“Retiring Allowances” and the Taxation of Wrongful Dismissal Damages

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Lawyers are often loathe to guarantee anything. However, it is said that two things in life are guaranteed: death and taxes.

This “guarantee” raises an important issue for the settlement of any wrongful dismissal case, the taxation of wrongful dismissal damages. While employers and employees can and often will agree to a favourable characterization of such damages, as the case of Ferhman v Goodlife Fitness Centres, Inc., 2017 ONSC 4348 (CanLII) demonstrates, sometimes that is not done and employees can end up receiving a lot less money – net of taxation – than they anticipated.

Why Employers Cannot Deduct Tax Obligations from Wrongful Dismissal Settlements

Taxes. People hate taxes. From paying taxes to wrestling with the provisions of the Income Tax Act there really is no joy when it comes to taxation.

A 2015 decision of the Ontario Superior Court of Justice, RJM56 Investments Inc. v Kurnik, 2015 ONSC 6893 (CanLII) presented two questions with respect to the interplay between employment-law settlements and taxation:

1. Must an employer withhold tax from an amount paid to an employee’s lawyers on account of incurred legal fees? And
2. Can an employer deduct the amount it must pay on account of EI, CPP, and EHT from the amount payable as a settlement?

While the answer to both questions may, or at least should, be obvious to any lawyer who practices in this area, Justice S.A.Q. Akhtar’s decision is an important, recent imprimatur of some rather fundamental principles employed daily by Ontario employment lawyers.

Tax Implications of Non-Competition Agreements

What are the tax implications of including a non-competition clause in an agreement for the sale of a business? Guest author Chad Saikaley, CPA, CA of the Ottawa accounting firm Ginsberg Gluzman Fage & Levitz, LLP , looks at those implications from an accountant’s perspective.

Costs of Hiring an Employment Lawyer

How much is hiring a wrongful dismissal lawyer going to cost me? When someone finds him or herself suddenly unemployed questions about the costs of services get serious. Legal services have long had a reputation of being expensive, and there may be a further perception that their cost may put them out of reach to some people. I wish to dispel that myth.