Severance Pay & CERB | Author: Jordan Reiner, Employment Lawyer
In mid-March 2020, the COVID-19 pandemic caused a sudden stoppage of economic activities in Canada. With it, came an unprecedented loss of jobs. Some employees qualified for the federal government’s Employment Insurance (EI) benefits, along with EI Sickness benefits. However, the government quickly discovered how these programs excluded thousands of self-employed and contract workers. Within a matter of weeks, the Canada Emergency Response Benefit (CERB) was born. It merged existing federal benefit programs and broadened coverage to anyone who had lost income due to the pandemic. This is a taxable income replacement program. It offers $2,000 a month for up to four months, to any worker who has lost income as a result of the COVID-19 pandemic.
Job Layoffs & Terminations
Since then, only a limited number of services deemed essential, like grocery, transportation, mail delivery etc., have continued to operate with in-person services. Other businesses reacted quickly to the government directive by setting employees up to work remotely and taking their operations online. However, many businesses shut their doors completely. Consequently, at the time of publishing this blog, six million Canadians had applied for emergency aid benefits.
For many, their employment status remains a temporary layoff until employers resume operations. However, organizations of all stripes have started taking a closer look at payroll expenses. The threat of a recession is real. Furthermore, COVID-19 will require employers to operate under a new normal that may include stunted efficiencies and perhaps, fewer workers. As employment lawyers, we stand as frontline witnesses to these disturbing occurrences. Employers have started handing out the pink slips and we are noticing a distinct trend in temporary layoffs becoming permanent.
In Ontario, the Employment Standards Act governs how employers must conduct terminations. The law entitles most employees to severance pay. If you are a CERB recipient then you must also understand what this means, financially. Severance pay represents a financial bridge to help you when you are in-between jobs. Under the Employment Insurance Act, EI Benefits fulfill the same purpose. Consequently, recipients of EI clearly understand why the law contains provisions for delaying EI Benefits until the severance period expires. Quite fairly, this ensures you do not double-dip.
In fact, if you applied for, and started receiving your EI benefits before your severance negotiations were complete, then legislation requires you to repay the EI benefits upon receipt of your severance pay.
CERB & Severance Pay
CERB, however, was introduced in great haste, and within a couple of weeks, as an efficient financial response to the COVID-19 emergency. Ordinarily, such programs take months and years to design. While it has temporarily replaced the EI benefits program, the government has not presently clarified how CERB will be treated against severance pay. If you find yourself inadvertently laid-off after you started receiving CERB, then we would counsel you to act with financial prudence. Do not treat your benefit like a windfall. Hold on to it until you are sure you will not have to pay it back.
Termination dates are very important milestones in severance packages as they determine the date your severance pay commences. When your employer permanently terminates your employment, then your severance pay would start the day after your last day of work.
One of the criteria to qualify for CERB is that you must be without income for at least 14 consecutive days within the first four-week period. Consequently, your severance pay may count as income, just like it would under the Employment Insurance Act, disqualifying you from receiving CERB for a certain period. While the government has not announced specifics about severance pay and CERB, you can fully expect CRA to pay very close attention to the termination date stipulated on your Record of Employment.
Temporary Layoffs & CERB
Employees who are temporarily laid off should not worry about CERB repayment. However, you must stop applying for the benefit once you return to work. If your employment is terminated permanently after your recall, then no overlap would exist between your severance pay period and CERB you already received. However, the severance package would eliminate your entitlement to CERB from your termination date, onwards.
Maximizing Your Severance Pay
If your employer has permanently terminated your employment, then a looming recession will weigh greatly on your mind. Maximizing your severance package is more important than ever, today. You must ensure it will cover you sufficiently for the next few weeks and months of unemployment.
We urge terminated employees not to sign termination documents without consulting an experienced employment lawyer if only to confirm you do not leave money behind. This is particularly true for tenured employees, those on sick leave as well as individuals who have only been offered statutory minimums, or worse, no severance package at all. Some employers will presume your ignorance of the law and your common-law entitlements. And this is where you will find legal counsel helpful. We can size up your severance package and advise you over a 1-hour consultation. We encourage you to contact us for a confidential video consultation that you can conduct from the privacy of your home.
During an economic downturn, even with a decent severance package, it is quite possible that you will remain unemployed for an extended period. While the Employment Insurance Act does not permit double-dipping, it also does not unfairly penalize qualifying individuals for receiving severance. If your unemployment status lasts beyond your severance pay, then you can apply for CERB benefits until December 2, 2020. We fully expect the government will revert to the original EI program, thereafter.
This is a nuanced area of law and a consultation with us will arm you with proper information to help you strategically plan your finances to ride out an extended period of unemployment.
Jordan Reiner, B.A., M.A., LL.B., is a partner and experienced employment lawyer at Lecker & Associates.
We have helped clients resolve disputes with their employers for over 35 years. From negotiating fair severance packages, securing disability benefits and offering strategic advice on employment contracts, to litigating egregious human rights violations and workplace harassment cases, we represent our clients aggressively and with swift efficiency. Unlike others, our focus is singular: To fiercely defend employee rights. We operate with deep expertise in this field. Read more about our employment law services.
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