Tag: Sick Bank

BC Supreme Court Confirms No Tax Deductions For Depleted Sick Bank Damages

Reasons for judgement were released this week by the BC Supreme Court, Vancouver Registry, confirming that where a Plaintiff proves damages for used up sick bank hours due to a collision related injury, the recovered damages will not be subject to income tax deductions (as is done with past wage loss awards).
In the recent case (Gormick v. Amenta) Mr. Justice Sigurdson made it clear that such damages will not be subject to income tax deductions and Plaintiff’s are entitled to recover damages on a gross basis.  In reaching this decision the Court provided the following reasons:
[5]             The authorities support awarding the gross amount for loss of sick bank credits…
[9]             As is evident from DeGuzman, treating loss of sick bank entitlement as past wage loss undercompensates the plaintiff because deductions could be taken from him or her twice.  This is consistent with Ballance J.’s characterization of loss of sick bank entitlement as a “potential future loss” not in the “character of past wage loss”.
[10]         In addition, the following cases have adopted Bjarnason without further comment in awarding the gross amount for loss of sick bank entitlement:
·                 Chingcuangoco v. Herback, 2013 BCSC 268 at paras. 128-133;
·                 Kilian v. Valentin, 2012 BCSC 1434 at paras. 125-127;
·                 Chalmers v. Russell, 2010 BCSC 1662 at para. 86;
·                 Pham-Fraser v. Smith, 2010 BCSC 322 at para. 90; and
·                 Rizzolo v. Brett, 2009 BCSC 732 at para. 67.
[11]         Contrastingly, the defendant in the instant case relies on Redl v. Sellin, 2013 BCSC 581, in which the court awarded the net and not the gross amount in respect of damages for lost benefits (including paid sick days, paid time off work for medical appointments and lost vacation credits).
[12]         In Redl, the court rejected the plaintiff’s position that “as full repayment of benefits to her employers appears to be required, the net loss calculation should not be applied to the total subrogated portions of the income loss claim” (at para. 33).  In this regard, the court said, at para. 34:
It is clear under the Insurance (Vehicle) Act that the defendant’s liability for all income losses – regardless of whether a subrogated interest is claimed by an employer or an insurer – is for the net amount only.  The rights of an insurer or employer claiming a subrogated interest in an employee’s damages claim are no greater than those of the employee.  The entire gross amount of Ms. Redl’s past income loss of $37,360.05 is subject to a deduction for taxes.  How this impacts Ms. Redl’s repayment obligations is a matter between her and her employers.
[13]         However, Redl make no note of Bjarnason or the other cases following that decision.  It appears that those cases were not brought to the attention of the judge deciding Redl. 
[14]         Further, the proposition which the defendant in the instant case extracts from Redl – namely, that “[t]he rights of an … employer claiming a subrogated interest in an employee’s damages claim are no greater than those of the employee” – is not inconsistent with Bjarnason.  Bjarnason holds that an employee has the right to the gross amount of damages in respect of loss of sick bank entitlement.  Accordingly, the employer claiming a subrogated interest in the gross amount of those damages is not claiming a greater right than that of the employee.
 

Yes, Reimbursement of Sick Leave Benefits is a Recognized Damage in BC Injury Litigation

The law in BC has long recognized that a Plaintiff can seek damages to reimburse banked sick leave benefits which are depleted due to an injury caused throught the negligence of others. Despite this litigants occasionally still argue that the law does not allow such recovery as it amounts to ‘double recovery’.  Reasons for judgement were released this week by the BC Supreme Court, Vancouver Registry, disposing of this defence argument.
In this week’s case (Chingcuangco v. Herback) the Plaintiff was injured in a 2008 collison.  She missed time from work and used up over $7,000 of banked sick time.  In confirming that the Plaintiff can recover this loss Mr. Justice Weatherill provided the following reasons:
[209]     During a portion of the time when the plaintiff was unable to work, she was paid the wages that she otherwise would have received by drawing on her sick leave and vacation benefits.  She seeks damages to reflect the depletion of those benefits.
[210]     The parties have agreed that the value of the plaintiff’s hours missed (sick leave and vacation time used with pay) totals $7,371.09.
[211]     The defendants argue that an award to the plaintiff in this regard will result in double recovery because she did not lose any money – she continued to receive her wages by drawing on her sick leave benefits and vacation time.
[212]     This issue was addressed by this court in Bjarnason v. Parks, 2009 BCSC 48.  In that case, Madam Justice Ballance provided a thorough and helpful analysis:…
[213]     I agree with that analysis and I adopt it in its entirety.  Here, the plaintiff exhausted her accumulated sick leave.  She also used up several of her vacation days.  She has had illnesses unrelated to the accident that have resulted in her being unable to work.  She is likely to have them in the future.  Her plan is to stay and make a career at CRA. 
[214]     I am satisfied that the plaintiff is entitled to be compensated for her lost sick leave and vacation benefits which total $7,371.09.  There will be no deduction for income tax.
I have canvassed this topic before and you can click here to access my archived posts addressing the law of recovery of sick time benefits.

