recent WSIAT decision considered the question
of the impact of payments received by a worker receiving loss of
earnings benefits upon the termination of his employment.
The worker was permanently laid off when his employer closed
The worker received 16 weeks of
severance pay and 8 weeks of termination pay under the
Employment Standards Act, 2000 (the
“ESA”). He also received an additional 8 weeks of
pay in lieu of notice. The Workplace Safety and Insurance Board
("WSIB") offset the amounts the worker received for
termination pay and pay in lieu of notice against his loss of
earnings benefits. The WSIB did not offset the severance pay
against the worker’s LOE benefits.
The worker filed an appeal to the
Workplace Safety and Insurance Appeals Tribunal (the
“Tribunal”) and argued that the payment of termination
pay and pay in lieu of notice should not have any impact on his
WSIB benefits. The Tribunal accepted the worker’s
argument in part and ruled that the worker’s statutory
entitlement to termination pay should not impact his WSIB benefits
but any amount above the statutory minimum should be considered
“earnings” under the Workplace Safety and
Insurance Act and must be offset.
It is somewhat surprising that the
Tribunal made a distinction between termination pay and pay in lieu
of notice at common law. Under the ESA, an employer is
entitled to provide a worker with either written notice of
termination or termination pay in lieu of written notice. The
same holds true for common law entitlements, which can be provided
by way of notice of termination or pay in lieu thereof.
However, severance pay under the ESA cannot be paid by way of
notice and must be paid in cash to employees who are legally
Clearly, there is a sound legal
basis not to offset severance pay from loss of earnings benefits as
the Legislature has prevented employers from offsetting notice of
termination against severance pay. However, the Legislature
has not required employers to pay termination pay in cash and thus
there ought to be no distinction between pay in lieu of notice at
common law and termination pay – both constitute pay in lieu
of what would otherwise have been working notice of termination
– i.e. “earnings”.
To put it another way, pay in lieu
of notice (whether required by the ESA or the common law) is
designed to compensate employees for funds they would have received
if they had received the required notice of termination required by
law. In our view, both statutory and common law notice
payments should be considered “earnings” under the
Workplace Safety and Insurance Act and should be offset against any
entitlement to loss of earnings benefits.
This decision may also have an
impact on wrongful dismissal litigation involving employees
receiving loss of earnings benefits. The Courts have
repeatedly held that loss of earnings benefits are to be offset
against any entitlement for pay in lieu of notice. As a
practical matter, this means that most employees receiving loss of
earnings benefits from WSIB do not have a significant claim for pay
in lieu of notice beyond the minimum payments mandated under the
ESA. We anticipate that employer counsel will be relying on
this decision to ask Courts to consider the “double
recovery” for termination pay and WSIB loss of earning
benefits when assessing damages for wrongful
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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