Getting terminated from your job can be stressful, and navigating the legalities of severance pay and Employment Insurance (EI) benefits can add another layer of complexity and confusion. Severance pay (sometimes referred to as “termination pay”) is provided by an employer following an employee’s termination. Conversely, Employment Insurance (also referred to as “EI”) is a program provided by the federal government that provides individuals with temporary financial assistance after losing their jobs through no fault of their own. This financial assistance is intended to help unemployed workers while they upgrade their education or seek new employment.

This blog post will answer frequently asked questions regarding severance pay and EI benefits.

Am I Eligible for EI Benefits?

Depending on the circumstances of your termination, you may be eligible for EI benefits. You may qualify for EI benefits if you have been terminated without cause, for example, due to corporate restructuring or cost cutting. However, you may not qualify for EI benefits if you were terminated for just cause or serious misconduct. 

The distinction between a termination “without cause” and a termination “for cause” can significantly impact your rights and entitlements. Therefore, it is important to ensure that your termination is properly classified. 

Situations Where You May Not Be Eligible for EI Benefits

There are various circumstances under which you may not be eligible for EI benefits, including situations where:

• you have been dismissed from your job for misconduct,
• you voluntarily resigned from your job without just cause,
• you are on a period of leave that compensates for a period in which you worked under an agreement with your employer, more hours than are normally worked in full-time employment, or
• you are unemployed due to your participation in a labour dispute (such as a strike or lockout).

Appealing a Decision

If you have been denied EI benefits, you may request a reconsideration within 30 days after the decision was communicated. You may contact Service Canada for assistance with your reconsideration request.

When Can I Apply for EI Benefits?

If you satisfy the eligibility requirements for EI benefits, you may apply for these benefits as soon as you have been terminated. In Alberta, a terminated employee has up to four weeks from their last day of work to apply for EI benefits. If you do not submit your application within this period, the delay may result in a loss of benefits. 

The government generally aims to decide on an application within 28 days of filing. It is also important to note that there is a one-week period that you will not be paid, which is called the “waiting period.” This is comparable to a deductible paid on other types of insurance. However, receiving severance pay may further delay your EI benefits. 

Does Severance Pay Affect EI Benefits?

If you have been terminated and received a severance package, it can impact your eligibility for government benefits. The government considers severance pay to be income, and as such, the amount of severance pay and how it is provided can impact your eligibility to EI benefits.

Lump Sum Payment vs. Salary Continuance

If you receive your severance pay as a lump sum payment, you will not be able to apply for EI benefits until after the period of time that the compensation was intended to cover is over. 

On the other hand, severance pay may be provided as a salary continuance, which means that you will continue to receive your regular pay and benefits for a specified period of time after termination. You may be eligible for EI benefits after the payment period ends if you receive a salary continuance. The amount of severance pay provided may also affect your EI benefit eligibility.

Can I Receive EI Benefits and Severance Pay at the Same Time?

After your severance pay period is over, you may be eligible for financial assistance through EI benefits, provided you meet specific criteria. However, in Alberta, you cannot receive severance pay and EI benefits simultaneously. This is considered “double dipping” and is prohibited under the federal Employment Insurance Act. 

Can My Employer Force Me to Collect EI Benefits and Refuse to Provide Severance Pay? 

An Alberta employer cannot refuse to provide a non-unionized worker with full severance pay if they are entitled to it. In other words, an employer cannot avoid their legal responsibility towards their employees and rely on EI benefits to compensate them instead. The amount of severance pay the employer provides will depend on various factors, including minimum standards set out in Alberta’s Employment Standards Code.

If your employer refuses to provide severance pay, this could be considered a wrongful dismissal. If this is the case, seeking legal advice from an experienced employment lawyer as soon as possible is imperative to ensure your rights are protected, and you receive the compensation you are entitled to.

Are There Tax Implications for EI Benefits?

EI benefits are considered taxable income subject to provincial and federal taxes. If you receive EI benefits, you will receive a T4E slip from Service Canada, which must be reported on your income tax return. 

Are There Tax Implications for Severance Pay?

Severance pay is considered taxable income and the amount to be deducted will depend on the total amount and applicable tax laws. 

Work With the Experienced Employment Lawyers at Getz Collins and Associates in Strathmore and Calgary for Advice on Severance Pay Matters

If you have been terminated and have questions regarding severance pay or Employment Insurance benefits, contact the trusted labour and employment lawyers at Getz Collins and Associates. With offices in Calgary and Strathmore, our employment law team provides comprehensive legal solutions to employees and employers throughout Alberta. Whether you are a unionized employee seeking assistance with a Labour Relations Board Proceedings or a non-unionized employee who believes they have been wrongfully dismissed, our lawyers are ready to help. Contact us online or by phone at (587) 391-5600 to schedule a confidential consultation with a member of our team to learn how we can assist you with your employment law matters.