No Income Tax Deductions for Depleted Sick Bank Damages


As previously discussed, when a person becomes disabled from work due to injuries and uses up banked sick time they can claim damages to be reimbursed for this loss in a tort claim.
If the tort claim arises from a BC motor vehicle accident the Insurance (Vehicle) Act requires awards for past wage loss to be reduced to take income tax consequences into account resulting in damages only for “net income loss”.  So, when damages are paid for use of banked sick time does the award need to be reduced to take income tax into account?   The answer is no and reasons for judgement were released last week by the BC Supreme Court, Vancouver Registry, addressing this issue.
In last week’s case (Chalmers v. Russell) the Plaintiff was a school teacher who was involved in two motor vehicle collisions.  The Plaintiff was not at fault for either of these crashes.  As a consequence of injuries sustained the Plaintiff had to use up several thousand dollars of banked sick time available to her through her employment.  Madam Justice Griffin awarded the Plaintiff damages for this loss and in doing so provided the following useful reasons explaining that these awards are not to be reduced to take income tax consequences into account:

[85]         I accept Ms. Chalmers’ evidence that following the first accident, she was so sore and painful that she felt it necessary to take time off work prior to the birth of her child in order to expedite her recovery.  I am mindful that she did not obtain any medical evidence in support of her decision to take time from work.  Regardless, given her advanced state of pregnancy, the trauma of the accident and the pain she was in after the first accident, I consider her decision not to return to work to be reasonable and due to her injuries.  The cost to reimburse the sick bank during this time period is $342.45 per day, totalling $3,766.95.

[86]         As noted in Bjarnason v. Parks, 2009 BCSC 48, depletion of a sick bank is a compensable loss: at para. 56.  However, it is not an income loss so there should be no deduction for income tax in accordance with ss. 95 and 98 of the Insurance (Vehicle) Act, R.S.B.C. 1996, c. 231: Bjarnason at para. 66.

In addition to the above, today’s case is worth reviewing for the Court’s discussion of non-pecuniary damages for mothers whose injuries affect their ability to look after their young children.  In today’s case the Plaintiff sustained various soft tissue injuries which, while not disabling, continued to affect the Plaintiff and interfered with her ability to look after her infant children.  Madam Justice Griffin assessed non-pecuniary damages at $50,000 and in doing so provided the following reasons:

[123] Importantly, Ms. Chalmers has lost the experience of being a relatively pain-free, physically active mother of her infant children during an important period in their young lives.  This is clearly a huge loss for Ms. Chalmers.

[124] I conclude that a reasonable award of non pecuniary damages, that is fair to all parties, is $50,000.

This is not the first time that pain interfering with parenting has been considered a relevant matter by the BC Supreme Court in addressing non-pecuniary damages and you can click here to read a previous post further discussing this topic.

BC Personal Injury Claims and Reimbursement of "Sick Bank" Time


Many BC employees have the benefit of a “sick bank“.  For those of you not familiar with these, a sick bank is basically a pooled amount of time which an employee is able to be absent from work for sickness and still receive full pay.  Sometimes a sick bank grows over the years of employment provided it is not drawn from.
When you are injured as the result of someone else’s carelessness, become disabled for a period of time and have to use up your “sick bank” are you entitled to recover damages to reflect the value of this used up asset?  Reasons for judgement were released today by the BC Supreme Court, New Westminster Registry, discussing this area of law.
In today’s case (Burton v. Bouwman) the Plaintiff was involved in a total of 3 motor vehicle collisions.  Following each collision he missed time from work and had to draw money from his sick bank.  In his lawsuit against the at-fault motorists he claimed for various damages including damaged for his depleted sick bank.
The Plaintiff largely succeeded in this claim.  In awarding the Plaintiff compensation for this loss Madam Justice Gray summarized and applied the law as follows:

[157] Mr. Burton is not entitled to receive cash from CSC for unused banked sick leave.  The banked sick leave will only be of value to him if he becomes sick and has insufficient banked sick leave, with the result that he takes an unpaid leave.

