Interim Order 8 Impacts Severance Payments on Terminations After September 27, 2020

The Federal government has released an Interim Order 8 under the Employment Insurance Act (“Act”).  It should have an effect on severance payments made to employees who were terminated after September 2020. 

In ordinary circumstances, if a terminated employee is receiving Employment Insurance and then receives a severance payment, the employee will have to make a repayment to Service Canada for the EI received.  This is addressed in section 45 of the Act and section 35 of the Regulations to the Act.   This repayment obligation appears to be changed temporarily by Interim Order 8.  The Interim Order can be found here and it includes the following provision:

153.193 The following are to be excluded from the earnings referred to in section 35 of the Employment Insurance Regulations:

(a) any pay or earnings referred to in subsection36(8), (9) or (19) of those Regulations if

(i) the claimant’s benefit period begins on or after September 27, 2020, or
(ii) the pay or earnings are declared to the Commission on or after September 27, 2020 and would otherwise have been allocated under section 36 of those Regulations to a week beginning on or after September 27, 2020;

This provision should have a practical effect on employees terminated after September 27, 2020.  If those employees are collecting Employment Insurance and then receive a severance payment, it should not affect their receipt of EI.  This also suggests that the employee will not have to repay the EI received during that time period. 

Employers can now be expected to take the position that amounts received for EI during this time period ought to be deducted from the severance owed to the employee (in the same way that employers are saying that CERB payments ought to be deducted). 

The Interim Order says it will cease to apply on September 25, 2021 or earlier if it is repealed before then. 

This update was authored by Harper Grey lawyer, Scott Marcinkow. Have questions regarding the topic discussed? Contact Scott at [email protected] or anyone else listed on the authors page.