Digest of Benefit Entitlement Principles Chapter 5 - Section 11
5.11.0 Compensation for incapacity
Loss of income due to illness or injury may be compensated by an employer (Digest 5.11.1; Digest 5.11.7), or by an insurance company under a wage-loss indemnity plan (Digest 5.11.2). Compensation for incapacity may also be received from other sources, such as:
- a workers' compensation board (Digest 5.11.3)
- an insurance company or provincial government, as a result of a motor vehicle accident (Digest 5.11.4)
- a person or company as a result of an accident (Digest 5.11.8)
- a provincial government for criminal injuries (Digest 5.11.6)
- a provincial government for a potential physical danger that continuing to work may cause (Digest 5.11.5), or
- a pension fund for a disability (Digest 5.13.14)
5.11.1 Paid sick leave
When an employee is unable to perform the duties of a job due to illness or injury, the employer may grant that employee a period of leave. When the employer pays the employee's salary during the leave, that period of leave is commonly referred to as paid sick leave.
Often, entitlement to a period of paid sick leave is based on a formula related to the length of employment. A long-term employee may be entitled to more paid sick leave than someone who has recently started with the same company. On the other hand, an employee who has suffered from ill health may not have any sick leave entitlement remaining.
Paid sick leave is earnings for benefit purposes (EIR 35(2)(c)). This subsection refers to sick leave that is paid, but also to sick leave, an employee is entitled to receive, if applied for. Therefore, even if the claimant chooses not to apply for their paid sick leave entitlement from their employer, any existing entitlement is still earnings. In these cases, the paid sick leave is allocated to the weeks for which it would have been paid or payable, had the claimant applied for it (EIR 36(12)(a)).
When a claimant has insufficient sick leave to cover the period of incapacity, an employer may advance paid sick leave based on entitlement that the employee will earn from future employment. These moneys are still earnings that must be allocated to the weeks for which they are paid or payable (CUB 54287).
An employer, as a gratuitous gesture, may pay an employee additional assistance during a period of illness. These moneys are earnings that arise out of employment. The payments under such terms can be said to be a transaction, and allocated to the week or weeks in which the transaction occurs.
Paid sick leave prevents an interruption of earnings from occurring (EIR 14(2); Digest 2.3.1); however, any sick leave pay received during the waiting period is not considered earnings (EIR 39(3)(b); EIR 40(6)).
5.11.2 Wage-loss indemnity plans
A wage-loss indemnity payment is a form of compensation for the loss of wages or salary during a period of illness or injury. Wage-loss indemnity plans may also provide for payments for reasons of maternity, adoption or parental leave. Maternity, parental or adoption payments are treated in the same manner as sickness or disability payments provided under the plan. An insurance company usually administers wage-loss indemnity plans; however, some employers may choose to administer their own plans. Whether payments from these wage-loss indemnity plans are earnings for benefit purposes depends on whether the plan is a group plan, or not a group plan (Digest 184.108.40.206; Digest 220.127.116.11).
18.104.22.168 Group wage-loss indemnity plans
Group wage-loss indemnity plans are designed to cover a group of workers who work for the same employer. They are not the same as disability pensions, which are discussed in section 5.13.14 of this chapter. Group wage-loss indemnity plans are earnings (EIR 35(2)(c)(i)). Even if a claimant who is covered by a plan, chooses not to apply for the wage-loss indemnity payments, any wage-loss payments to which the individual would have been entitled, had the individual applied for them, are still considered earnings (EIR 35(2)(c)).
Wage-loss payments a claimant receives, or upon application is entitled to receive, are allocated to the weeks for which those payments are paid or payable, or would have been paid or payable had application been made (EIR 36(12)(b)).
22.214.171.124 Not a group wage-loss indemnity plan
Payments under a sickness or disability wage-loss indemnity plan that is not a group plan (also referred to as a private plan) are specifically excluded as earnings (EIR 35(7)(b)). By policy, this includes wage-loss indemnity payments that are not a group plan, and provide for payments for reasons of maternity, parental or adoption leave, or leave to provide care or support to a family member who is ill.
