The Federal Court of Appeal has ordered a redetermination of a grievance filed by an employee of the National Research Council Canada (NRC) concerning the recovery of salary overpayments made while she was on leave without pay.
Between April 17, 2019, and June 12, 2019, the worker — V.S. — was mistakenly paid by her employer despite being on unpaid leave. On March 10, 2022, the NRC notified V.S. that it would begin recovering the overpaid amounts by withholding a portion of her salary. V.S. challenged this action through a grievance.
The Federal Public Sector Labour Relations and Employment Board (the Board) initially ruled in favour of V.S., agreeing that the employer’s claim to recover the overpayment was statute-barred under Ontario’s two-year limitation period. The Board ordered the NRC to cease payroll deductions and to repay any amounts already deducted from V.S.’s salary.
Attorney general sought judicial review
The Attorney General of Canada sought judicial review of the Board’s decision, arguing that the federal six-year limitation period should apply instead, as outlined in section 32 of the Crown Liability and Proceedings Act. The Attorney General contended that the cause of action arose “otherwise than in a province,” making the provincial limitation period inapplicable.
Section 32 states:
“Except as otherwise provided in this Act or in any other Act of Parliament, the laws relating to prescription and the limitation of actions in force in a province between subject and subject apply to any proceedings by or against the Crown in respect of any cause of action arising in that province, and proceedings by or against the Crown in respect of a cause of action arising otherwise than in a province shall be taken within six years after the cause of action arose.”
In its judicial review, the Federal Court of Appeal examined whether the Board’s decision was reasonable, particularly in how it applied section 32 to the facts of the case. The Court noted that both parties agreed on the applicability of section 32 but differed on its interpretation regarding the origin of the cause of action.
The Attorney General relied on precedents such as Markevich v. Canada, 2003 SCC 9, where the Supreme Court of Canada determined that actions to collect federal tax debts arose “otherwise than in a province,” thus applying the federal six-year limitation period. Similarly, in Dansou v. Canada Revenue Agency, 2020 FPSLREB 100, the Board found that an overpayment to a unionized employee also arose “otherwise than in a province” due to the national scope of the collective agreement and the employer’s operations.
Two-year versus six-year limitation periods
Despite these precedents, the Board distinguished V.S.’s case, concluding that the cause of action arose in Ontario and that the two-year provincial limitation period applied. The Board reasoned that all relevant events — including V.S.’s employment, the overpayment, and the attempted recovery — occurred in Ontario.
However, the Federal Court of Appeal found the Board’s decision unreasonable. Justice Monaghan, delivering the judgment with Justices Stratas and Heckman concurring, stated that the Board failed to identify the relevant cause of action before determining where it arose.
“A cause of action arises in a province only where all the relevant elements of that cause of action occurred in the same province,” Justice Monaghan wrote. “Here, the Board failed to identify the relevant cause of action, despite the parties’ written submissions to the Board on this point.”
The Court highlighted that the Board did not specify whether the cause of action was breach of contract, unjust enrichment, or another legal claim. Without this crucial determination, the Board could not reasonably conclude where the cause of action arose or which limitation period applied.
“While we must review the Board’s reasons in light of the history and context of the proceedings giving rise to those reasons, the reasons must also ‘meaningfully grapple with [the] key issues,'” Justice Monaghan noted, citing Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65.
Inconsistent outcomes?
The Court also addressed the Attorney General’s argument that applying different limitation periods to federal public servants governed by the same national collective agreement would lead to inconsistent outcomes. However, the Court stated that this concern did not override the necessity for the Board to properly identify the cause of action and apply the correct legal analysis.
“Courts should generally respect Parliament’s intention that administrative decision-makers decide the matters entrusted to them,” Justice Monaghan emphasized. “That principle applies here.”
As a result, the Federal Court of Appeal granted the application for judicial review and remitted the matter back to the Board for redetermination. The Board is tasked with identifying the specific cause of action, outlining its constituent elements, and determining whether all elements arose within a single province, which would make the provincial limitation period applicable.
No costs were awarded in the judgment, as the Attorney General did not seek them.
“Accordingly, I would grant the application for judicial review, and remit the matter to the Board for redetermination,” Justice Monaghan concluded. “To apply section 32 of the Crown Liability and Proceedings Act, the Board must decide on the relevant cause of action, identify its constituent elements and decide whether they all arise in a province.”
For more information, see Canada (Attorney General) v. St-Onge, 2024 FCA 207 (CanLII).
