Deductibility of Statutory Pay from Workers’ Compensation Benefits

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A production worker, 59 years old, suffered an elbow injury that resulted in the permanent impairment of both of his arms. He claimed workers’ compensation benefits under the Workplace Safety and Insurance Act, 1997 (WSIA), and was granted a Non-Economic Loss award.

Shortly after he returned to the accident employer on modified duties, he was laid off due to a plant closure, at which time the employer paid him severance pay and sixteen weeks of pay in lieu of notice of termination.

An annual review of the worker’s claim revealed that, in determining entitlement to Loss of Earnings (LOE) benefits for the period immediately following the layoff, his pay in lieu of notice was not to be deducted, which resulted in an overpayment that the Workplace Safety and Insurance Board (WSIB) sought to recover.

The worker raised an objection to the decision to recover the funds with the WSIB’s Appeals Branch, but the objection was denied. The Appeals Resolution Officer did not consider the severance pay amount to be earnings, but did consider the pay in lieu of notice of termination to be earnings as reported on the worker’s tax documentation, and therefore deducted this amount from his LOE benefits.

The worker appealed to the Workplace Safety and Insurance Appeals Tribunal (the Tribunal) and asserted that, as the termination payments were made in recognition of his years of service pursuant to the Employment Standards Act, 2000 (ESA), they were not disability payments under the WSIA, and he therefore ought to be entitled to both during the same period. The employer chose not to participate in this hearing.

The appeal was allowed in part. The Tribunal acknowledged that the ESA entitled the worker to eight weeks of pay in lieu of notice of termination for his sixteen years of service with the employer. The Tribunal also held that, in the interests of consistency and fairness, it ought to rely on prior decisions in which it had held that pay in lieu of notice, being a statutory entitlement, did not disentitle workers from LOE benefits during the same period. The Tribunal found this proposition to be supported by the WSIA and WSIB policies.

However, although the case law presented to the Tribunal did not address this issue, the Tribunal concluded that the additional eight week payment was deductible because these amounts constituted payments in excess of the minimum standards for termination pay, were part of a negotiated agreement regarding the closure of the plant, and meant that the worker did not suffer loss of earnings during that period. The Tribunal determined that this additional payment constituted taxable earnings that could be deducted from the worker’s LOE benefits for that period.

This decision demonstrates the benefits of employer participation in workers’ compensation proceedings. Because the employer in this case did not participate, the assertions made by the worker went uncontested before the Tribunal.