The Impact of a Retroactive Lump Sum Payment on IRBs

The recent Licence Appeal Tribunal (LAT) decision, Botari v The Dominion of Canada General Insurance Company (22-001245/AABS) focused on the issue of retroactive payments.

The dispute in this case was whether the Applicant’s retroactive lump sum payment from a wrongful termination grievance should be considered in calculating his Income Replacement Benefits (IRBs) payable. At the time of the February 8, 2019 accident, the Applicant was employed as a civilian driving instructor for the military and as a reserve member of the Department of National Defence. After the accident, the Applicant received IRBs of $400 per week until October 5, 2020.

Prior to 2015, the Applicant had worked for the Ontario Ministry of Labour but was terminated in 2017. After a successful wrongful termination grievance, the Applicant was reinstated in 2019 and received a lump sum payment for retroactive wages allocated to the 2017, 2018 and 2019 tax years. In addition, because of the re-instatement, the Applicant also became eligible for LTD and CPP Disability benefits.

The Respondent argued that the Applicant’s IRBs should be recalculated to “nil” due to receipt of LTD and CPP Disability benefits and sought repayment of past IRBs. At the same time, the Respondent did not include any of the retroactive payment for wages in their calculation. The Applicant’s accounting expert included the retroactive wages in his pre-accident gross employment income, which resulted in his IRB entitlement remaining at $400 per week after deducting LTD and CPP Disability benefits.

The Tribunal determined that the Applicant’s retroactive salary from his reinstatement with the Ontario Ministry of Labour should be included in the calculation of his IRBs. Per the SABS, gross employment income includes salary, wages, and other remuneration from employment. The Tribunal rejected the Respondent’s argument that the lump sum payment was an award for damages, instead classifying it as retroactive salary due to the clear language in the Grievance Settlement Board decision and the Memorandum of Agreement.

Furthermore, the Tribunal found that the retroactive payment met the criteria and precedent for taxable employment income as he had filed the required Canada Revenue Agency form. Additionally, the Tribunal found that the Respondent’s position of deducting LTD benefits from the Applicant’s IRBs while excluding his retroactive salary was inconsistent.

Considering the above, the Applicant was deemed entitled to IRBs of $400 per week from February 15, 2019 onward. The Tribunal upheld the findings of the Applicant’s accountant, confirming that despite receiving LTD and CPP Disability payments, the Applicant’s IRB entitlement remained at $400 per week when his retroactive wages are included.

Read the decision in full detail here: Botari v The Dominion of Canada General Insurance Company (22-001245/AABS)