[158] There is a real and substantial possibility that Mr. Burton will become sick while still employed by CSC and have insufficient banked sick leave.  Mr. Burton is entitled to compensation to reflect that…

[189] Mr. Burton did not suffer a wage loss as a consequence of the accidents, because he was able to use his banked sick time.  However, he claims lost banked sick leave and annual leave, $21,600 for lost overtime, and an unspecified amount for the past lost opportunity to earn income outside CSC.  The position of the defence is that Mr. Burton should recover nothing for these claims.

[190] As discussed above, Mr. Burton is entitled to be compensated for the loss of his banked sick time.  CSC paid Mr. Burton about $12,000 for his banked sick leave after the First Accident, about $250 after the Second Accident, and about $18,700 after the Third Accident.  That is a total of about $30,950.

[191] The method of compensating a continuing employee for loss of sick bank credits was discussed in Bjarnson v. Parks, 2009 BCSC 48, and the cases cited in it.  In that case, and in Roberts v. Earthy, [1995] B.C.J. No. 1034 and Choromanski v. Malaspina University College, 2002 BCSC 771, the court awarded the full amount of salary corresponding to the banked sick leave, without making any deduction for contingencies.  Other cases cited in Bjarnson made such a deduction.

[192] I would assess the likelihood that Mr. Burton will become sick while working at CSC and have insufficient banked sick leave at 75 percent.  As a result, Mr. Burton is entitled to damages of $22,500 in respect of his lost banked sick leave.

BC Personal Injury Claims and Sick Leave Benefits

Imagine that you are injured through the fault of another in British Columbia.  As a result of your injuries you become disabled and are unable to return to work for a period of time.  Fortunately you have a good job and have built up a ‘sick bank’ at work and you are able to draw from this during your period of disability.  When you bring your claim against the person responsible for injuring you are you able to claim your lost wages?  Reasons for judgement were released yesterday by the BC Supreme Court addressing this issue.
In this case the Plaintiff was injured in 2005 in a motor vehicle collision.  The Plaintiff was unable to work for a few weeks as a result of injury.  The Plaintiff had built up a sick bank and drew from this.  In her ICBC claim she claimed compensation in an amount equivalent to the hours depleted from her sick bank.  In awarding the Plaintiff this money the court engaged in a very thorough and well reasoned discussion of the law addressing this topic which I am pleased to reproduce below:

[56]            This court has long recognized the loss of sick bank credits as a compensable loss (see generally: McCready v. Munroe (1965), 55 D.L.R. (2d) 338, 54 W.W.R. 65 (B.C.S.C.)).  InLavigne v. Doucet (1976), 14 N.B.R (2d) 700 at para. 12 (C.A.), the New Brunswick Court of Appeal held that the depletion of a plaintiff’s accumulated sick leave arising from injuries suffered in an accident removed a benefit that he or she would otherwise have and, therefore, constitutes a genuine loss.  That conceptual approach was approved of by McLachlin J. (now the Chief Justice) in Ratych v. Bloomer, [1990] 1 S.C.R. 940 at 972, 69 D.L.R. (4th) 25:

I accept that if an employee can establish that he or she has suffered a loss in exchange for obtaining wages during the time he or she could not work, the employee should be compensated for that loss. Thus in Lavigne v. Doucet the New Brunswick Court of Appeal quite rightly allowed damages for loss of accumulated sick benefits.

[57]            Some years later the issue was revived before the Supreme Court of Canada in Cunningham v. Wheeler, [1994] 1 S.C.R. 359, 113 DLR (4th) 1, where Cory J. confirmed at 13 that an employee who uses sick leave in order to receive wages while off work and loses those sick day credits is entitled to receive compensation.

[58]            In Roberts v. Earthy, 1995 CanLII 1421 (B.C.S.C.) [Roberts], Clancy J. held at para. 8 that it was not necessary to adduce evidence showing that any consideration was paid by the plaintiff or negotiated on the plaintiff’s behalf through a collective agreement or other employment arrangement.  He did so on the basis that the accumulation of sick days is not related to what has come to be known as the insurance exception to the compensatory principle where such supporting evidence is generally required.

