Severance Pay and Employment Insurance

Denim pocket with a wrench sticking out and and a note reading job search | Severance Pay and Employment Insurance

Severance Pay and Employment Insurance | Co-Authors Jordan Reiner and Bram Lecker

Severance Pay and Employment Insurance

In the current economy, many individuals can expect a job loss at least once during their career. The Canadian Federal Employment Insurance (EI) program is a social safety net that covers eligible employees temporarily for some income loss when this happens. If you receive notice and/or severance as part of your layoff, then you must understand the implications of severance pay and Employment Insurance.

You cannot receive EI benefits while in receipt of your severance payout. if you received one, your EI Benefits will likely be delayed until the severance period expires. Severance pay represents a financial bridge. You may use it to get through the period in between jobs. Employment Insurance Benefits fulfill the same purpose. The Employment Insurance Act quite fairly, does not permit you to double-dip.

Timing of Severance Pay and Employment Insurance

We encourage all laid off workers to apply for Employment Insurance Benefits right away. Service Canada must receive your application within 30 days. For some people however, the job loss circumstances are not clear cut. If you are caught up in an unfortunate wrongful dismissal or constructive dismissal case requiring legal representation, then your severance negotiations will continue well beyond your last day of work, perhaps even beyond the 30 day deadline. In this case, you should still apply for EI on time. However, you must also remain mindful of the rules that apply for severance pay and Employment Insurance under these circumstances.

An over-payment will be triggered on your file if your severance settlement occurs after your EI benefit payments have started. In this event, Service Canada will issue a Notice of Debt to you. They will ask you to pay the Receiver General a portion or all of the benefits you have received from your severance payout.

Extended Unemployment

Red chessboard with wooden managers and workers as opposing playersOur employment laws layout very specific guidelines for minimum notice and/or severance pay. However, under common law, your employer must also offer you a fair severance package. This depends entirely on your unique situation.  During Notice and Severance negotiations, our team of employment lawyers look at your age, seniority, position and employment opportunities to calculate what you should reasonably receive.

Accordingly, if you are a tenured employee in an industry facing an economic downturn, minimum notice might be inadequate. You may need more time to find equivalent employment or require retraining for a new career. This must be reflected in your severance pay and we would fight hard to obtain this for you.

Sometimes, even with a decent severance, it is quite possible for some individuals to remain unemployed after the severance / notice period is over. In this event, you may be eligible to receive EI benefits again. You could gain back the over-payment you repaid earlier. This amount will be added on at the end of your eligibility period and you might not lose the entitlement! While the Employment Insurance Act does not permit double dipping, it also does not unfairly penalize qualifying individuals for receiving severance.

This is an incredibly complicated and nuanced area of law. if you are undergoing a job layoff, book a consultation with one of our employment and labour lawyers.  It will be well worth your while for strategic planning of your finances when Severance Pay and Employment Insurance occur simultaneously.

Lecker & Associates exclusively represent employees.  More about our employment law services.

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