A 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 its facility.
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 eligible.
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 dismissal.