[59]            The case authorities do not appear to support a universal approach to the quantification of the loss flowing from the depletion of sick leave benefits.  For example, in Collins v. Ma, 1990 CanLII 1634 (B.C.S.C.), the court endorsed a contingency calculation being applied in order to take into consideration the likelihood of an employee drawing on the lost banked sick days in the future.  That approach was followed by the court in Olson v. Nixon, [1991] B.C.J. No. 155, 1991 CarswellBC 1346 (S.C.).

[60]            In Roberts, however, Clancy J. made no deduction for contingencies.  Likewise, more recently in Choromanski v. Malaspina University College, 2002 BCSC 771, the court rejected the defence argument that there should be a  reduction of the loss taken based on the plaintiff’s work history and the rate at which he had traditionally availed himself of his sick benefits. 

[61]            In my view, whether it is appropriate to make deductions for contingencies in quantifying the loss will depend upon the presence or absence of certain factors.  Those would include, for example, whether there is a maximum limit of accumulated sick leave, whether the plaintiff is able to cash out accumulated sick leave days on termination or retirement, whether the plaintiff has several years of employment remaining in which to potentially use the sick leave or has only a few months of employment left until retirement with a significant sick leave remaining, or whether the plaintiff has left the employment in which he earned the sick day credits altogether.  It cannot be predicted with any degree of certainty whether a person who is healthy today will be so tomorrow.  Illness or injury can afflict any one of us at any time.  Placing much if any reliance on the plaintiff’s past use of sick benefits strikes me as an unsound and potentially unfair approach because it fails to adequately protect a plaintiff against an unexpected serious or catastrophic illness in the future which could occur in any otherwise healthy plaintiff, or against a future injury, which, by its nature, is unpredictable.  In neither case would those future events necessarily be related to the plaintiff’s past use of sick benefits.

[62]            I accept that had Ms. Fenwick not used her sick leave credits, she would have been entitled to transfer them from her then employer, the Vancouver School Board, to her new employer, the Coquitlam School Board.  As well I am satisfied that, pursuant to her collective agreement, any monies awarded to Ms. Fenwick on account of lost sick days is repayable to her then employer in order to replenish her sick leave bank.  Beyond that, the evidence pertaining to the details of the portability of Ms. Fenwick’s sick day credits was not well developed.  I do not have cogent evidence as to whether there is a maximum number of sick days allowable, the formula for which she has earned them or whether she is able to cash them out on retirement or termination.

[63]            As best I can decipher from the evidence, the loss that Ms. Fenwick has sustained is a potential future loss in the sense that it would only be experienced if she has insufficient sick leave credits to adequately cover a future period of absence due to illness in respect of which she could have drawn upon the lost sick bank for income continuation.

[64]            Ms. Fenwick thoroughly exhausted her accumulated sick leave as a result of the accident.  She is a relatively young woman in the early stages of her career as a teacher.  I have found that she likely will experience flare-ups of her symptoms caused by this accident from time to time in the future which may require her to miss brief intervals of time from work.  She may also suffer from other illness or medical conditions in the future which will keep her from work. 

[65]            I am satisfied that fair and reasonable damages for this loss is compensation which reflects the actual hours Ms. Fenwick missed from work and used as sick time, multiplied by her approximate average hourly rate, without deduction.  To that, I would add her wage loss stemming from fifteen hours of unpaid absences attributable to her injuries.  The total damages amount to $5,469.18.

[66]            Ms. Fenwick’s counsel raised a concern about whether damages for Ms. Fenwick’s lost sick bank entitlement could be validly characterized as pre-trial earnings or income and thereby attract a deduction for income tax pursuant to sections 95 and 98 of the Insurance (Vehicle) Act, R.S.B.C. 1996, c. 231.  In my view, this kind of loss is not in the character of past wage loss.  Accordingly, there will be no deduction for income tax

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ERIK
MAGRAKEN

Personal Injury Lawyer

When not writing the BC Injury Law Blog, Erik is the managing partner at MacIsaac & Company, based in Victoria, B.C. He is also involved with combative sports regulatory issues and authors the Combat Sports Law Blog.

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