Canada: Ontario Court Finds That Benefits Paid To Former Employee Under A WSIB Loss Of Earnings Program Should Be Credited Against Damages Award

In the recent Ontario Superior Court of Justice case of Jensen v. Schaeffler Canada Inc., the Court found that loss of earnings benefits provided to a former employee pursuant to an Ontario Workplace Safety and Insurance Board "Labour Market Re-entry Program" should be credited against a damage claim for wrongful dismissal. This was significant as the amounts paid under the WSIB program were greater than the amounts granted to the employee for damages in her wrongful dismissal claim.


The employee, Mary Jensen, was a 28 year employee of Schaeffler Canada Inc. Schaeffler is an Ontario corporation in the business of formulating, manufacturing and selling high quality bearings and other steel components, particularly for the automobile industry.

Following the downturn in the automobile industry in 2006, Jensen was one of 180 employees permanently laid off by Schaeffler. At the time of her termination, Jensen was 48 years old, and had been employed by Schaeffler for essentially her entire working life. Based on her years of service, Jensen was entitled, pursuant to the provisions of the Employment Standards Act, 2000, to termination pay of $7,040 and severance pay in the amount of $22,880. Jensen held several production facility positions during her tenure, but following a workplace accident in 2003, was unable to continue in the physically demanding roles she had previously filled. From 2003 until her dismissal in December 2006, Jensen was either off work due to her injuries, or was placed in administrative positions that were less physically demanding.

At the time of her layoff, Jensen was given a reference letter which noted her as a valuable employee who was committed to the Company. Knowing her dismissal would be hard on her, both the Company's director of human resources and CEO travelled to Jensen's home to personally deliver the news. During this visit, they also gave Jensen information regarding the WSIB's "Labour Market Re-entry Program", which would provide Jensen loss of earnings benefits while she was trained and prepared to re-enter the workforce. Jensen entered the WSIB Program, and started to receive benefits following her dismissal.

Shortly thereafter, Jensen commenced an action for wrongful dismissal, claiming that she was entitled to common law notice of 18 to 24 months of notice, along with damages for the manner in which she was dismissed. Schaeffler argued that the proper notice period, if any, was 12 to 14 months. After an initial trial, the Court found no damages in regards to the manner she was dismissed, specifically citing the fact that Schaeffler sent representatives to Jensen's home to discuss her termination. In regards to proper notice, Justice Haines found as follows:

"I would have found that a notice period of 15 months was appropriate in the circumstances of this case but because of the additional difficulties that [Jensen] would undoubtedly encounter in securing comparable employment in light of her physical limitations I have concluded that proper notice would be 18 months.

However, due to the benefits that Jensen had been receiving under the WSIB Program for the entirety of her notice period, Justice Haines requested additional submissions on the impact these benefits should have on the damage award.

Having received the additional submissions, Justice Haines found that the WSIB benefits received by Jensen should be applied to reduce her wrongful dismissal claims. Justice Haines found support in the Alberta Court of Appeal case of Salmi v Greyfriar Developments Ltd., which held that benefits paid by the WSIB on account of lost earnings during the notice period must be credited against any corresponding loss. Although not bound by the decision, Justice Haines found the case to be persuasive and agreed with the Alberta Court.

In the result, Jensen's entitlement to damages for wrongful dismissal were reduced by the benefits she received from the WSIB program, which meant her total claim for lost wages and related damages of $74,554.95 was completely covered by the amount of $75,759.72 she received in severance, termination and WSIB payments. While the calculation of her lost pension benefits remained outstanding and to be determined by the parties, the result of the judgement was that she was not owed any additional payment from Schaeffler.

Our Views:

This case is encouraging from the employer's perspective, as it is further precedence for the proposition that damages in a wrongful dismissal action can be offset by WSIB loss of earnings benefits received by an employee during their notice period. In this regard, it is analogous to certain other types of disability payments or benefits.

The question whether post-termination disability payments or benefits will be deductible is dependent on the circumstances and fact-dependent. Employers who find themselves in a similar position are advised to seek legal advice.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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