Digest of Benefit Entitlement Principles Chapter 5 - Section 6

5.6.1.1 Paid

For EI purposes, paid means actually received and accepted. The concept of paid combines the offer of a payment by an employer or any other person, with the receipt and acceptance of that offer by the claimant.

Received means to come into possession of, to acquire, or to have control of the payment. Claimants have received payment when they physically hold the cheque or cash, when payment is deposited into their bank account, or when they receive non-pecuniary income. Claimants are also considered to have received payment when it is expected to be in their possession shortly, usually the next payment processing date. This commonly occurs with wages, salary, vacation pay paid with each pay, periodic pensions and termination moneys. Received applies equally to cases where the money is transferred directly by the employer to a RRSP, or paid in fulfilment of a debt (CUB 47731; CUB 68776).

The claimant generally accepts an offer of payment by cashing the cheque or accepting a bank deposit. Even if the claimant does not cash the cheque, payment may still be considered received and accepted. Sometimes the employer delays issuing the cheque; the claimant delays picking up the cheque or does not cash it; or a court or tribunal has decided the issue and there is no further litigation. In these cases, the amount is considered paid. However, it is not considered paid if the amount and condition of payment are in dispute and the cheque is refused or returned (CUB 36736).

If the claimant accepts an offer of money by cashing the cheque, the claimant cannot invalidate that payment by any subsequent repayment arrangements. Only if the money was paid by mistake or not legally due, would the Commission accept repayment arrangements, and no longer consider the earnings paid.

5.6.1.2 Payable

According to normal usage and by law, the term payable means justly due and legally enforceable. A sum of money is said to be payable when an individual is under an obligation to pay it. This obligation to pay can be immediately due or due at some time in the future.

Earnings are payable when the claimant is in a lawful position to enforce payment (FCA A-71-95, CUB 26456; CUB 28075). Earnings are only considered payable for EI purposes when the obligation to pay is immediate, and not when the obligation to pay is some time in the future. That is, when the claimant can access them, or when the right to receive the earnings is immediate. Any other approach may cause hardship to the claimant, as earnings that the employer has not yet paid, or may not pay for some time, would be allocated.

The fact that employees have acquired the right to some moneys does not mean they are immediately due. The obligation for the employer to pay these moneys may only become due at some time in the future, and the person is only able to enforce payment at that time. For example, vacation pay is not immediately due after each hour of work. It is usually due at some time in the future, such as during a vacation period, at an anniversary date, or at an entitlement date when the employee may then request the payment, according to the provisions of the contract of employment.

When employees are entitled to moneys on termination, they may have the right to choose the method or time of payment. That is, one cheque at the time of separation, one cheque in the calendar year following separation, or several cheques over a period that may extend over several years. The choice of the method or time of payment governs the moment when the employer is obligated to pay and the claimant is in a position to enforce payment. Only at that time are the earnings considered payable.

In addition, an amount is not considered payable when the amount and condition of payment are in dispute and the cheque is refused or returned. In that case, the amount is not immediately due but rather is payable sometime in the future when the agreement between the parties is reached, as it is only then that the person is in a position to enforce payment. Likewise, an amount is not considered payable when the employer has filed for bankruptcy or is experiencing financial difficulties, and it is not expected that payment will be issued in the immediate future (Digest 4.5.3). If the payment is made at a later date by the employer, trustee, or from a governmental Wage Earner Protection Fund, it must be allocated according to the type of earnings and the reason for the payment.

When the entitlement date and the employer's obligation to pay coincide, the moneys are payable on that date. In the case of vacation pay that is paid on an anniversary date, the entitlement date (i.e. the date when the employee can access the vacation pay) and the employer's obligation to pay, occur on the same date. The vacation pay is therefore payable on that anniversary date. However, where there is first an entitlement date plus an additional condition, such as the requirement for employees to request the payment of vacation pay, earnings are not payable until the additional condition is met. The employee is not in a lawful position to enforce payment until they make a request for the vacation pay. The same would be true where an employer requires employees to return to work before becoming entitled to payment (CUB 35199).

5.6.2.1 Allocation of earnings that were paid or payable by reason of a lay-off or separation

Any earnings that are paid by reason of a lay-off or separation, to meet all the employer's obligations with respect to the lay-off or separation, must be allocated from the week of lay-off or separation, regardless of their nature. This includes any earnings paid to compensate for loss of employment, as well as any payment of outstanding entitlement to unused benefits (e.g. vacation pay; accumulated sick leave credits) paid out on separation under the terms of the contract of employment. This allocation must begin from the week of lay-off or separation, regardless of the period for which the earnings are purported to be paid or payable (EIR 36(9), Digest 5.12.0).

