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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 | Author: Jordan Reiner, Employment Lawyer, B.A., M.A., LL.B.


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

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. Consequently, laid-off employees must understand that you cannot receive EI benefits while in receipt of your severance payout. If you received one, the federal government will likely delay your EI Benefits until the severance period expires. 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 from your last day of employment. For some people, however, the job loss circumstances are not clear cut when the termination occurs. If you are caught up in an unfortunate wrongful dismissal or constructive dismissal case requiring legal representation, then your severance negotiations might continue well beyond your last day of work. This could delay resolution past the 30-day deadline.

In this event, you should still apply for EI on time. However, remain mindful of the rules that apply for severance pay and employment insurance under these circumstances. Service Canada will trigger an overpayment on your file if your severance settlement occurs after your EI benefit payments have started. In this event, they will issue a Notice of Debt to you and ask you to pay the Receiver General a portion or all of the benefits you have received from your severance payout.

Negotiating a Fair Severance Package

Our employment laws stipulate 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 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, the minimum notice might be inadequate. You may need more time to find equivalent employment or require retraining for a new career. Engaging an employment lawyer to negotiate your severance package is well worth it to ensure you do not leave money behind and that your severance pay reflects your circumstances adequately.

Extended Unemployment and EI

Sometimes, even with a decent severance package, it is quite possible that you will remain unemployed after the severance/notice period has expired. In this event, you may be eligible to receive EI benefits and gain back the over-payment triggered earlier. Service Canada will add this amount at the end of your eligibility period so you do 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 lawyers. It will arm you with proper information to strategically plan your finances when severance pay and employment insurance occur simultaneously.


About the Author

Jordan Reiner | Toronto Employment Lawyer

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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