Before a conclusion can be reached that the wage-loss plan is not a group plan, all of the following conditions must be met:
- the plan cannot be related to a group of persons who are all employed by the same employer;
- the plan is not financed in whole or in part by the employer;
- the plan is voluntarily purchased by the insured person;
- the plan is completely portable, in that the rate of premium and the protection provided will remain the same should the claimant become employed by any other employer within the same occupation;
- the plan provides constant benefits, that is, there is no provision calling for automatic benefits increments in accordance with a pre-arranged benefit schedule based on current earnings; and
- the premium rates are not dependent on the experience of the employer's group of workers, that is, the premiums paid for the wage loss insurance coverage cannot be increased by the insurance company because of a loss on claims by the insured over a period of time
These are the only conditions to be considered when determining if the plan is not a group plan. The criteria that must be met to qualify for a reduction in EI premiums is not relevant in making this determination.
5.11.3 Workers' compensation for an illness or injury
Workers who develop a work-related illness or who are injured on the job may be entitled to compensation for that illness or injury from a provincial workers' compensation board (WCB). Payments made by these boards are funded through contributions made by employers, and are paid under the provisions of provincial legislation. They may be for loss of income, prescriptions, medical treatment, rehabilitation costs (including training and medical equipment) clothing, attendant care allowances, or physical impairment.
WCB payments received or to be received by a claimant, other than lump sums or pensions paid in full and final settlement of a WCB claim, are earnings for benefit purposes (EIR 35(2)(b)). Lump sums or pensions paid in full and final settlement of a WCB claim are specifically excluded from earnings (EIR 35(7)(a)).
Although only full and final settlement WCB payments are specifically excluded from earnings for benefit purposes, not all other payments made by workers' compensation boards are earnings. Earnings for benefit purposes are only those moneys that replace earnings normally earned by labour, or that resemble moneys earned by labour (FCA A-241-94, CUB 24266). Moneys paid by WCB, designed to compensate a claimant for loss of income due to incapacity and that are not made in full and final settlement, clearly fall into this category.
There are other moneys paid by workers' compensation that are not intended to replace the claimant's lost income such as compensation for costs related to the illness or the injury itself. These moneys are not considered earnings for EI benefit purposes. These payments may include:
- reimbursement of medical, chiropractic or physiotherapy costs
- costs in obtaining attendant care to assist with daily living, or
- costs for prescriptions
In addition, costs associated with the rehabilitation process that are not designed to replace income, are not earnings. These costs could include tuition costs or prosthetic equipment. However, any payments designed to provide income support during rehabilitation training, are earnings.
Moneys may be awarded under the workers' compensation legislation for permanent impairment associated with an illness or injury. These moneys may be paid to workers in full and final settlement for disfigurement or permanent diminished capacity. They may also be paid for the loss of enjoyment of life, directly related to the illness or injury. These moneys are not earnings as they are paid in full and final settlement, and are in no way related to compensation for the workers' loss of income. They can be likened to moneys paid to accident victims by insurance companies for permanently disfiguring injuries, or settlements paid to workers as damages to health or reputation, as a result of a wrongful dismissal (Digest 5.12.11).
Although there may be different names given to income support provided by WCB, their commitment to pay is either temporary or permanent and made in full and final settlement of the person's claim.
Temporary income support is paid to workers during the initial stages of their illness or injury. These temporary payments continue until the worker recovers, or until an assessment process determines that full recovery is not likely. Depending on the particular workers' compensation legislation and policies, this assessment process may occur at a set point in time (after 1 or 2 years have elapsed from the date of the accident), after all retraining or rehabilitation has occurred, or only after a plateau in the recovery process has been reached. Temporary income support payments are earnings because they are not made in full and final settlement of the workers' compensation claim.
A full and final settlement is only made after the worker’s health has been assessed and the extent of the worker's recovery is known. Full and final settlements are made when complete recovery is not expected (CUB 31595) or to settle a particular claim.
Full and final settlements may be made to compensate for a work-related injury or illness that has caused permanent damage to the worker's ability to follow their pre-injury or pre-illness occupation, or any other suitable occupation. A full and final settlement may be made when WCB determines that the disability prevents the individual from working at any suitable employment, or when it is determined that the worker can work at some occupation, but not up to the worker's previous earning capacity (CUB 20091). The decision to pay an income support pension until age 65 represents WCB's commitment to discharge their obligations to pay income support on a claim for an injury or accident. The same would be true if a lump-sum amount was paid instead of a pension.
Full and final settlements may also occur when the board decides to settle all their outstanding financial obligations to a worker by making a lump-sum payment and requiring that the worker sign away all rights to future payments (CUB 61311). However, for payments not made in lieu of a disability pension, there must be documentary evidence that the settlement releases the board from any further obligation to pay for that illness or injury. This applies whether or not the actual illness or injury is permanent.
