Over the course of the past year, many people have had reductions in earnings and received some form of government income assistance – EI, CERB or Canada Recovery Benefit (CRB).
In some cases, employees who initially thought that their interruption or reduction in earnings was temporary have had their employment terminated.
In almost all termination situations an employee will be entitled to some form of termination payment from the employer. Employees who are also receiving government income assistance may wonder how their government payments will be impacted by their termination packages.
While not everything is crystal clear at this point, we have some thoughts!
Layoffs and the Deemed IDEL
As noted, in some circumstances, employees have been temporarily laid off. During 2020, these layoffs converted into Deemed Infectious Disease Emergency Leaves (IDEL). Unless an employee is terminated, these Deemed IDELs will continue during the COVID-19 Period, which is presently set to end July 3, 2021.
While an employee is not receiving income, or while they are receiving 50% or less of their pre-COVID income due to COVID-19 reasons, they will typically be eligible for EI or the CRB.
Employees who have not had their employment ended at the end of the COVID-19 Period can expect to either be recalled to work or be placed on a temporary layoff. A temporary layoff can continue for up to 35 weeks if the employer continues the employee benefits.
An employee can expect to continue to be eligible for CRB or EI after the COVID-19 period should they be continued on a layoff.
Terminations, EI, CERB and CRB
An employee who is terminated while on the Deemed IDEL should receive their termination entitlements up to the date of their termination. This means that for the purposes of calculating length of service the employee’s time on the Deemed IDEL should be included. This should also mean that the income replacement benefits that the employee received prior to their termination date should not be required to be paid back, for reasons of double-dipping. The termination package should cover a time period after the termination date and therefore not impact the benefits received prior to the termination date.
While it is not 100% clear how the CRA will treat an employee’s continued entitlement to income replacement benefits following the termination date after the employee receives a termination package there are a few general principles:
- EI – Typically an employee will not be entitled to EI when they are receiving income from the employer, and EI will regard termination payments as income. However, the government’s EI FAQs state that “As a temporary measure most separation monies received when you are laid off will not affect the payment of your EI benefits for the claims established on or after September 27, 2020 for one year.” This suggests that EI payments with respect to COVID-19 may be treated differently.
- CERB – While the period for which employees could receive CERB is over, the government CERB FAQs indicate that “A severance payment does not impact an individual’s eligibility for the Canada Emergency Response Benefit.” This suggests that receiving a termination package will not disentitle an employee from their CERB. In a recent decision the Ontario Superior Court agreed – see Iriotakis v. Peninsula Employment Services Limited, 2021 ONSC 998.
- CRB – The CRB will likely be treated similarly to the CERB, and we expect that an employee will not have to repay the CRB if they also receive a termination package so long as they continue to maintain eligibility. An employee will be required to re-pay $0.50 of CRB for every dollar of net income earned above $38,000 in the calendar year.
Terminated employees who have been receiving income replacement benefits should get advice so that they can understand the impact of their termination packages on their entitlements to these benefits.
