What is Employment Insurance?

When a non-unionized employee loses their job, normally through no fault of their own, they can apply for Employment Insurance (EI). Employment insurance is meant to supplement, but not necessarily replace, the remuneration lost by the individual so that they may support themselves until they find a new position.

If you are considering applying for employment insurance, you should apply as soon as you have been terminated and no later than 30 days after your termination, even if you have no yet settled on an appropriate severance offer or have not received your Record of Employment (ROE). You can contact Service Canada if you are unsure as to whether you are eligible for Employment Insurance.

What is Severance Pay?

What people often call ‘severance pay’ is more accurately known as ‘termination pay’ or ‘pay in lieu of notice’. If an employee is terminated without cause—meaning they did nothing wrong to be terminated—the Employment Standards Act (ESA) entitles individuals who have worked for more than three months to receive notice of dismissal or pay in lieu of notice of dismissal. This means that your employer must give you a certain amount of ‘heads-up’ that you will be terminated, or your employer can terminate you immediately and pay you for the notice period you should have worked with them (the most popular option).

Can I Collect Both Employment Insurance and Severance Pay?

The general rule in Canada is that individuals are not allowed to collect Employment Insurance (EI) benefits while they receive severance pay. A severance package represents the compensation you would have received if you had continued in your position. Therefore, you are technically still receiving renumeration the same as people who are actively employed. For this reason, receiving both severance payments and EI benefits would be ‘double-dipping’.

What Happens If I Am on EI and Receive a Severance Package?

If you go on EI, and later receive a severance package you will have to pay Service Canada back for all the EI you received while receiving severance payments. Service Canada will backdate your severance package as if you got this money the day you were terminated from work even if you negotiated it many months later. However, the upside is that your entitlements to EI benefits will be extended for the amount of “time” you paid back, meaning you can recover the amounts you had to pay back.

Please note that this article is only to be used as general information and it does not constitute legal advice. We encourage employers and employees to contact Levitt LLP directly to better understand vaccination-related issues and seek legal advice to their questions.