Like all earnings issues, it is the terms and conditions of the payment from the provincial WCB that determines whether it is made in full and final settlement of the claim. This remains true whether the board is fully and finally settling the claim by paying income support through a pension, or making an agreement with a worker to close their claim by paying a lump-sum amount.
When the specific workers' compensation legislation uses terminology relating to permanency or pensions, it is easier to determine whether the payments are made in full and final settlement. WCB may pay income support for an injury from which a claimant is not expected to recover, under a section separate from the one under which temporary income support is paid. Other WCB legislation may pay temporary and permanent income support under the same legislative provision. In these cases, the WCB policies and administrative procedures must also be examined to determine whether the particular income support payment, which the claimant is receiving, is made in full and final settlement, or is just temporary until the claimant recovers or until an assessment on the probability of recovery can be made.
With workplace technological advances rapidly occurring, workers with disabilities that were thought to permanently prevent them from working, are finding and keeping employment that pays wages comparable to their pre-accident salary levels. In addition, medical science is evolving to such an extent that injuries and illnesses thought to disable an individual for the rest of their employable life may no longer do so. As a result, WCB may structure their commitment to pay income support to include a review process, and include provisions to have payments cease if the worker attains pre-accident earning capacity (CUB 38094). Although the commitment by the board is to pay a wage supplement or income support until age 65 in full and final settlement of their obligations, these supplements may be discontinued should it be discovered that the individual is again able to earn their previous level of pay. In effect, by this review process, it is not the permanency of the disability settlement that is being reviewed, but rather the level of the income support that the board is paying. The fact that there is a review process of the level of income support to be paid does not alter the nature of the settlement. The commitment to pay the income support is continuous and permanent; however, the level of income support may vary, or even cease, depending on the claimant's physical and employment circumstances.
The fact that the board makes a full and final settlement at some point in time cannot alter the nature of any temporary income support payments made until the WCB legislation or procedures allow a decision to be made regarding full and final settlement.
WCB payments that are earnings are allocated to the period in respect of which they are paid or payable (EIR 36(12)(d)). These earnings do not prevent an interruption of earnings from occurring and are not considered earnings in the waiting period (EIR 35(4); EIR 39(3)(a)).
5.11.4 Motor vehicle accident insurance payments
Individuals who are involved in motor vehicle accidents may receive payments from one of 2 sources, depending on the coverage in effect when the accident occurred. Coverage may be either through insurance provided under or pursuant to a provincial law, or through insurance provided by commercial insurance companies not under or pursuant to a provincial law.
Payments for pain, suffering, disfigurement, or medical expenses are never considered earnings for EI purposes, as they are not meant to compensate the person for the loss of employment income. However, payments meant to compensate a person for an actual or presumed loss of employment may be earnings for EI purposes, depending on the source of those payments and whether benefits under the EI Act are taken into account when calculating those payments.
When payments for an actual or presumed loss of employment are made to a person from a commercial insurance carrier or company, that are not provided under or pursuant to a provincial law, these moneys are not earnings for benefit purposes. However, the same may not be true of similar payments made by motor vehicle insurance plans under or pursuant to provincial laws.
Governmental motor vehicle insurance plans may exist, which insure all drivers in a province and cover, among other things, the actual or presumed loss of employment. Payments from these plans are considered to be earnings, but only if benefits under the EI Act are not taken into account in determining the amount payable to the claimant (EIR 35(2)(d)). If EI benefits are taken into account, the moneys paid are not earnings for benefit purposes.
Governmental motor vehicle insurance plans take into account benefits under the EI Act when the plan deducts any EI benefits received, from the amount they pay the injured party.
Payments from provincial motor vehicle insurance plans that do not take EI into account in determining the amount payable under the plan, are allocated to the weeks for which these amounts are payable (EIR 36(12)(c)), regardless of when they are actually paid. Furthermore, it is not necessary that such compensation be actually paid. It is sufficient that it could have been paid, had the claimant applied for it (EIR 35(2)(f)). The amount of the compensation that could have been paid, as well as the period it would have covered, will be determined according to what would appear most probable under the circumstances.
Motor vehicle accident compensation payments are not considered earnings if, after the date of the accident, the claimant has accumulated enough hours of insurable employment that would allow them to establish a benefit period. Once this condition has been met, any motor vehicle accident payments covering subsequent weeks are not earnings and therefore not deducted from EI benefits (EIR 35(3)). It is not necessary that a new benefit period be established. For example, a claimant may have established an earlier claim, then returned to work and accumulated enough hours that would allow them to establish a new claim, but chose to renew the previous claim.
