Jul 5

Wrongful Dismissal and Employment Insurance

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A question that often arrises is whether terminated employees should apply for Employment Insurance (EI) when they believe that they might have an outstanding claim against their employer for wrongful dismissal.

What is EI?
Employment Insurance can be a very helpful bridge for those who have been terminated since, depending on the number of qualifying hours worked, it can be up to 55% of the previous salary or to maximum of $501 per week (in 2013) for about 8 months, or, preferably, until you find a new job. That being said, EI is very complex and takes into account the hours worked, the unemployment levels in your geographic area and a number of other factors when determining an employee’s entitlement.

You to have to fight for EI if terminated for cause
If the employer is alleging that you were fired for cause (theft, misconduct, unacceptable performance or attendance) or that you resigned, then this can present particular problems for an EI seeker. Service Canada will not pay EI if they determine that you were fired due to your own misconduct after hearing from both sides. It is important to protect your rights in a case where your EI is contested and make sure to contact a lawyer for assistance in drafting your response to the allegations of your employer. Often the best way to prove that your employer did not have just cause is to go to court.

What happens when you succeed in a wrongful dismissal action?
If you end up suing your employer for wrongful dismissal and are successful, under the Employment Insurance Act, you must pay back the EI amount that you received. which is “earnings, including damages for wrongful dismissal” for the “same period” that you were paid EI under sections 45 and 46 of the Act. Note that that does not mean all EI, if you are paid money equal to two months notice by your employer then you would likely just need to pay back two months of EI.

Taking EI or not
Many persons who are terminated and some lawyers who dabble in Employment Law, knowing that the employee will likely have to pay back EI, believe the better choice is never to take it in the first place since they are intending to sue for wrongful dismissal. Some lawyers even might suggest not taking EI because it could end up with them winning a ‘larger’ settlement and then getting a larger fee if work is done on a contingency basis.

Although opinions vary and you should consult with us or another employment lawyer before choosing to take EI, I generally suggest to clients that they should take EI even if they have a clear claim against their employer. The most basic reason for this is the old saying that a bird in the hand is worth two in the bush.

What happens afterwards
By applying to EI you get your money now, as opposed to later, and there is no guarantee that you will be successful in your claim against your employer. Even if you are successful it is not guaranteed that you would have to pay the money back to EI either. A knowledgeable employment lawyer can structure settlements to minimize EI repayments.

Moreover, EI claimants can apply to the government to not repay the overpayment if repayment in some situations. For instance if the repayment would be a hardship for them under section 56(1)(f) of the EI regulations as one example. The length of time since receiving EI can be an important factor in this case. If you do have to pay back the EI it can be possible to extend you EI as well, such that the time you paid back would not count against your total EI allocation.

Overall, EI is a complex area of law and one where it is important to seek the advice of an employment lawyer. However, you should not give up on applying for EI just because you believe that you were wrongfully terminated, check with a lawyer first, then apply away!