that is more credible than the other(s) Footnote 2 . When determining responsibility, the adjudicator must reasonably demonstrate that an employee acted with the express consent, or under the specific direction, of the employer.

For either the claimant or the employer, if express consent is not present, the evidence must be examined for the presence of implied consent.

18.7.3.2 Implied consent

Implied consent means the evidence on a file supports that a third party was authorized to act on the claimant's or employer's behalf. The standard of proof is the balance of probabilities. This means that it is more, and not less, likely, that the third party was authorized to represent the claimant or the employer.

For example, when a third party submits a claimant report using the claimant's Social Insurance Number and Access Code, the Commission can reasonably conclude that the third party acted with the claimant's consent. Claimants are reminded to keep their Access Codes private, since they are used as an electronic signature and identifier for the purposes of managing electronic data on a claim. A conscious decision to provide that information to a third party concludes the claimant gave that party permission, or consent, to act on his or her behalf. Once the Commission can reasonably conclude consent exists, the onus of proof falls to the claimant to show that such consent was not given for any particular false statement.

If a claimant denies consent existed, other evidence may conclude or disprove that consent. For example, when a bi-weekly benefit is directly deposited into a bank account that bears the claimant's name, it raises a presumption that the claimant knew about the payment. This is particularly true if the claimant's name is the only one recorded on the account. Evidence must be examined and a conclusion of consent must be supported by that evidence. Similarly, a denial that consent existed must be supported by the evidence.

If an employee has access to personnel or payroll files from which information is provided, it indicates the employee acted with the employer's consent. When an unauthorized employee is responsible for the misrepresentation, the employer must show what precautions prevent an employee from inappropriately accessing records or documents (such as Records of Employment). If the precautions are inadequate or non-existent, there is a strong presumption of implied consent.

18.7.4 A claimant and third party (amended 8 July 2010)

Except in cases where a claim for benefit is made on behalf of a person with mental disabilities, an incapacitated person or a deceased person Footnote 3 , the legislation expects a claimant to make their own claim for benefit, prove entitlement to benefits and provide the Commission with any additional information about their claim.

On occasion, claimants may, unbeknownst to the Commission, ask or allow a third party to act for them in relation to their claim for benefit. Typically, this will occur when a claimant asks or allows a third party to complete their bi-weekly declaration to the Commission. Problems arise when it is later discovered that representations made to the Commission by third parties, with or without the claimant's permission, were false or misleading.

Section 38 Footnote 4 of the Act allows the Commission to impose a monetary penalty on any person acting for a claimant if that person knew that the representation was false or misleading.

In order to determine which party is liable to repay any overpayment arising out of the false representation, as well as which party is subject to a monetary penalty, the Commission must assess the extent to which the claimant asked or allowed the third party to act for them. The Commission must also determine whether or not both parties were aware that the representation was false. Both parties must be questioned, all relevant details obtained and contradictory evidence clarified.

If the claimant asked or allowed a third party to act for them and the third party unknowingly made a false or misleading representation to the Commission, the third party would not be responsible for any overpayment, and no penalty would be assessed against them. However, if the claimant knew that the information provided by the third party was false or misleading, then the claimant would be responsible for any overpayment arising out of the representation and may also be subject to a penalty.

However, if the claimant asked or allowed a third party to act for them and the third party made a false or misleading representation to the Commission, where both the claimant and the third party knew that it was false or misleading (collusion), then the claimant would be responsible for any overpayment arising out of the representation and both the claimant and the third party may be subject to a penalty.

In addition, a third party may, without the claimant's knowledge or permission, either file a false claim for benefits based on the claimant's employment history or, once a legitimate claim is established for a claimant, make bi-weekly declarations to the Commission and direct those benefits to themselves. In these types of situations the third party acts on their own and in effect becomes a claimant when they attempt to claim benefits that are not payable to them. As such, the third party is responsible for any overpayment arising out of the misrepresentation and may also be subject to a penalty.

In all of these cases, the adjudicator must record the rationale for any decision to penalize the claimant and/or the third party, including all of the factors that were taken into account, how the amount of the penalty was determined and any mitigating circumstances that were considered.

[ July 2010 ]

18.7.5 Employer and third party

EIA 39 allows for the imposition of multiple penalties in an incident of employer misrepresentation. Adjudication of employer and third party penalties range in complexity. The employer and the company may be the same. The employer may be a multi-national corporation. It may be difficult to say a corporate employer is capable of "knowing" that a misrepresentation was made. However, corporate employers have a responsibility to ensure only designated agents, or employees, can access sensitive documents such as the Record of Employment, and that only authorized employees disclose information that affects Employment Insurance claims. Negligence and carelessness in controlling information can be interpreted as implied consent, and simply being unaware of a misrepresentation does not relieve an employer of responsibility for a penalty. Conversely, a corporation may show appropriate controls are in place and that an employee abused the trust that an employer reasonably placed in that employee's integrity. When the evidence supports a genuine breach in the employer-employee relationship, penalizing the corporation may be inappropriate. The abuse of trust cannot translate to a situation in which the employer consented to their agent's action.

Similarly, an employer may or may not be responsible for a misrepresentation that occurs because an officer or director of the corporation abuses his or her position in the company. If there is no express or implied consent, the penalty is most appropriately assessed against the third party. Although the Commission could impose a penalty against the corporate employer in any case in which abuse occurred, Commission policy restricts that penalty to the responsible party or parties. When the Commission determines the corporate employer is not implicated in the misrepresentation, the Commission will issue a caution letter Footnote 5 . This does not mean the Commission cannot penalize both the employer and the employer's representative. Rather, the Commission must determine whether responsibility for a false statement lies within the employer's control before determining the degree to which penalties against multiple parties are appropriate.

18.7.6 Directors and officers of the corporation

A director, officer or agent of the employer may be an active or passive party in misrepresenting information to the Commission. These individuals may be employers within the meaning of EIA 39, or may be considered third party representatives, depending on the exact nature of the misrepresentation. The legislation Footnote 6 specifies the conditions under which such an individual may be penalized. One or more of the following acts must be proven:

  • the person directed/ordered the misrepresentation;
  • the person authorised the misrepresentation;
  • the person agreed to or accepted that the false statement would be made (i.e., assented to them);
  • the person knew about the misrepresentation and silently accepted it (i.e. acquiesced to them); or,
  • the person actually participated in the misrepresentation.

In other words, if a representative of the company actively participates in, or passively allows misrepresentation, that representative is subject to a penalty. This penalty may be in addition to any other penalty assessed. The test is whether the Commission can establish express or implied consent from the employer in the representative's actions. If consent can be shown, both the employer and the representative are subject to a penalty. If consent cannot be shown, Commission policy restricts the penalty to the officer, director or agent.

A third party penalty for a corporate representative is calculated in the same way any employer penalty is calculated. Evidence and the standard of proof remain the same.

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