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). EI is a program administered by Canada’s federal government that is designed to provide temporary financial assistance to individuals who have lost their job in this way. Employment insurance is meant to supplement, but not necessarily replace, the remuneration that the individual lost 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 not yet settled on an appropriate severance offer or have not received your Record of Employment (ROE). There is a one-week waiting period before EI benefits begin, so it is important to apply as soon as possible to avoid unnecessary delays in financial support.
Eligibility
Eligibility Criteria for EI in Ontario include the following:
- You were employed in insurable employment
- You paid EI premiums through your employment
- You lost your job through no fault of your own
- You have been without work and pay for at least 7 consecutive days in the last 52 weeks
- You have worked for the required number of insurable employment hours in the last 52 weeks or since the start of you last EI claim (whichever is shorter)
- You are capable of working and actively looking for work
You can also contact Service Canada if you are unsure about whether you are eligible for Employment Insurance.
Applying for EI benefits involves the following steps:
- Gather the required documents (SIN, ROE, personal identification).
- Apply online via the Service Canada website.
- Ensure your information is accurate and submit your application.
- Wait for Service Canada to review your application and notify you regarding your eligibility.
If your application is denied, you have the right to request that Service Canada reconsider the decision. You must request reconsideration within 30 days of receiving the notice that your application was denied. To make this request, you must submit a written request to Service Canada detailing why, in your opinion, the decision was incorrect. If your application is denied after requesting reconsideration, you can appeal to the Social Security Tribunal of Canada.
How is EI Calculated?
The amount of EI an individual is eligible to receive varies from person to person. It is based on a percentage of a claimant’s average insurable earnings, up to a maximum amount. The duration of EI benefits also varies according to the regional unemployment rate and the claimant’s insurable hours.
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).
It is important to note that employers have a legal obligation to provide non-unionized workers with severance pay if they are terminated without cause. An employer cannot rely on EI to compensate their former employees.
Can I Collect Both Employment Insurance and Severance Pay?
No. 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, the Employment Insurance Act prohibits receiving both severance payments and EI benefits, as this would be ‘double-dipping’.
If you receive your severance entitlements through salary continuance (i.e., you continue to receive regular pay and benefits for a set period of time after being terminated), you can apply for EI once this period ends. If you receive severance in a lump-sum payment, you can only apply for EI when the period of time the severance package was intended to cover ends.
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. In other words, by re-paying the EI for any number of weeks, you are able to add those weeks onto your EI period after your severance period ends.
Can I Get EI If I Was Fired?
Yes, individuals can qualify for EI benefits if they are fired without cause. For example, if their company downsizes, needs to decrease costs due to adverse economic conditions, or if the individual has performance issues. See our blog on this topic: [insert link to other blog post here].
Can I Get EI If I Was Fired for Just Cause?
You may not be eligible for EI benefits if you were fired for just cause, as this means that your employer had a valid reason (i.e., serious misconduct) to terminate your employment. However, in some cases you may be approved for EI benefits, if you explain the circumstances of your termination and the assessment officer agrees that there was not proper cause to terminate your employment. See our blog on this topic: Can You Collect EI If You Quit?.
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 employment law-related issues and seek legal advice to their questions.
