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Employment Insurance is broken in Canada

Aleksander Demko September, 2012

This article is probably of interest to fellow Canadians, as it's about our Employment Insurance system.

Short summary:

Long story:

My wife went on her second maternity leave after the birth of our second child. We decided she would stay home for a few years after the leave, so she informed her employer mid way through that she won't be returning. Her employer thanked her and paid our her remaining vacation days as cash. A few months later, Service Canada said she "worked during her leave" (and got paid) and clawed back some of her EI benefits.

The problem is, she didn't work a minute during her leave. she earned her vacation pay before going on maternity leave. Her employer simply owed her this money and kept it as a balance and paid it out when she gave notice of not returning. If she would have had it paid out before or after the leave, then she would not have been penalized.

Unfortunately, you can only give notice of not returning during your mat leave. You can't given notice before going on leave, since the child isn't born yet and you can't predict your future circumstances. You can't give notice after the leave, since you then just strung your employer along for a year while they assumed you would be returning. The only option left is to give notice during the leave.

Service Canada however, doesn't care. No one could give me an answer on how we should have handled the situtation to avoid getting penalized. Everyone agreed that she earned the money before her leave (ie. no one disputed that it was vacation pay). However, except for (faux?) sympathetic shoulder shrugs, we were still going to get penalized.

They also mentioned that people who get their vacation pay in cash upfront would never have this issue underscoring the unfairness of it all.

Service Canada (and their "Board of Referees") don't care when you earned the money, just that when it was received. This is contrary to what Service Canada implies on their web site. This is contrary to basic logic. No reasonable person would see it how Service Canada sees it, yet no one thinks this is a problem.

So remember: You can work all you want, just don't get paid right away. Get paid after your leave and you'll be fine. Bank your work as vacation days and get them paid out later. This is apparently all legal.