Executive Summary: Key Legal and Evidentiary Issues

• Entitlement to disability benefits under the Canada Pension Plan depended on whether the applicant’s disability was “severe and prolonged” as defined by statute.

• The calculation of “substantially gainful occupation” was at issue, specifically whether gross or net business income should be used.

• Legitimacy and classification of business expenses were questioned in relation to their impact on income thresholds for benefit eligibility.

• Consideration was given to the applicant’s actual work capacity, including travel, increasing work hours, and intent to work more.

• The tribunal’s authority to excuse repayment of benefits due to financial hardship was examined and found lacking.

• Procedural fairness of the Social Security Tribunal’s process was challenged but not found to be compromised.

Facts of the case

David Menzelefsky sought to set aside the decision dated January 17, 2024, of the Social Security Tribunal – Appeal Division: 2024 SST 51. In that decision, the Appeal Division found that Mr. Menzelefsky was no longer disabled as of January 2019 within the meaning of the Canada Pension Plan, R.S.C. 1985, c. C-8. As a result, from April 2019, Mr. Menzelefsky was no longer entitled to benefits, and he was required to pay back roughly two years of benefits received after that time. Mr. Menzelefsky contested this outcome.

Policy terms and clauses at issue

The Appeal Division based its decision on the requirements for entitlement to a disability pension under the Canada Pension Plan. To qualify, a claimant’s disability must be severe enough that they are “incapable regularly of pursuing any substantially gainful occupation” and prolonged such that “the disability is likely to be long continued and of indefinite duration or is likely to result in death”: Canada Pension Plan, s. 42(2)(a). The Appeal Division also considered the definition of “substantially gainful occupation,” which is one that provides a salary or wages equal to, or above, the threshold set out in section 68.1 of the Canada Pension Plan Regulations, C.R.C., c. 385. The maximum amounts for 2019 and 2021 were considered, and it was found that for those years, Mr. Menzelefsky’s gross earnings exceeded them.

Arguments and evidentiary issues

Mr. Menzelefsky argued that the Appeal Division should have considered his business expenses when determining whether his earnings were equal to or above the substantially gainful threshold. He pointed out that his gross income in 2019 was only approximately $200 above the amount set by the regulations and asserted that his business expenses were legitimate because his employer required him to attend in-person training in New Jersey. He further argued that even if the Minister queried his expenses, the small amount required to bring him under the threshold should weigh in favour of finding his work was not substantially gainful. The Appeal Division, however, relied on past decisions showing the Minister may rely on gross business income, not net business income, because the profitability of a business is not necessarily evidence of a claimant’s capacity to work. The Appeal Division refused to consider the business expenses because it found them “anomalous.” Mr. Menzelefsky had listed his expenses as office expenses in his Statements of Business and Professional Activities, but at the hearing he referred to them as related travel, and his expenses were inordinately high compared to his earnings and were for a job that was supposed to be performed remotely and did not require travel.

The Appeal Division also found that Mr. Menzelefsky’s earnings “do not decide the matter by themselves.” It considered several additional facts: his ability to undertake multiple business trips to New Jersey, his hours worked were increasing into 2021, and he wanted and intended to work more hours. Further, the Appeal Division found that Mr. Menzelefsky’s employer was not a “benevolent employer” who offered him work despite an inability to perform at a competitive level.

Procedural fairness and tribunal powers

Mr. Menzelefsky claimed that the Appeal Division was procedurally unfair. The Court found nothing in the record that would give rise to a procedural fairness concern. Mr. Menzelefsky expressed surprise about the decision of the Appeal Division, but the Appeal Division is entitled to consider cases before it afresh. He also argued that requiring him to pay back the benefits he received after April 2019 would cause him undue financial hardship and that his debt should be excused. The Court confirmed that it is not open to the Appeal Division to excuse the debt, as Parliament has not given it the power to consider financial hardship. As an administrative tribunal, it can exercise only the powers Parliament has given to it.

Ruling and outcome

The application was dismissed. The Court found the Appeal Division’s decision to be reasonable, based on an internally consistent and rational chain of analysis and justified on the facts and the law. The respondent, Attorney General of Canada, did not seek costs and so none were awarded. No damages were awarded.