December 11, 2008 / 3:10 PM / 9 years ago

Supreme court raps jobless fund, OKs use of surplus

OTTAWA (Reuters) - The Supreme Court ruled on Thursday that the government collected employment insurance premiums unlawfully for three years, but it declined to order the government to return surplus funds to contributors.

The high court ruled in a case brought by Quebec unions, which had argued that C$54 billion ($44 billion) in surpluses rung up in the employment insurance account amounted to an illegitimate form of taxation and should be returned.

The court ruled that the government had acted constitutionally in amassing large surpluses, which ended up going to the federal debt, because they were accounted for at least nominally in an Employment Insurance Account.

But it said that in 2002, 2003 and 2005 the way legislation had been crafted meant the premiums had been collected without Parliament having given its proper approval.

“This means that employment insurance premiums were collected unlawfully, without the necessary legislative authorization,” Justice Louis LeBel wrote in the 7-0 decision.

The court suspended its declaration for 12 months “to allow the consequences of that invalidity to be rectified”.

LeBel gave no guidance on what consequences should ensue but it was possible that a simple declaration by Parliament authorizing the collection of premiums in those years might suffice.

He said the judgment does not apply to years after 2005 since amendments had been made that meant those years were not directly relevant to this case.

Reporting by Randall Palmer; editing by Peter Galloway

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