Earnings paid at the time of a lay-off or separation are usually considered to be paid for that reason. However, there may be evidence that the payment simply coincides with the date of lay-off. The true reason for the payment may be something entirely different. For instance, a lay-off may coincide with an anniversary payment of vacation pay. If the vacation pay would have been paid at that time, regardless of the lay-off, then it cannot be said that the payment was made by reason of the lay-off. Payments may be merely bookkeeping activities prompted by the lay-off or separation and not truly paid to compensate for that lay-off or separation. For instance, at the time of layoff, the employer may discover that certain earnings should have been paid at an earlier date, but were overlooked. While payment was prompted by the lay-off, it was not the reason for the payment.

EIR 36(9) regarding earnings by reason of a lay-off or separation is not based on the type of earnings paid, but rather the reason for the payment. Therefore, regardless of the type of earnings involved, if earnings are paid or payable to the claimant by reason of a lay-off or separation (i.e. to compensate for that separation event or to pay out any remaining benefits under the contract), they are allocated under that subsection. If the earnings are not paid or payable for these reasons, they are allocated according to the type of earnings.

5.6.2.2 Allocation based on the type of earnings

Once it is confirmed that the earnings were not paid or payable by reason of a lay-off or separation (e.g. not to compensate for a lay-off or separation or to pay out unused entitlement to benefits under the terms of a contract), an appropriate subsection of the regulation must be identified. EIR 36 refers to the allocation of specific types of earnings, as well as the reason for payment. If the specific type of earnings is mentioned in the regulation, earnings are allocated according to the relevant subsection (EIR 36(4) to 36(18)). If the specific type of earnings is not mentioned, earnings are allocated pursuant to EIR 36(19); the section used when none of the other subsections apply. Wages or salary for the performance of services are always allocated to the period where services were performed (EIR 36(4); Digest 5.7.1).

Although there are a number of types of earnings that are payable under a contract of employment without the performance of services, if a type of earnings has been specifically mentioned elsewhere in the regulation, allocation is under that subsection rather than the more general one. When a payment is made under a contract of employment without the performance of services, these earnings are allocated to the period for which they are payable (EIR 36(5); Digest 5.7.2).

When a payment is made in consideration of a claimant's returning to work or commencing work with an employer, these earnings are allocated to the period for which they are payable (EIR 36(5); Digest 5.7.0). These earnings are not payable until the claimant meets the condition of returning to work or commencing work with that employer. As such, the earnings are allocated to the week in which the claimant meets the condition.

Earnings from participation in an employer’s profits (profit sharing), on the basis of a commission, or through self-employment are other types of earnings that are specifically mentioned (EIR 36(6), EIR 36(6.1), EIR 36(6.2); Digest 5.15.0, Digest 5.8.0, Digest 5.16.0). Earnings that fall into these categories and arise from the performance of services are allocated to the week or weeks in which the services were performed.

Where the earnings arise from a transaction, including farming transactions, the earnings are allocated as follows:

• if the amount of the transaction occurring in a week is greater than the maximum yearly insurable earnings divided by 52, the earnings are allocated to the week or weeks when the work that gave rise to the transaction was performed, in a manner that is proportional to the amount of work that was performed during each of those weeks. If no work was performed, then the earnings arising from the transaction are allocated to the week of the transaction only
• if the amount of the transaction occurring in a week is less than or equal to the maximum yearly insurable earnings divided by 52, the earnings are allocated to the week the transaction occurred, unless the claimant indicates that the work was performed in more than one week. If that is the case, the earnings are allocated to the weeks when the work that gave rise to the transaction was performed, in a manner that is proportional to the amount of work that was performed during each of those weeks

Earnings arising from self-employment in farming, received in the form of a subsidy, are allocated to the week in which the subsidy is paid (EIR 36(7)).

Earnings received following the settlement of a wrongful dismissal complaint are generally not allocated based on their nature or type. They are allocated as earnings paid by reason of lay-off or separation, that is, based on the reason for their payment (EIR 36(9); Digest 5.6.2.1, Digest 5.12.11). However, where there is a finding or admission of discipline against the employee and the earnings are awarded to specific weeks under the settlement, these earnings are handled in a different manner. The allocation starts from the first week for which the earnings are awarded, based on normal weekly earnings. However, no earnings are allocated to any weeks during a period of suspension without pay (EIR 36(11)).

