EI and Severance Pay in Ontario

What is Employment Insurance (EI) in Ontario?

Employment Insurance (EI) is a government program in Ontario that provides temporary financial assistance to individuals who have lost their jobs through no fault of their own. Provided by Canada’s federal government, It is designed to help unemployed workers while they look for new employment or upgrade their skills.

Eligibility

To be eligible for EI in Ontario, individuals must satisfy all of the following points:

• You have paid EI premiums through your employment
• You have lost your job through no fault of your own (such as layoffs or termination without cause)
• You are actively seeking and available for work.

Additionally, they must have worked a minimum number of insurable hours in the last 52 weeks or since their last claim, which varies depending on the region’s unemployment rate.

How It Works

In Ontario, EI benefits are calculated based on a percentage of the claimant’s average insurable earnings, up to a maximum amount.

The duration of EI benefits can vary, depending on the claimant’s insurable hours and the regional unemployment rate.

Recipients are required to report their job search activities and any earnings or changes in their employment status while receiving EI benefits.

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How does severance pay affect EI benefits in Ontario?

When you receive a severance package in Ontario, it may delay the start of your EI benefits, as the government considers this payment as income. It depends on whether you receive salary continuance or a lump sum payment.

Salary Continuance

Salary continuance means you keep getting your regular pay and benefits for a certain period after being fired or let go. If your severance is paid this way, you might qualify for EI benefits once the payment period ends.

The amount of severance pay you receive can also affect the duration of your EI benefits. It’s important to report any severance pay when applying for EI to ensure accurate calculation of your benefits.

Lump Sum Payment

Instead of providing compensation over a set amount of time, some employers prefer giving severance as a lump sum payment.

• Example: You are entitled to 10 months’ pay if you are fired or let go. Rather than break up your severance into monthly payments, your employer provides you with your entire severance package immediately after your termination. Even if you receive your severance all at once, you won’t be able to apply for EI benefits until the period of time that the compensation was for ends.

Using the above example, you would have to wait 10 months before applying.

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Can I collect EI after my severance runs out?

Yes, once your severance period ends, you can apply for Employment Insurance (EI) benefits in Ontario if you meet the eligibility criteria. Severance pay delays the start of your EI benefits, but once it runs out, you may be able to collect EI to support you while you look for new employment.

Can I collect both Employment Insurance and severance pay?

No, you can’t collect both EI and severance pay simultaneously, as the Employment Insurance Act prevents “double dipping.” Receiving severance pay delays your EI benefits until after your severance period ends. Once that period is over, you may be eligible for EI if you’re still unemployed and meet the necessary conditions.

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Can I get EI when I’m fired?

Yes, you can qualify for EI benefits in Ontario if you are fired without cause, for something like downsizing, performance issues, cost cutting or economic conditions. However, EI may be denied if you were terminated for serious misconduct.

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Can I still collect EI if I have been fired for just cause?

Being fired for just cause means your employer had a valid reason related to serious misconduct or insubordination. In this case, you are not eligible for EI benefits.

It’s important to note that many terminations labeled as “for cause” are actually incorrect and should be considered terminations without cause. This means you may still be owed severance pay and could be eligible for EI benefits. The distinction between termination for cause and without cause can significantly affect your rights and entitlements.

Understanding the circumstances of your termination is crucial to determining your eligibility for EI. Seeking advice from an employment lawyer at Samfiru Tumarkin LLP can help clarify your situation and protect your rights.

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When should I apply for EI?

Yes, you can still qualify for EI benefits in Ontario if you are fired, unless you were terminated for misconduct or cause. If you are let go without cause, such as due to company restructuring or downsizing, you are generally eligible for EI. However, if your termination was due to serious misconduct, EI benefits may be denied.

You should apply for Employment Insurance (EI) as soon as possible after you lose your job even if you haven’t received your Record of Employment (ROE) yet. In Ontario, you have up to four weeks from your last day of work to submit your EI application. Delaying your application beyond this period could result in a loss of benefits.

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• Code M: Navigating termination for and without cause

It’s important to apply early to ensure that your benefits start as soon as your severance period ends or as soon as you are eligible. Keep in mind that there is a one-week waiting period before EI benefits begin, so the sooner you apply, the sooner you can receive support.

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How do I apply for EI benefits in Ontario?

Applying for EI benefits in Ontario is a straightforward process:

1. Gather Required Documents: Have your Social Insurance Number (SIN), Record of Employment (ROE), and personal identification ready.
2. Apply Online: Visit the Service Canada website to complete the online application for EI benefits.
3. Submit Your Application: Ensure all information is accurate before submitting your application.
4. Wait for Approval: Service Canada will review your application and notify you of your eligibility.