It is important to understand the terms of the applicable provincial legislation in order to determine the character and purpose of the benefits paid. Some provincial vehicle insurance plans may make a distinction regarding the benefits they provide to accident victims, depending on their employment status at the time of the accident. One type of benefits may be paid to individuals who were employed at the time of the accident and another to those who were unemployed.
The benefits paid to an individual who was considered employed at the time of the accident are paid to replace the actual or presumed loss of income from employment. These moneys are earnings for EI purposes if the amount of EI benefits is not taken into account in determining the amount that the claimant receives through the insurance. However, if the benefits paid to those unemployed at the time of the accident represent an indemnity for being unable to perform the essential tasks of living these benefits are not earnings. They reimburse the disabled claimant for expenses incurred to have others perform tasks that they were able to perform prior to the accident (for example: snow removal, lawn mowing, housework) and not in respect of the actual or presumed loss of income from employment (FCA A-94-94, CUB 23985).
Provincial governmental insurance plans may take into account EI payments in determining the amount to be paid for an actual or presumed loss of employment due to an accident. However, a particular settlement offered to an accident victim may not. It is not just the specific provisions of the provincial insurance legislation regarding whether EI payments are normally deducted that must be considered. The circumstances of the payment to that particular individual and whether EI was deducted in determining the amount to be paid must also be examined. If it can be established that the settlement was payable for an actual or presumed loss of employment, was made pursuant to or under a provincial law, and EI was not taken into account in determining the amount payable, these moneys will be considered earnings for EI benefit purposes (EIR 35(2)(d)).
Some provincial governmental accident insurance plans may continue payment after the individual has recovered but has not yet been able to return to employment that was lost due to the accident. These payments are designed to compensate the accident victim for the loss of the employment, and if EI is not taken into account in the calculation, then these payments are earnings for EI benefit purposes (EIR 35(2)(d)). These types of payments may also be made in provinces where EI is normally taken into account in determining the amount payable to the accident victim, in which case they would not be considered earnings for EI.
5.11.5 Withdrawal of services as a preventative measure payments
Continuing to work in a particular job may entail physical danger to a worker's health. The physical danger that the job presents may not only be to the worker's health; it could include danger to an unborn child or to a child the worker is breast-feeding. In this situation, if the employer cannot reassign the worker to another area or to other duties, the worker may become unemployed. Individuals in these situations are not incapacitated; however, they may have been if preventative measures were not taken. Under provincial legislation, indemnification may be paid to workers in these situations. The amount of EI benefits to which a worker is entitled may be taken into account in calculating the amount of indemnification to which they may be entitled under the provincial legislation.
In order to prevent double indemnification, any payment received for withdrawal of services as a preventative measure is earnings if EI benefits are not taken into account in the calculation of the amount to be paid under the provincial legislation. Even if the claimant chooses not to apply for the payments to which they would have been entitled under the provincial law, that entitlement is nevertheless earnings (EIR 35(2)(f)).
Preventative withdrawal payments are allocated to the weeks in respect of which those payments are paid or payable. If the claimant has not applied for payments to which they may have been entitled, these payments are allocated to the weeks for which they would have been paid or payable had the claimant applied (EIR 36(12)(c)).
5.11.6 Criminal injuries compensation
Compensation may be payable to someone who is injured while a crime was being committed. This compensation may be paid for various reasons and from various sources, such as provincial governments or under a court order, from the person who committed the crime. Compensation may be paid for the criminal act itself, pain and suffering, disfigurement, or for medical expenses. These moneys are not earnings for EI purposes, as they are not meant to compensate the person for loss of income from employment, even if the amount of compensation is calculated based on the earnings of the injured person. The method used to determine how much to compensate a victim of a crime cannot change the nature of what is being compensated, that is, the compensation is for the injuries caused by the person committing the crime.
5.11.7 Supplemental unemployment benefit plans for incapacity - Criteria not met
Employers may supplement their employees' EI benefits during a period of unemployment due to illness, injury or quarantine. These supplemental unemployment benefit (SUB) payments make up a percentage of the difference between the amount of the claimant's EI benefits and the employee's normal wages while employed. When there is more than one employment, only the portion of the benefit rate and the normal weekly earnings from the employer that pays the SUB are to be considered.
