Digest of Benefit Entitlement Principles  Chapter 4 - Section 4

4.4.0 Remuneration without work

It often happens that employees are remunerated for weeks during which they are not required to perform their normal duties, or for which they receive their full weekly salary even though they have been employed for less than the full working week.

Any week during which a worker's contract of service continues and for which the usual remuneration for a full working week is received, is not a week of unemployment (EIA 11(2)). This means that, regardless of whether or not services have been performed, the claimant is not entitled to be paid any benefits for such weeks.

4.4.1 Annual vacation period

Budget 2021 measures alert – Temporary measures are in place from September 26, 2021 to September 24, 2022 which affects the following information:

  • earnings paid due to separation from employment are not deducted from benefits

Workers are not unemployed during any week in which they are on annual leave (vacation) and for which they receive their usual remuneration for a full working week (EIA 11(2)). When the actual payment is made, is not a determining factor (CUB 56514). It is immaterial whether the leave with pay is taken during the course of employment, at the time of a separation from work (CUB 74797) or sometime during a lay-off (CUB 67739).

A company may decide to close down for several weeks a year so that all employees take their vacation at the same time. Workers with little seniority may have entitlement to vacation for only part of the shutdown period. In spreading out the vacation pay according to the usual weekly remuneration of the worker, from the beginning of the shutdown, any week during which the allocation is equal to what the worker is normally paid, is not a week of unemployment.

A proportionate deduction from the weekly benefits payable shall be made in respect of a week for which the worker receives less than the usual remuneration (Digest 4.1.3).

On the other hand, workers are frequently given their accrued vacation pay at the time of separation, without actually being on vacation leave. In this case, the contract of service does not continue and the weeks immediately following separation may be weeks of unemployment. The same is true when vacation pay is paid during a period of lay-off without the contract of service being revived to allow for a vacation leave. However, the vacation pay will most likely reduce the weekly benefits payable (EIR 35; EIR 36; Digest 4.1.3).

4.4.2 Leave with pay

Where a person is placed on leave with full pay for any reason during a week, that week is not a week of unemployment (EIA 11(2)). It is clear that while the person receives their full pay, the contract of service with the employer continues, regardless of the type of leave.

Accordingly, weeks for which a claimant is remunerated for a full working week while claiming any type of benefits (regular, compassionate care, family caregiver, sick, maternity or parental), are not weeks of unemployment. A proportionate deduction shall be made from the weekly benefits payable in respect of any week for which less than the usual remuneration is received (Digest 4.1.3).

4.4.3 Compensatory leave

It is not uncommon for people working overtime to be given a period off work rather than pay as compensation for the additional hours worked. Any week for which a worker is being compensated for additional hours or overtime worked, and not required to perform some or all of their duties, is not a week of unemployment (EIA 11(2)). A contention that the payment should be allocated to the period during which the services were performed and not to the period of leave is not accepted.

It is possible that a contract of service provides for a regular workweek that is longer than normal and allows a period of time off to compensate for the additional hours (lay days). Every week off granted in this way is not considered a week of unemployment (EIR 29(4); FCA A-92-03, CUB 56090A; CUB 52217A). When the remuneration is actually paid under the terms of the contract, is not a determining factor.

It has been held many times that workers in the navigation industry are subject to this rule when using up lay days that were accrued while at sea for a certain period of time. The rule applies even where the worker is not expected to resume work at the end of their leave, and even where the contract of service comes to an end on the last day worked.

4.4.4 Deferred salary leave plans

These types of plans help to reduce the number of lay-offs in a given industry. Under these plans, a payment formula provides for a distribution of salary over an agreed period, which includes a period of leave of absence.

A most common application appears to provide for salary from four equal periods to be paid over five equal periods, one of which is a period of leave. For example, it may be agreed between an employer and employee that the worker’s salary for four years will be spread over five years; that the employee will provide services for the first four years and then be off work for the entire fifth year.

It is considered that:

  • the percentage of the salary payable for each week under the terms of the arrangement, becomes the employee's usual remuneration for a full working week, for the duration of such arrangement
  • the contract of service continues beyond the last day worked to include the period of leave, and
  • a portion of the salary is payable without the performance of services during the period of the leave (EIR 36(5); CUB 62689A; Jurisprudence Index/earnings/deferred salary leave plans/). As a result, that employee is considered not unemployed at any time while the contract continues (EIA 11(3))

4.4.5 Off-season covered by contract

Where the remuneration for a full working week is guaranteed for a specific period of time under a contract and is paid, the weeks wholly contained in that period are not weeks of unemployment, regardless of when payment is made, or the amount of work performed (EIR 29(4)). An example would be that of certain stevedores whose seasonal contract guarantees that they will be paid at least an amount equivalent to what they would receive for 40 full working weeks. Regardless of when payment is made, or how many hours/days they work, the entire 40 weeks of the contract would not be considered weeks of unemployment.

Similarly, any week covered by a contract of service where remuneration is provided for the period of the contract, is not a week of unemployment, even if the person is exempted from performing services during some of those weeks (EIA 11(2); EIR 29(4)). A professional football player was held not to be unemployed for the duration of his contract, and in particular, beyond the termination of the season, even though the payments of his salary ceased with the last game played (CUB 42735).

4.4.6 Notice and severance pay

Budget 2021 measures alert – Temporary measures are in place from September 26, 2021 to September 24, 2022 which affects the following information:

  • earnings paid due to separation from employment are not deducted from benefits

Wages in lieu of notice, as well as severance pay, are generally paid in one lump sum upon termination of the contract of employment. Where this is the case, the weeks following the last day worked are weeks of unemployment (EIA 11).

However, this does not mean that a person automatically becomes eligible for the payment of EI benefits. The lieu of notice or severance payments received may be earnings to be taken into account, so they may result in reduced benefits, or no benefits being payable (EIR 35; EIR 36; Digest 4.1.3).

4.4.7 Damages for wrongful dismissal

Budget 2021 measures alert – Temporary measures are in place from September 26, 2021 to September 24, 2022 which affects the following information:

  • earnings paid due to separation from employment are not deducted from benefits

In some cases, an employer's action in terminating employment may be regarded as unjust, and is challenged by the employee through the proper grievance process, or before a court. Damages for wrongful dismissal may then be awarded, either through a labour board decision, through a court judgment, or be conceded by the employer as an out-of-court settlement.

Where, following such an action, a person is reinstated in employment with full pay for the past period, the contract of service is considered to be re-established retroactively, and the weeks elapsed since the last day worked are no longer regarded as weeks of unemployment. As a consequence, any EI benefits paid for those weeks will result in an overpayment that must be repaid by the claimant.

On the other hand, if the contract of service is not re-established, or if the claimant is only partially compensated for the period elapsed, these weeks remain weeks of unemployment for benefit purposes. The moneys received as partial compensation may then become earnings, resulting in the reduction of the total EI benefits payable.

4.4.8 Stand-by hours

The requirement to be on standby is a condition of employment for claimants in certain occupations. These hours may or may not be remunerated. The remuneration for the standby hours is normally at a rate less than the rate paid for normal hours of work. The hours that an employee is required to be on standby are usually over and above the hours worked in a given week or pay period. A person could work 40 hours per week and be on standby for a couple of evenings per week or during the weekend.

A claimant who is on standby for 35 hours in a week and is not receiving their normal remuneration for that week, would be considered unemployed for that week, unless the standby hours require the claimant to be on the employer's premises.

However, a week during which a claimant receives their normal remuneration for a full working week, even though they are not performing any duties during that week, cannot be considered as a week of unemployment (EIA 11(2)).

[March 2021]

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