Sunday, 15 April 2012

The Benefit of Benefits

(c) istock/olm26250

An area too often overlooked in wrongful dismissal cases is that of disability benefits. Often, dismissed employees, who previously participated in group benefit plans, are informed at the time of dismissal that their short and long-term disability benefits will terminate at the end of the “statutory notice period,” typically eight weeks for long-term Ontario employees.

Employees are typically informed that this period of time is as long as the group disability insurer will permit the employee to remain on the plan. But, is that the end of the argument? “No” says Ontario law.

Although Brito v. Canac, 2011 ONSC 1011 remains one of my favourite decisions on this issue (for the reasons set out in the post available by clicking this link, Justice Lois B. Roberts’ decision in Hussain v. Suzuki (2011), 209 A.C.W.S. (3d) 101 (ON SC) provides a more thorough analysis of the point.

In her reasons for decision, Justice Roberts (now of the Court of Appeal for Ontario) wrote the following:

[20] It is a well established principle that a wrongfully dismissed employee is entitled to the value of the lost salary and benefits flowing from the dismissal (see, for example: Davidson v. Allelix Inc., [1991] O.J. No. 2230 (CA), at para. 21).

[21] The cost to the plaintiff of replacing the benefits provided under a group insurance policy is far more than the plaintiff's contribution while he was employed. If the benefits cannot be continued by the defendant's group carrier(s), then the value of the benefits must be assessed for the remainder of the period of reasonable notice and paid to the plaintiff, either at the employer's cost or the cost to the plaintiff of replacing them in the marketplace, less any amounts the plaintiff would have contributed to them during his employment, and less any amounts which were paid by the defendant for the disability benefits.

Certainly the cost of these benefits can be quite significant, especially for older employees and it is a factor not to be overlooked at the time of dismissal or when negotiating a severance package.

Where an employer refused to extend such benefits or arrange for sufficient alternative coverage, as was the case in Brito, the Ontario Superior Court ordered the employer to pay the employee’s long-term disability benefits to the age of 65, as if it were the long-term disability insurer. The cost to the employer was just under $200,000.00; had the employee been younger the cost could have been significantly higher.

Thus, the lesson is that long-term disability benefits must be considered at the time of dismissal. Employees are entitled to the benefit of the benefits to which they would have been entitled while employed throughout the duration of their “notice period.” The failure to provide such benefits or to provide the means for the dismissed employee to acquire those benefits on his or her own can demonstrably have some serious consequences for the employer.

Contact Me

To reach the author of this blog, Sean Bawden, email or call 613.238.6321 x260.

Sean P. Bawden is a partner with Kelly Santini LLP, located in Ottawa, Ontario, Canada. He practices in the areas of employment law and civil litigation. He has also taught Trial Advocacy for Paralegals and Small Claims Court Practice at Algonquin College in Ottawa.

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As always, everyone’s situation is different. The above is not intended to be legal advice for any particular situation. It is always prudent to seek professional legal advice before making any decisions with respect to your own case.

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