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WSIB Benefits Deducted from Wrongful Dismissal Damages

There are many different pieces of legislation and legal principles that often overlap and interact to affect employee entitlements and employer obligations.  One particular area that can lead to confusion, and about which the lawyers at CCP are frequently asked, is how WSIB benefits received by a worker affect reasonable notice when terminating someone’s employment.  While we know that other payments and benefits will offset wrongful dismissal damages, the deductibility of WSIB benefits from wrongful dismissal damages (or from pay in lieu of reasonable notice) has been a topic of debate for some time.  However, the Ontario Superior Court of Justice has recently provided some guidance, in the case of Jensen v. Schaeffler Canada Inc.

This case involved a long-term production employee, Ms. Jensen, who, as a result of a workplace accident in 2003, was shifted into a modified administrative role to accommodate her physical restrictions when she returned to work in late 2004.  Unfortunately, due to an economic downturn, Ms. Jensen was one of 180 employees laid off in 2006  - while her 28 years of seniority would have allowed her to retain a job in her original classification, she was physically incapable of performing that job and was placed on temporary layoff.  When informing her of the layoff, the Employer’s representatives discussed with Ms. Jensen the WSIB’s Labour Market Re-entry Program (“LMR”), in which Ms. Jensen subsequently enrolled.

Although there was some confusion about the effective date of her layoff and subsequent termination, at the end of the temporary layoff period of 35 weeks Ms. Jensen exercised her option to receive her termination and severance entitlements under the Employment Standards Act, 2000: termination pay of $7,040 and severance pay in the amount of $22,880, respectively.  She then also sued for wrongful dismissal, alleging she was entitled to reasonable notice of 18 to 24 months at common law.

Ultimately, Justice Haines decided that in fact the reasonable notice period for Ms. Jensen was 18 months.  However, in assessing the damages and Ms. Jensen’s mitigation information, Justice Haines took note of the “…bi-weekly loss of earnings payments from WSIB…” that she received during her participation in the LMR, and invited submissions from both counsel as to the effect that these payments should have on the determination of Ms. Jensen’s damages.  This was a significant issue, as the total of WSIB payments received, plus termination and severance already paid, exceeded the damages awarded for reasonable notice.

After hearing argument from both parties on the issue of the WSIB payments, Justice Haines ultimately found in favour of the Employer, ruling that the WSIB payments received by Ms. Jensen during the notice period could be deducted from wrongful dismissal damages.  Justice Haines relied on the Alberta Court of Appeal’s decision in Salmi v Greyfriar Developments Ltd.  Essentially, the reasoning is that because the Employer pays into this insurance scheme as mandated by legislation (in Ontario, the Workplace Safety and Insurance Act, 1995) and Ms. Jensen received these payments in lieu of earnings while unable to work, the Employer should receive the benefit of this mitigation.  Accordingly, Ms. Jensen’s damages were reduced by the amount that she received from the WSIB, the end result of which was that she was owed no further payments from the Employer.

While this case represents a positive decision for employers who participate in the WSIB program, it is important to remember that all wrongful dismissal cases – including those involving WSIB or other additional or post-termination benefits – are unique, and that entitlements are based on the specific circumstances of each case.  The lawyers at CCP can help you sort through the applicable legal principles when determining an employee’s entitlements at termination.

Please Note: This blog has been prepared as an informational service for our clients and other interested parties. It is not intended to constitute legal advice, a complete statement of the law or opinion on any subject. Although we endeavour to ensure the accuracy of the content, no one should act upon the information provided without a thorough examination of the law after the facts of a specific situation are fully considered.



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