Employers EI obligations from severance and termination pay

Question: What is an employer’s obligation with respect to the withholding and remittance of employment insurance benefits from severance and termination pay?

Answer: Under the Employment Insurance Act, an employer must deduct and account to employment insurance any amount of pay in lieu of notice the employee has received during a period in which the employee also received employment insurance benefits. From EI’s perspective, if an employee received pay in lieu of notice for any given week after termination, the employee should not also be entitled to EI benefits during that week. Both the employee whose employment has been terminated and the employer are jointly responsible for the repayment of employment insurance benefits to the Receiver General. But the employer’s obligation only arises where it has reason to believe the employee has received employment insurance benefits. The difficulty is the act does not specify whether the employer has a positive duty to make inquiries as to whether the employee has in fact received employment insurance.

Therefore a safe course of action for an employer would be to have the employee sign a statement representing that he has not received employment insurance benefits when providing him with a severance and termination package. Alternatively, an employer can require an employee to obtain a statement from employment insurance confirming the employee has not received EI benefits for a given period.

Peter Israel is counsel to Goodman and Carr LLP in Toronto and is head of the firm’s Human Resource Management Group. Peter can be reached at (416) 595-2323.

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