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| Ellen Low |
Pursuant to the Employment Insurance Act, any labour arbitration award, court judgment or settlement is considered income earned after that person’s employment has ended, with very few exceptions, and the receiver general must be reimbursed for any overpayment. Both the employer and employee are jointly responsible for determining what is owed and what must be repaid.
In the 2020 taxation year, approximately 171,000 claimants repaid a total of $250.8 million in EI benefits. These numbers increased in the following year, with around 245,000 claimants who repaid a total of $450.6 million. That is money that every taxpayer should want back in the system ASAP.
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There can be a number of considerations that go into a repayment adjustment calculation, also known as an EI “clawback.” For example, repayment for unpaid overtime or bonuses, payments for special damages, legal fees, court costs, disbursements and other legitimate expenses directly related to the legal action or settlement are not subject to clawback.
However, getting it right can be tricky. More importantly, making a mistake can be costly. Both the employer and employee are responsible for determining repayment to the receiver general and nobody wants to get it wrong because there are penalties for what could be deemed EI fraud.
An employer or employee who purposely holds back information, changes the facts or makes false claims can be charged and penalized. And these penalties should not be taken lightly. Employees can jeopardize an existing or future EI claim by making a false statement. Employers who are found guilty of fraud, which includes the falsification of a record of employment, can be fined. Their corporate directors and their officers can also be penalized for fraud for making false statements.
The current system complicates what should be a fairly simple process. Assume a settlement was achieved in a wrongful dismissal and the employee received employment insurance benefits. Under the Employment Insurance Act, the employer and the claimant have an obligation to determine how much, if any, the receiver general requires in repayment.
Quantification of the repayment obligation comes in the form of a notice of debt or notice of waiver. But getting one has become increasingly difficult and time-consuming. It has proved impossible to get a real human to advise exactly what that overpayment obligation would be in a timely manner. We have been verbally advised by an EI representative that the present, proper, manner is to have the employer issue a revised record of employment (ROE) which will automatically trigger a notice of debt; however, this leaves counsel arguing about what amounts are subject to inclusion on the ROE or, worse, leaving it for their employer’s payroll provider to sort out.
In effect, we have a stalemate where employers are saying they have to inquire about how much EI a person received so they can deduct the amount from the settlement owed to the claimant and the employee who is telling the employer to pay them, and they will be responsible for reimbursing the receiver general.
Once upon a time, it was possible to write a letter or email on behalf of a client telling an EI representative that a settlement with the employer had been achieved. The letter would lay out what the agreement covers, wages, benefits, legal fees in achieving that settlement and how much EI that person has received. We would receive an almost instantaneous response upon which counsel could rely in crafting their settlement documents.
Alternatively, it used to be that the client could take a letter including similar information to Service Canada and ask for a notice of debt to share with the employer, who could then pay out the settlement. But we are advised that the system has changed, and we are left with this impasse of figuring out exactly how much has to be remitted to the receiver general.
The problem could be solved with a dedicated department dealing with EI recapture that would be accessible to claimants, employers and their lawyers. Alternatively, a public document regarding the process would be extremely helpful in clarifying what the new process or procedure is, and here is how we are going to deal with these situations efficiently and expeditiously.
A dedicated human within the employment insurance system on whom lawyers could call or email with the appropriate information would expedite, and not exacerbate, this entire process. At present, once we agree on a settlement and then agree on the amounts that the employer will report on the revised ROE, it still takes between 30 and 120 days to have the notice of debt issued. This means that you can settle your employment law matter in September and unless you are dealing with clever, and co-operative counsel, not stand a chance of being paid until January of the following year.
As employment lawyers advising clients who are trying hard to comply with their repayment obligations, it is imperative that we know exactly what employment insurance requires.
The current system is creating additional work for people who are trying to do the right thing and unnecessarily delaying both repayment to the government of funds it is due, and delaying settlement monies to plaintiffs who need them. My advice is that people in this situation should call their member of Parliament and demand a way to untangle some of this red tape.
Ellen Low has been working exclusively in employment and human rights for over a decade. She obtained her law degree from the University of Ottawa, articled at Gowlings, practised as a partner with a boutique Toronto employment law firm and founded her own firm, Ellen Low & Co. Employment Law, in 2018.
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