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 employerFootnote 1 or by an insurance company under a wage-loss indemnity planFootnote 2. Compensation for incapacity may also be received from other sources, such as, a workers' compensation board;Footnote 3 an insurance company or provincial government as a result of a motor vehicle accident;Footnote 4 a person or company as a result of an accident;Footnote 5 a provincial government for criminal injuriesFootnote 6 or a potential physical danger that continuing to work may entailFootnote 7; or a pension fund for a disabilityFootnote 8.
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 generally called 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, a long-term employee who has suffered from ill health may not have any sick leave entitlement remaining.
Paid sick leave is earnings for benefit purposesFootnote 9. Even if the claimant chooses not to apply to the employer for his or her paid sick leave entitlement, any paid sick leave entitlement is nevertheless earningsFootnote 10 which is allocated to the weeks for which the paid sick leave would have been paid or payableFootnote 11 had the claimant made application.
When a claimant has insufficient sick leave to cover the period of incapacity, an employer may advance paid sick leave based on the sick leave 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 payableFootnote 12.
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 occursFootnote 13.
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. The 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 planFootnote 16 or not a group planFootnote 17.
184.108.40.206 Group wage-loss indemnity plans
Group wage-loss indemnity plansFootnote 18 are designed to cover a group of workers who work for the same employer. Group wage-loss indemnity plans are earningsFootnote 19. 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 determined to be earningsFootnote 20.
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 madeFootnote 21.
220.127.116.11 Not a group wage-loss indemnity plan
Payments under sickness or disability wage-loss indemnity plan that is not a group planFootnote 24 are specifically excluded as earnings.Footnote 25 By policy, this includes wage-loss indemnity payments that are not a group plan and provide for payments for reasons of maternity, parental leave or adoption.
Before a conclusion can be reached that the wage-loss plan is not a group plan, each and every one of the following conditions must be metFootnote 26:
- 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;
- it 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 equivalent 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 workersFootnote 27.
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 by 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. Payments made by these boards may be for loss of income; prescriptions; medical treatment; rehabilitation costs, including training and medical equipment; clothing; attendant care allowances; and physical impairment.
Workers' compensation payments received or to be received by a claimant, other than lump sums or pensions paid in full and final settlement of a claim made for workers' compensation payments, are earnings for benefit purposesFootnote 28. Lump sums or pensions paid in full and final settlement of a claim made for workers' compensation payments are specifically excluded from earningsFootnote 29.
Although only full and final settlement workers' compensation payments are specifically excluded from earnings for benefit purposes, not all payments made by workers' compensation boards are earnings. Earnings for benefit purposes are only those moneys which are earned by labour, or which resemble moneys earned by labourFootnote 30. Moneys paid by workers' compensation boards that are designed to compensate a claimant for loss of income due to the incapacity and are not made in full and final settlement clearly fall into this category.
There are other moneys, which are paid by workers' compensation, that are not intended to replace the claimant's lost income. Workers' compensation boards may provide compensation for costs related to the illness or the injury itself. These moneys are not considered as earnings. They may include reimbursement of medical, chiropractic or physiotherapy costs; costs in obtaining attendant care to assist with daily living; and prescription costs. In addition, costs associated with the rehabilitation process that are not designed to replace income are also not earnings. These costs would include tuition costs and prosthetic equipment. Nevertheless, any payments designed to provide income support while on rehabilitation training are earnings.
Associated with the illness or injury, are moneys awarded under the workers' compensation legislation for permanent impairment. These moneys are paid to workers in full and final settlement for their disfigurement or their permanent diminished capacity. These moneys may also be paid for the loss of enjoyment of life directly related to the illness or injury. These moneys are not earnings in that 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 dismissalFootnote 31.
Although there may be different names given to income support provided by workers' compensation boards, their commitment to pay is either permanent and made in full and final settlement of the person's claim, or temporary.
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 complete 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 one or two 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.
Full and final settlement is only made after the workers' 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 expectedFootnote 32 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 the Workers' Compensation Board 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 capacityFootnote 33. The decision to pay this income support pension until age 65 represents the Board's commitment to discharge their obligations to pay an income support on that workers' compensation claim for that 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 paymentsFootnote 34. However, for payments not made in lieu of a disability pension, there must be documentary evidence that the settlement absolves the board of any further obligation to pay for that illness or injury. This applies whether the actual illness or injury is permanent or not.
Like all earnings issues, it is the terms and conditions of the payment from the provincial workers' compensation board that determines whether it is made in full and final settlement of the workers' compensation 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 in their legislation, it is easier to determine whether the payments are made in full and final settlement. Workers' compensation 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 workers' compensation legislation may pay temporary and permanent income support under the same legislative provision. In these cases, the workers' compensation 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 impair their ability to work are finding and keeping employment that pays wages that approximate 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 his or her employable life may no longer do so. As a result, workers' compensation boards 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 capacityFootnote 35. 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 his or her 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, it is the level of the income support that 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 by the Board until their legislation or procedures allowed them to make a decision regarding full and final settlement.
