By Robert Smithson

Pretty much the first thing a fired employee does is to apply for employment insurance benefits.  When the employee has been fired for just cause reasons, the issue arises whether the individual is entitled to collect E.I. benefits.  Often, at its own risk, the employer will become embroiled in that issue.

The situation tends to follow a well-established pattern.  The terminated employee both applies for E.I. benefits and consults a lawyer about the possibility of launching a civil action for wrongful dismissal.  Typically, these two processes commence almost simultaneously (although the civil action will usually drag on much longer).

If the employer is defending the wrongful dismissal action on a just cause basis, then it’s likely the same issues will be raised during the application for E.I. benefits.  That requires both the courts and the employment insurance officer to determine whether or not cause for summary dismissal existed.  They go at this question a little differently (the employment insurance officer seeks to determine if the employee was guilty of “misconduct”), but the end result is often the same.

These are very significant determinations for the individual.  In the court context, a finding of just cause for summary dismissal means the individual will not be entitled to severance (pay in lieu of notice).  Under the employment insurance regime a finding of just cause for summary dismissal will disqualify the individual from receiving any E.I. benefits.

The risk for the employer is that arguing the existence of misconduct during the E.I. determination process may disqualify it from raising the just cause defence in the wrongful dismissal context.  In effect, the employer may get only one kick at the can and thus must choose its forum carefully.  A recent Ontario case exemplifies this dilemma.

In Korenberg v. Global Wood Concepts Ltd., the former employee brought a civil action in court for wrongful dismissal.  Prior to the trial, however, he had applied for employment insurance benefits.  The employment insurance officer had initially found him guilty of misconduct and, as a result, he was disqualified from receiving benefits.

But Korenberg appealed that finding and the officer’s decision was overturned by an E.I. Board of Referees.  During the course of that E.I. appeal, the employer actively participated and argued (unsuccessfully) that he was guilty of misconduct in the course of his employment.  The alleged misconduct raised by the employer was that Korenberg, a night supervisor, had permitted employees to steal and to leave shifts early.

During the civil action in court for wrongful dismissal, Korenberg brought a motion to prevent the employer from raising the defence of just cause for summary dismissal.  He was successful in this regard and, as a result, the employer was deprived of its primary defence at trial. 

The court found that the same issue had been decided in a previous proceeding (the E.I. process), it resulted in a final decision on the question of the alleged misconduct, and the parties in the previous proceeding were the same.  In legal terms, the employer was “estopped” from re-litigate the same issue which had been decided during the E.I. process.

The court pointed out that, had the employer not taken part at all in the employment insurance proceedings, its entitlement to argue just cause for summary dismissal in court would have been preserved.  Given that the E.I. proceedings really have no impact on the employer (regardless of the outcome), this would certainly have been the wiser route.

And this is really what the whole matter boils down to for the former employer.  If there is the risk that the former employer can only argue the existence of misconduct or just cause in one forum, then it makes sense to use that opportunity when it really counts.

Employment insurance benefits determinations have no direct impact on the employer’s business.  Civil actions in court for wrongful dismissal can, however, have very serious consequences.  The accepted upper limit on damages for wrongful dismissal is in the range of 24 months’ pay and that can be a very heavy price tag.  It makes no sense for the employer to potentially throw away the opportunity to put forward a just cause defence because it involved itself in an E.I. benefits determination. 

Perhaps at some point the federal Employment Insurance Act will be amended to allow employers to be involved in the E.I. benefits determination process without jeopardizing their position in court.  This would certainly be a desirable result because it is in every taxpayer’s interest to ensure only deserving individuals dip into the employment insurance fund.  Until then, my advice is to leave it to the E.I. people to do their job.

Robert Smithson is a partner at Pushor Mitchell LLP in Kelowna practicing exclusively in the area of labour and employment law.  For more information about his practice, log onto www.pushormitchell.com.  This subject matter is provided for general informational purposes only and is not intended to be relied upon as legal advice.