The Supreme Court of Canada on Thursday refused to order the government to return a $54-billion surplus in employment insurance premiums to contributors. Photograph by: Geoff Robins/AFP/Getty Images , Getty Images

OTTAWA - There will be no EI Christmas bonus for Canadians after the Supreme Court of Canada refused Thursday to order the government to return a $57-billion surplus in the employment insurance fund to contributors.

However, the court said in the same decision that the former Liberal government illegally collected premiums for three years because it let the federal cabinet set the annual rate rather than Parliament.

In the 7-0 ruling, the judges gave the government one year to fix its unconstitutional error of “taxation without representation” in 2002, 2003, and 2005.

"According to that principle, a tax can be imposed only by Parliament or a clearly authorized delegate of Parliament,” wrote Justice Louis LeBel.

The court did not suggest ways to make amends, nor did it order that any of the approximately $53 billion in illegal collections be repaid.

One option, said legal analysts, would be for Parliament to pass retroactive legislation approving cabinet setting the premium criteria in the years in question.

“We are analyzing the decision . . . and its implications to develop a solution that respects the Supreme Court decision,” said Julie Vaux, communications director for Human Resources Minister Diane Finley.

The Canadian Labour Congress called on government to put at least some of the money toward improved benefits at a time when the unemployment rate has started to inch upward.

The Bloc Quebecois went further, saying in a news release that the government has the “moral responsibility” to reimburse EI contributors.

The ruling was bittersweet for the labour movement, which was seeking a broader declaration that the government overstepped its constitutional powers by accumulating large surpluses in the EI account for more than a decade and then using it toward general spending on debt reduction.

Justice Louis LeBel concluded that it was up to Parliament, under its general taxation powers, to spend the surplus as it saw fit.

“The federal employment insurance power must be interpreted generously,” wrote LeBel.

“It is my opinion that the system adopted to finance employment insurance has remained consistent with constitutional norms, except in 2002, 2003, and 2005.”

The case was brought to the Supreme Court by the Confederation des syndicats nationaux, Quebec’s second-largest trade union with more than 300,000 members, and the Syndicat National des Employes de l’Aluminium.

After two losses in the Quebec courts, the unions failed to convince the judges that the surplus was used in an abusive way.

The surplus began to swell in 1997, a year after the federal government imposed new criteria that made it harder for jobless workers to collect benefits.

At the same time, the government created a new system of setting premiums so that the fund would accumulate healthy surpluses to cushion contributors and the unemployed in economic hard times.

Under the EI scheme, employers pay 60 per cent and employees contribute 40 per cent.

After the federal government implemented new rules in 1996, the balance in the EI account reached $12 billion in 1997, falling within the $10-billion to $15-billion cushion recommended by the fund’s chief actuary.