Workers' compensation payments that are earnings are allocated to the period in respect of which they are paid or payableFootnote 36. Workers' compensation earnings do not prevent an interruption of earnings from occurringFootnote 37 and are not considered as earnings in the waiting periodFootnote 38.
5.11.4 Motor vehicle accident insurance payments
Individuals who are involved in automobile accidents may receive payments from one of two 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 for medical expenses are never earnings for EI purposes, as they are not meant to compensate the person for the loss of income from employment. 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 Act are taken into account in their calculation.
When the 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 schemes provided under or pursuant to provincial law.
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 Act are not taken into account in the determining the amount that is payable to the claimantFootnote 39. If benefits are taken into account, the moneys paid are not considered earnings for benefit purposes. Governmental auto insurance plans take benefits under the Act into account when the plan deducts any EI benefits received from the amount paid by them to the injured party.
Payments from provincial motor vehicle insurance plans that do not take EI in account in determining the amount payable under the plan are allocated to the weeks for which these amounts are payableFootnote 40 regardless of when paid. Furthermore, it is not necessary that such compensation be actually paid. It suffices that it could have been paid had the claimant applied for itFootnote 41. 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 never earnings when they are meant to cover weeks subsequent to a period in which the claimant has accumulated, after the accident, enough hours of insurable employment to establish a benefit periodFootnote 42. However, it is not necessary that a new benefit period be established.
It is important to know 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 in 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 those individuals who were employed at the time of the accidentFootnote 43 and another to those who were unemployedFootnote 44. The benefits paid to an individual considered employed at the time of the accident are paid to replace the actual or presumed loss of the income from employment. These moneys are considered to be earnings for EI purposes if EI benefits are not taken into account in determining the amount that the claimant receives. However, if the benefits paid to those unemployed at the time of the accident represents an indemnity for being unable to perform the essential tasks of livingFootnote 45, these benefits for being unable to perform the essential tasks of living are not earnings. These moneys are not paid in respect of the actual or presumed loss of income from employmentFootnote 46.
Although the provincial governmental insurance plan may provide for EI payments to be taken into account in determining the amount to be paid for an actual or presumed loss of employment due to an accident, a particular settlement offered to an accident victim may not have done so. It is not just the specific provisions of the provincial insurance legislation regarding whether EI payments normally are deducted that must be considered. The circumstances of the payment to that particular victim and whether EI was deducted in determining the amount to be paid must also be examined. As long as it can be established that the settlement was payable for an actual or presumed loss of employment, was made pursuant or under a provincial law, and EI was not taken into account in determining the amount in the particular case, these moneys will be determined as earningsFootnote 47.
Some provincial governmental accident insurance plans may continue payment after the individual has recovered and has not yet been able to return to employment 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 purposesFootnote 48. These types of payments may be made even in provinces where EI is normally taken into account in determining the amount payable to the accident victim.
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 includes danger to an unborn child or to the child that the worker is breast-feeding. If the worker in this situation cannot be reassigned by the employer, unemployment may result. The individual in these situations are not incapacitated, however, he or she may have been if these preventative measures were not taken. Indemnification may be paid to workers in these situations under provincial legislation. The amount to which a worker is entitled under the Employment Insurance Act may be taken into account in calculating the amount of indemnification to which a worker 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 benefits under the Act 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, any entitlement under that provincial law is nevertheless earningsFootnote 49.
Payments, which are made due to the withdrawal of services as a preventative measure, are allocated to the weeks in respect of which those payments are paid or payable. If the claimant has not made application for payments to which he or she may have been entitled, these payments are allocated to the weeks for which they would have been paid or payableFootnote 50 had the claimant made application.
Preventative withdrawal payments do not prevent an interruption of earnings from occurring and are not considered as earnings in the waiting period.
5.11.6 Criminal injuries compensation
Compensation may be payable to persons who are injured in the process of the commission of a crime. This compensation may be paid for various reasons and from various sources, such as provincial governments or from the person who committed the crime under a court order. 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. This remains true 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 in the commission of 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 payments make up the difference between the claimant's EI benefit and the employee's normal wages while employed. When there is dual employment, only that 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 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 Supplementary Unemployment Benefit (SUB) Plan which meets specific conditions.Footnote 51
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 earningsFootnote 52 and is allocated to the period for which it is payable, that is the period of incapacityFootnote 53.
[ September 2003 ]
5.11.8 Payments for injuries from other sources
Injuries may occur to claimants as they go about their activities that are totally unrelated to their employment. 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, and medical expenses.
Payments intended to indemnify a person for pain and suffering and medical expenses are not considered to be earnings for EI benefit purposes as they cannot be considered to be income that arises out of employmentFootnote 54. In addition, any moneys paid for lost wages by an insurance company or by the negligent party are not considered to be earnings for EI purposes. Although these moneys are paid to compensate for the loss of employment, the Commission has decided not to include them as earnings for benefit purposes.
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