Time to change Employment Insurance repayment system

By Tony Poland, LegalMatters Staff • A simple bureaucratic change could help avoid ongoing Hunger Games scenarios for those attempting to satisfy Employment Insurance (EI) repayment obligations after a workplace settlement, says Toronto employment lawyer Ellen Low.

Low, principal of Ellen Low & Co., says it is not unusual for people to receive EI benefits while waiting for their claim against their former employer to be adjudicated for such matters as wrongful or unjust dismissal.

However, under the Employment Insurance Act, any labour arbitration award, court judgment, or settlement, is considered income earned after that person’s employment has ended and the receiver general must be reimbursed for overpayment, she says, adding that both the employer and employee are jointly responsible for determining what is owed and that there are very few exceptions.

Low says there can be many variables that go into the repayment calculation and the government could be doing more to ensure employers and employees are on the same page when trying to satisfy their respective obligations.

Current system ‘is inviting mistakes’

“The system we have is inviting mistakes to be made,” she says. “These are people who have received an Employment Insurance benefit and are actively trying to meet their duties and responsibilities in accordance with the Act.

“These are not people who are trying to engage in fraud or false reporting,” Low tells LegalMattersCanada.ca. “However, there are the hoops the government is asking people to jump through. They have finally achieved a settlement. Now, welcome to the Hunger Games of dealing with employment insurance repayment. It seems there must be a reasonable way to resolve this.”

She says 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 would not be subject to tax or clawbacks,” says Low.

Getting it right can be tricky but, more importantly, making a mistake can be costly, she says.

“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 would be deemed EI fraud,” Low explains. “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.

Can jeopardize existing EI claim

“For employees, it can mean that they jeopardize their existing EI claim. They can also jeopardize future claims by making a false statement,” she adds. “If employers are found guilty of fraud, which includes the falsification of a record of employment, they can be fined. As well, their corporate directors and their officers can be penalized for fraud if they make false statements.”

Low says the current system complicates what should be a fairly simple process.

“Let’s assume that we have achieved a settlement in a wrongful dismissal and the employee in question received employment insurance benefits,” she says. “In accordance with the Employment Insurance Act, the employer and the claimant have an obligation to find out how much the receiver general requires in repayment. As it stands, we in the employment law bar are having a very difficult time getting notices of debt, which quantify the amount of any re-payment.

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“It has proved impossible to get a real human to advise, in a timely manner, exactly what that overpayment obligation would be,” Low adds. “So, 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 saying just pay me the money and I will be responsible for what is owed to the receiver general.”

Low says it was once possible to write a letter or email on behalf of her clients informing the government that a settlement with the employer had been achieved. The letter would lay out what the agreement covers, how much EI that person has received and how much was paid in legal fees and disbursements etc. to get that settlement, she says.

“The client would take that letter to someone at a Service Canada location and ask for a notice of debt or notice of waiver that could be taken to the employer who could pay out the claim,” Low says.

‘We are left with this impasse’

However, the system has changed, she says, and “we are left with this impasse of who figures out exactly how much has to be remitted to the receiver general.”

The simple solution would be a government call centre dedicated to EI recapture that would be accessible to claimants, employers and their lawyers, says Low.

“It is a really complicated situation, which is why I am trying to bring some attention to it,” she says. “I would ideally love some sort of EI statement that lawyers could at least point to that has some clarity in terms of what the new process or procedure is, and here is how we are going to deal with these situations.

“What could end these stalemates is to have a dedicated human within the Employment Insurance system that lawyers could call or email with the appropriate information to expedite and not exacerbate this entire process,” Low adds. “As employment lawyers, we need to know exactly what employment insurance is looking for. It would make sense to have an individual who could input that information and generate either a notice of debt or at least tell us verbally what the likely recapture, if any, would be so that we can write it into our settlement agreements.”

The current system “is just creating additional work” for people who are trying to do the right thing, she says.

“The federal government needs to untangle some of this red tape,” says Low. “My advice to people in this situation is to call your Member of Parliament. It is time to change the system.”