The Divisional Court has recently weighed in on the deductibility of EI benefits from an income replacement benefit owing to an insured person after an accident. The Court held that all EI benefits are deductible as “gross employment income”.
Section 4(1) of the SABS states that, for the purpose of calculating IRBs, “gross employment income” includes any benefits received under the Employment Insurance Act. However, s. 4(1)(a)(i) also states that EI is not deductible post-accident as “other income replacement assistance”. These seemingly incompatible references to EI has caused confusion and disagreement between stakeholders as to whether EI sickness benefits are deductible from IRBs when those benefits are received following an accident.
This issue was dealt with by the LAT in 2021. The hearing Adjudicator, both at the hearing and on reconsideration, determined that EI sickness benefits are not deductible from IRBs. The Adjudicator found that there was ambiguity in the SABS and concluded that EI sickness benefits were more akin to temporary disability benefits under s. 47 of the SABS or “other income replacement assistance”. As such, he concluded that the SABS intended EI sickness to be dealt with in a different way to regular EI or EI maternity benefits, which had previously been found deductible.
In the recent decision of Aviva v. Spence, the Divisional Court disagreed with the LAT Adjudicator’s finding and confirmed that all EI should be treated the same way under the SABS as all EI is considered “gross employment income”. The Court found that there was no ambiguity in the SABS and that the sections that reference EI can all be read harmoniously and consistently. The Court went on to state that the SABS was very clear in establishing that anyEI benefits received are to be treated as gross employment income, both for the purpose of calculating IRB entitlement under s. 7(2) and for deductions under s. 7(3).
The Court pointed out that there is nothing in the definition of “gross employment income” that requires active employment and that, by definition, EI is paid “as a result of being employed”. The Court also confirmed that EI sickness benefits are not temporary disability benefits under s. 47, particularly in this case, as they were being paid to the claimant in connection with the subject accident (and notably, EI is also specifically excluded from the definition of “temporary disability benefit” in s. 47(3)).
Overall, this decision provides clarity to insurers and claimants alike regarding the interplay of EI and IRBs: in all claims, 70% of any EI payment paid to a claimant post-accident is deductible from IRBs.
See: Aviva Insurance Company of Canada v. Spence, 2022 ONSC 4988 (CanLII)
