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EMPLOYMENT INSURANCE (EI): Voluntary Departure

EMPLOYMENT INSURANCE (EI): Voluntary Departure

September 29, 2020 0

Voluntary departure for CERB purposes has the same meaning as for EI


EMPLOYMENT INSURANCE (EI): Voluntary Departure



In a June 5, 2020 Federal Court of Appeal case, the Court reviewed Service Canada’s decision to deny EI benefits on the basis that the individual left his employment voluntarily. The individual argued that although it was his decision to leave, he had just cause (which would allow him to receive EI). To have just cause, the individual would be required to establish that he had no reasonable alternative but to leave his job.

Taxpayer loses

The Court found no reviewable error in earlier decisions, noting that the individual could have:

  • discussed his concerns more thoroughly with his employer to explore possible accommodations (rather than asking on arrival at the worksite not to work the night shift);

  • requested medical leave, consulted with a doctor, or obtained a doctor’s note; or

  • continued to work until he found other employment.

The Court also noted the individual’s own statement that he could have continued working if his employer had not refused to pay him an additional $3/hour.

The Canada Emergency Response Benefit (CERB) angle

Voluntary departure from a position (quitting) also prevents participation in the CERB. Although there is uncertainty as to whether a “voluntary departure” for CERB purposes has the same meaning as for EI, they will likely be fairly similar.

ACTION ITEM: Eligibility for CERB is dependent upon whether it is the employer or employee’s decision to leave, and why that decision was made. Prior to changing employment status of workers, consult with a human resources specialist or lawyer to understand the implications for both the business and the employees.


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UNEMPLOYMENT BENEFIT (SUB): TEMPORARY LAY-OFFS

UNEMPLOYMENT BENEFIT (SUB): TEMPORARY LAY-OFFS

August 30, 2020 0

Consider setting up SUPPLEMENTAL UNEMPLOYMENT BENEFIT (SUB) plans as individuals transition to traditional EI


TEMPORARY LAY-OFFS: Supplemental Unemployment Benefit


The purpose of a SUB plan is to allow an employer to make supplemental payments to Employment Insurance (EI) benefits, without eroding those EI benefits. As payments under a registered SUB plan are not insurable earnings, EI premiums are not deducted.

In order to be eligible, SUB plans must be registered with Service Canada before their effective date. Plans must:

  • identify the group of employees covered and the duration of the plan;

  • cover a period of unemployment caused by one or a combination of the following:

    • temporary stoppage of work,

    • training,

    • illness, injury or quarantine;

  • require employees to apply for and be in receipt of EI benefits in order to receive payments under the plan;

  • require that the combined weekly payments from the plan and the portion of the EI weekly benefit rate does not exceed 95% of the employee’s normal weekly earnings;

  • require it be entirely financed by the employer;

  • require that on termination all remaining assets of the plan will revert to the employer or be used for payments under the plan or for its administrative costs;

  • require that written notice of any change to the plan be given to Service Canada within 30 days after the effective date of the change;

  • provide that the employees have no vested right to payments under the plan except during a period of unemployment specified in the plan; and

  • provide that payments in respect of guaranteed annual remuneration, deferred remuneration, or severance pay will not be reduced or increased by payments received under the plan.

A plan registered with Service Canada is not required to be a trust. It could be funded from general revenues.

Income tax treatment

For income tax purposes, a SUB plan is defined more restrictively, as it is required to be a trust to which the employer makes payments. Such plans can be registered with CRA, in which case any income earned within the SUB trust is non-taxable. Whether or not registered, receipts are taxable to the employee. Payments to a registered SUB plan are deductible to the employer if made no later than 30 days after year-end. Payments to SUB plans are not otherwise deductible, so a plan structured as a trust must be registered for employer contributions to be deductible.

A SUB plan which is not a trust would not be subject to the above rules. Deductibility of payments would follow the general rules for all expenses for income tax purposes.

Interaction with the Canada Emergency Response Benefit (CERB)

The provisions that exist under the EI system for employers to make additional payments to workers through SUB plans do not apply to employees who are receiving the CERB.

Amounts received by individuals from any employer in excess of the $1,000 threshold would create an obligation for the individuals to repay CERB they received for the same benefit period.

Employers that wish to do so may continue to submit a SUB plan to Service Canada. By registering a plan, employers can make payments to employees who are currently receiving EI regular or sickness benefits and will also be prepared should employees need EI benefits at a future time.

ACTION ITEM: As CERB is scheduled to end September 26, 2020, many individuals will now begin to rely on the EI system. The time may be right to consider setting up SUB plans as individuals transition to traditional EI.


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