For a smooth application process, ensure all information is up-to-date and accurate.

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What should I do if my EI claim is denied?

If your EI claim is denied in Ontario, you have the right to request a reconsideration of the decision. This must be done within 30 days of receiving the denial notice.

To request a reconsideration, you need to submit a written request to Service Canada, explaining why you believe the decision was incorrect. If the reconsideration still results in a denial, you can appeal to the Social Security Tribunal of Canada. It’s important to gather and present any additional evidence or information that supports your case during these processes.

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Can my employer refuse to pay severance and tell me to collect EI instead?

No. In Ontario, employers are legally required to provide non-unionized workers with full severance pay if they lose their job. A company can’t ignore their legal obligation and rely instead on EI to compensate their employees.

If your employer is refusing to offer severance and is instead directing you to apply for EI benefits, this could be considered a wrongful dismissal. In such cases, it’s crucial to seek legal advice from an experienced employment lawyer at Samfiru Tumarkin LLP. We can help you understand your rights and work to secure the severance pay you’re entitled to.

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How is severance pay calculated in Ontario?

Severance pay is calculated by considering a non-unionized employee’s age, position, and length of employment. Other factors that affect the amount you’re owed by your employer include:

• Commission
• Bonuses
• Vacation pay
• Overtime pay
• Pension
• What your employment contract says
• The availability of similar work

In Ontario, a severance package can be as much as 24 months’ pay. Wrongful dismissal occurs when your employer fails to provide the correct amount of severance.

You are entitled to severance pay if you work full-time, part-time, or hourly. Even if you are fired for cause, it’s very likely that you are still entitled to full severance pay because employees often don’t meet the conditions necessary for this type of dismissal.

In many cases, independent contractors are owed severance when they lose their job because of misclassification. Read our resource about independent contractors in Ontario to learn more.

Severance Offer Deadlines

In Ontario, you are not obligated to sign a severance offer by your employer’s deadline. During a termination meeting, you may be presented with a severance offer and pressured to sign quickly. These deadlines are often used as pressure tactics to encourage employees to accept inadequate severance packages without fully understanding their rights.

• Fact: You have up to two years from the termination date to claim your full severance entitlement, which can be as much as 24 months’ pay.

You are entitled to have the offer reviewed by an employment lawyer at Samfiru Tumarkin LLP to ensure it meets your full entitlements.

If you sign off on a severance package before we have a chance to review it, you forfeit your ability to negotiate fair compensation.

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Can I negotiate my severance package?

Yes, you can negotiate your severance package in Ontario, but it’s not advisable to do so on your own. Employment law is complex, and negotiating without legal expertise can significantly disadvantage you.

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• Can I Negotiate My Own Severance in Ontario?

Every employment matter is unique, and there might be additional factors to consider during severance negotiations, such as employer misconduct or harassment and discrimination.

When Samfiru Tumarkin LLP represents you, our lawyers will ensure that your boss takes your case seriously and addresses it promptly.

Before accepting any severance offer, contact the experienced employment law team at Samfiru Tumarkin LLP to protect your rights and secure the best possible outcome.

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What are the tax implications of receiving EI and severance pay?

Receiving Employment Insurance (EI) benefits and severance pay in Ontario has tax implications. EI benefits are taxable income,b meaning they are subject to federal and Ontario taxes. You’ll receive a T4E slip from Service Canada for the EI benefits received, which must be reported on your income tax return.

Severance pay is also considered taxable income. The amount of tax deducted from your severance pay depends on the total amount and any applicable tax laws. It’s important to consult with a tax professional or financial advisor to understand how these payments will affect your overall tax situation and to plan accordingly.

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How We Can Help

At Samfiru Tumarkin LLP, our exceptional team of Ontario employment lawyers has been a pillar of strength and success for tens of thousands of clients across the province. With proven results and a comprehensive understanding of the legal landscape, we diligently work to safeguard your rights.

Let us handle the complexities of negotiating your severance or pursuing your wrongful dismissal claim. Benefit from our unwavering commitment, ensuring you navigate your employment issues with clarity, confidence, and a powerful advocate by your side.

Our lawyers in Ontario, Alberta, and B.C. are ready to help you solve your workplace issues. If you are a non-unionized employee who needs help with an employment issue, contact us or call 1-855-821-5900 to get the advice you need, and the compensation you deserve.