The following payments are allocated to the period for which they are paid or payable (EIR 36(12)):

• payments for sick, maternity and parental leave (EIR 36(12)(a))
• sickness or disability payments made under a group wage-loss indemnity plan (EIR 36(12)(b); Digest 5.11.2)
• provincial motor-vehicle accident insurance payments where EI is not taken into account (EIR 35(2)(d); EIR 36(12)(c); Digest 5.11.4)
• payments made by provincial governments for the withdrawal of services as a preventative measure (EIR 35(2)(e); EIR 36(12)(c); Digest 5.11.5), and
• workers' compensation payments, other than lump sum or pension paid in full or final settlement of a claim for workers' compensation payments (EIR 36(12)(d); Digest 5.11.3)

Holiday pay for a day of leave that is a designated day recognized by law, custom, or agreement is always allocated to the week in which that day occurs (EIR 36(13)).

Pension earnings paid periodically, or in a lump sum, are allocated to the period for which they are payable (EIR 36(14); EIR 36(15); Digest 5.13.5). When the payment is made in a lump sum, it must first be converted to a weekly amount ((EIR 36(17); Digest 5.13.6).

Earnings that are payable to a claimant under a government program intended to encourage re-employment and that are payable to the claimant as a supplement to earnings arising from a contract of employment, are allocated to the period for which they are payable (EIR 36(18)).

5.6.2.3 Other cases where EIR 36(1) to 36(18) do not apply

EIR 36(19) provides for the allocation of earnings when no other subsection applies. The period of allocation depends on whether the earnings arise from the performance of services, or if they arise from a transaction. In cases where earnings are not specifically mentioned in EIR 36(1) to 36(18); if they arise from the performance of services, they are allocated to the period in which the services were performed; if they arise from a transaction, they are allocated to the week in which the transaction occurred.

An example of such a circumstance is a gratuitous payment from an employer, such as a monetary bonus or a gift at Christmas. This payment is neither paid by reason of a lay-off or separation, nor is it paid for work performed. This type of earnings, a gratuitous payment, is not specifically mentioned in any other subsection. The value of the bonus or gift is allocated to the week in which the transaction occurred, that is, to the week in which Christmas occurs (Digest 5.14.3).

5.6.3.1 That employment

The total earnings from a specific employer are allocated at the claimant's normal weekly earnings from that employment, to each consecutive week except the last, beginning with the week of lay off or separation from that employment (EIR 36(8)(a) & (b); EIR 36(9); EIR 36(10)).

Only earnings arising from that employment are to be considered when allocating at normal weekly earnings. Which employment is meant by the phrase “that employment” must be examined in the context of the wording of the regulation in which it appears.

In the case of allocation of earnings paid or payable by reason of a lay-off or separation from an employment, the term “that employment” refers to the employment that is lost for that reason, and that gives rise to the earnings (EIR 36(9)). This means that all earnings paid or payable by reason of a lay-off or separation are allocated to each week so that the total earnings in that week from the employment which has been lost, do not exceed the normal weekly earnings from that same employment. Earnings from a different employer are not considered as earnings from that employment.

As long as a lay-off or separation from the employment giving rise to the earnings legitimately occurs, or the right to the payment legitimately occurs under a contractual provision, earnings from any subsequent employment with the same employer are not used in determining the normal weekly earnings to be used for allocation purposes. Termination moneys paid or payable before a claimant actually ceases work with an employer must be carefully examined to determine exactly what is giving rise to the payment and why they are paid or payable at that time.

When a trustee is appointed to continue the operations of an employer in bankruptcy, it is considered to be subsequent employment and not “that employment”. As a result, earnings for work performed for the trustee are not taken into account when allocating any earnings paid or payable by reason of a lay-off or separation, by the trustee or a Wage Protection Fund, on behalf of the bankrupt employer (FCA A-397-08, CUB 70719).

In the case of an allocation of vacation pay that is paid or payable to a claimant by reasons other than a lay-off or separation from an employment, the term “that employment” refers to the employment that triggered the payment of the vacation pay.

In the case of earnings awarded to specific weeks after a finding or admission of discipline, that employment referred to is the one from which the claimant was suspended (EIR 36(11)).

If an allocation is required at the rate of normal weekly earnings, the allocation period must be reviewed to see if there are any other earnings applicable to that same period, from the same employment that triggered the earnings being allocated. Any earnings from employment other than the employment that gave rise to the amount being allocated, are not considered when determining the amount to be allocated to each week as normal weekly earnings.