eCaseNote 2011 No. 05

Post‐Termination Worker’s Compensation Benefits Are Deductible From Dismissal Damages

Jensen v. Schaeffler, 2011 ONSC 1342

The Ontario Superior Court of Justice has recently released a decision that sheds light on the deductibility of post‐ termination workers compensation benefits from wrongful dismissal awards. The plaintiff, Mary Anne Jensen, was employed by the defendant, Schaeffler Canada Inc. (“Schaeffler”) for 28 years. She primarily worked in various production jobs until she suffered a workplace injury in 2004. Ms. Jensen left work temporarily and drew on Ontario’s Workplace Safety and Insurance Board (“WSIB”) benefits. She returned nine months later but had to take an administrative role due to her reduced physical capacity. 

Jensen was laid off in December 2006, and notified in October 2007 that her employment was permanently terminated. Schaeffler provided Jensen only her statutory minimal severance benefits.  When Jensen was dismissed, Schaeffler suggested that she enrol in the Labour Market Re‐entry Program offered by WSIB. Jensen agreed and collected WSIB benefits after her termination.  

  Jensen then applied to court for wrongful dismissal. She claimed an 18‐24 month notice period along with claims of misconduct by Schaeffler and mental distress caused by her termination. The court allowed her claim for 18 months notice but dismissed her claims of employer misconduct and mental distress.  

An issue arose over the deductibility of Jensen’s post‐termination WSIB benefits. The benefits collected by Jensen were greater than her award at trial. The Court accepted the defendant’s argument that worker’s compensation benefits paid in the post‐termination period are meant to be payments in lieu of wages, and served to mitigate Jensen’s loss the same way that alternative employment does. Because of this, they were deductible from the award in the same way. In the result, Jensen received nothing in her award except her statutory minimum benefits.

The law of wrongful dismissal in Newfoundland also calls for employees to mitigate their losses when they have been terminated and deducts any wages they are able to earn. Courts in this province may well take the Ontario approach and employers should be aware that post‐termination workers compensation benefits could be deducted in any wrongful dismissal award. However, be aware that this deduction does not impact the statutory minimum of severance.   

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