As these payments are moneys arising out of employment, they would normally be earnings to be deducted from EI benefits. However, payments made by an employer to supplement EI benefits are excluded from consideration as earnings, if they are made under a SUB Plan that meets specific conditions (EIR 37; Digest 5.5.2).
SUB plans are reviewed at the national level to determine if all required conditions are met, and a list of the SUB plans that meet the conditions is maintained. Any payment made under a SUB plan that does not meet all of the conditions is treated as earnings and allocated to the period for which it is payable (that is, the period of incapacity) (EIR 35(2); EIR 36(12)(a)).
5.11.8 Payments for injuries from other sources
A claimant may suffer an injury unrelated to employment at any given time. These injuries may occur on business or commercial premises, as well as private residences. If these injuries occur due to negligence, there may be compensation paid by either the business or commercial property itself, or through their insurance company. Payment may be made for lost wages, pain and suffering, disfigurement, or medical expenses.
Payments intended to indemnify a person for pain and suffering, disfigurement or medical expenses are not considered earnings for EI benefit purposes, as they are not income that arises out of employment (EIR 35(2)). In addition, any lost wages paid by an insurance company or by the negligent party, are not considered to be earnings for EI benefit purposes. Although these moneys are paid to compensate for the loss of employment, the Commission’s policy is not to include them as earnings for EI benefit purposes.
5.11.9 Critical illness payments
Some employers offer critical illness benefits through a group plan financed by the employer. These plans may provide a tax-free lump sum payment through an insurance provider, to employees on medical leave, in the event they (or a dependent) are diagnosed with a critical illness specifically covered by the plan. The payment may be used for any purpose, including subsidizing the cost of out of country treatment, paying down debts, or taking a vacation with the family while dealing with the disease.
Although this is a group plan, generally, it is not meant to compensate for the loss of wages. It is more in line with a type of life insurance benefit. Pursuant to EIR 35(2)(c) and Digest 126.96.36.199, group wage loss insurance plans are earnings for EI benefit purposes. However, this coverage differs in that the amount paid is not related to loss of wages. If a claimant or their dependant is ill with one of the illnesses or diseases covered by the plan, the claimant may be eligible for a lump sum payment.
In order to determine whether critical illness payments are earnings, full details of the payments must be obtained from the employer, and/or the plan. Factors to consider include:
- Does the employer have any type of wage loss insurance plan or sick leave plan, to which the claimant is entitled?
- If not, are critical illness payments meant to replace wage loss insurance payments?
- If these payments are payable because the employee or dependent has been diagnosed with a critical illness, does the person have to be on leave without pay in order to have access to the payments from the insurance company?
- If it is a dependent who has a critical illness, could the claimant continue working and access this payment?
- Is the lump sum payment the same amount in all cases; does it vary based on the employee’s rate of pay, or is it equivalent to a specific period of time, based on the employee's pay rate?
In many cases the determination process is straightforward, because the name or the nature of the payment clearly indicates that the moneys are income arising out of employment. The allocation is then based on the applicable section of EIR 36.
As previously stated, the true nature of the payments must be established to determine whether they are advantages related to, attached to or arising out of employment. Relying solely on the terms used by the parties is sometimes insufficient because the name given to a payment does not necessarily determine its true nature. When doubt exists about the true nature of a payment, the best way to clarify the issue is to examine the intentions of the parties, by reviewing all relevant documents and contacting all the parties involved.
In most cases of critical illness payments, the intention of the payment is to cover additional expenses arising from the critical illness, and it is not meant as an income replacement in the event of incapacity. The policy may state that for benefits to be payable, the employee must satisfy a survival period, which is defined as a minimum number of consecutive days immediately following the date of diagnosis of a covered illness, or from the date of a surgery. The survival period and other conditions are normally specified in the plan. There may be different conditions based on the type of illness, or benefits may only be payable once to an employee. Further evidence that the payment is not linked to the employee’s incapacity to work and loss of wages may be:
- not all employees who become ill and unable to work are entitled to access this benefit
- it is a lump sum payment based on conditions related to the illness, as per the policy
- the nature of the payment is a lump sum amount paid out regardless of the amount of time the person is off work
- it is not based on a percentage of the person’s wages
- it is linked to the critical illness itself; specifically, to assist with the recovery of the illness
In most cases, based on the information provided, the payment would not be considered as earnings under EIR 35(2)(c)(i), as it is not a wage loss plan. However, each case must still be closely examined, and documents obtained to support the decision as to whether these payments are earnings.
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