Edo

Long story short, someone got laid off by their employer in 2014 and refused to accept the usual 2 weeks severance as he thought he was entitled to more than 2 weeks pay in severance. He applied for the EI while his lawyer started correspondence with his ex employer to ask for more money in severance. His EI application was accepted and he started getting EI which he declared on his tax returns for the year 2014.

In 2015 after a lot of correspondence back and forth with his ex employer they increased the severance pay and the case was settled out of court.

Now the EI people want all of the EI back that was paid in 2014 stating that he received money in settlement (which was probably reported by the ex employer) so he should repay the EI. So perhaps EI department has deemed that the money that was paid out to him in 2015 should go towards the time when he was out of work even though that severance was paid about 7 months after he was laid off, in the new tax year.

Question is that if he declared the EI he received in 2014 on his taxes and he is going to declare the severance received in the next year on his 2015 taxes, why should he return the money that was his right when he was out of work.

plasticcanuck

A Severance is treated by CRA/EI as income until it is used up or you get other employment You are not permitted to collect both severance and EI. You need to refile your income taxes with the proper amounts. You should repay the unentitled funds. Too bad, So sad.

Edo

So thats the whole point. He was not collecting both Severance and EI at the same time. The severance was received way after the fact AND in a completely different tax year (hence it should be declared as income for the year when it was received, no?).

I can see where you are coming from but how is one supposed to survive when they are out of work and do not have money. I am also struggling to understand what is the whole point of paying for an insurance when it is not there for you when you need it

Shard

He received the EI when he needed it though (when the severance was in dispute and therefore not paid) once it is paid, the EI represents an overpayment since the severance relates to that period, and so it makes sense that it is paid back.

scrubbedexpat091

The government doesn't care how your supposed to survive, to them it's not an issue to be concerned with, there is no pressure on the government side to approve or not approve. If you lose your housing, oh well.



And what Shard said for the other bits....If the person can't afford to pay it all back in a lump sum, call and tell the government, they will usually (in my experience) work out a reasonable payment plan. CRA always did for student loan debt anyhow, but while there is outstanding debt, CRA will take any tax refunds to re-pay it even when you have a payment arrangement.

Aviator

It is the pay period it was deemed as earned, not when it was actually recieved. Nothing to do with the tax year.

Shirtback

This.

And this.

AND this.

It's quite normal. Seen it happen in various circumstances. If the OP's friend checks the EI website, it's spelt out somewhere.

Edo

OK, sounds like you guys are quite well verse with this type of thing.

So..., I was just thinking it was a 'settlement' that was received as a resolution to a dispute between him and his ex-employer? Just like people settle matters out of court when they have disputes/disagreements, and then declare compensation received as income.

The actual fact of the matter was that the guy was brought into Canada from abroad by them and then was let go only after a few months. And when his lawyer approached his ex-employer it was on the premises that he left a settled life behind in the UK to come and work for them based on what they lured him with. That employer is not usually easy to deal with (I know this personally cuz I once used to work for them) and if they were not at fault he would not have got even a single penny out of them.

Aviator

It appears to me as remuneration from an employer as a severance settlement, however one tries to dress it up.

If court proceedings had been filed, a lot would depend on what the statement of claim said, severance or damages for something else. If proceedings had not been filed, it would not be an out of court settlement (as there were no court proceedings to settle), just an employment issue that had been settled privately.

Matters settled out of court require a court process to be already undertaken and the settlement is to avoid the risk of a trial. From what you say it seems the employee felt disgruntled and decided to try for more severance, this would come under common law if the labour standards minimum was met and it went to court.

One cannot have it both ways, EI and severance while EI was being paid. If this payment had been made by the employer at the time of the lay off, as part of the severance package, the EI outcome would have been the same.

If the employee considers that SC are incorrect in their assessment they should perhaps consult the lawyer who got them their settlement for advice.

EI asking for money back is a common occurrence where an over payment occurred for one reason or another.

Edo

OK thanks a lot for such a detailed response. Now its more clear as to why EI has to be repaid. I will pass this on.

Aviator

This was just my personal take on it. Consulting a lawyer or going into SC and discussing the issue would give them a more definitive answer and help them decide how to proceed.

Shirtback

+1.

OP's friend's lawyer will be able to clarify the question. Some "settlements" can be classed as severance, but not vice versa. The official documents will hold the answers.

Oink

Canadians don’t seem to have any shame when it comes to receiving unemployment benefits. In fact it seems quite acceptable to for healthy 20 and 30 something’s to go on the dole just because they can't be arsed to work full-time. Maybe they should tighten up on accepting claims so the money goes to the people who really need support rather than giving it out as de facto pocket money so these wastrels can go surfing or skiing for six months a year?

neill

I suspect it's because Canadians explicitly 'pay in', i.e. it's on their weekly/monthly paystub, therefore if they use it they feel like they're taking from a savings account they paid in to as opposed to just taking from all their working neighbours.

Oink

Maybe it should be called what it is, state welfare. Plus, anyone under age of 35 shouldn't be entitled to it anyway. If they can't work, then they should be on disability benefits.