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Rudner MacDonald - Toronto Employment Law Firm
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Cutting off Benefits

My latest Canadian HR Law blog post discusses the tricky risk of cutting off benefits during an employee’s notice period. For example, imagine the scenario: Michael has been working for a manufacturing company for 23 years. He started off on the manufacturing line and worked his way up to a lower managerial position.

A few months ago, his marriage ended . Unfortunately, due to the nastiness of the separation and divorce proceedings, he has had to cash in his RRSPs and refinance his home. Earlier today, he was asked to attend a meeting in the boardroom. When he arrived, he saw his manager and a member of HR sitting at the table, and immediately realized what was happening.

He almost fainted, but managed to sit down and remain for the meeting, although he did not process much of what was said. He heard enough to confirm that he had lost his job, and they handed him some paperwork.

When Michael went to his car, he could barely focus on the road and he could feel his heart pounding. Feeling scared and unsure if he could drive home safely, he went into a walk in clinic, and was told to go to the hospital. There, he was told that his heart was racing and his blood pressure was extremely high.

They were concerned it was a heart attack, and immediately got him a bed. However, when his insurance company was contacted, it advised he was no longer covered. Upon being advised of this, he became even more stressed, and his medication had to be increased.

This scenario may be a little extreme. But it is not at all unusual for people to have their benefits, and particularly their disability coverage, cut off immediately when they are let go.

However, that will be a breach of the common law in many cases, and also a statutory breach in some. Some employment standards legislation, such as Ontario’s, requires that all benefits continue during the statutory notice period. And while many insurers will not continue disability coverage for employees who are not “actively employed,” Ontario’s legislation deems the statutory notice period to be active employment.

In recent years, courts have repeatedly confirmed that all benefits, including disability, must continue during the notice period unless there is some wording in the employment agreement that provides otherwise. As discussed previously in several blog posts, this can be a significant liability for employers, who should take steps to mitigate it.

Ideally, they would have contracts signed by all employees that limit their rights at termination. If not, then it is even more important to obtain a full and final release post-dismissal. If that is not possible, then the employer may want to consider obtaining alternate coverage for the dismissed employee in order to mitigate their potential liability.

In Michael’s situation, he will go through an extremely difficult period, and the lack of benefits will undoubtedly make things worse. If he retains an employment lawyer, then it is likely that, ultimately, the company will pay for the way in which it proceeded.

It is quite surprising to me that although the law in this regard is clear, many organizations continue to knowingly roll the dice, leaving dismissed employees uninsured and counting on the fact that they will either not need their benefits, or will not know their rights. That is risky business. The best course of action in such a situation to contact an employment lawyer for advice – whether you are an employer, or an employee.

By Stuart Rudner


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