Employee Benefits: The Potential Costs of Not Continuing Them Upon Termination

Mar 6, 2012

Employee Benefits

Did you know that an employer is generally required to maintain an employee’s benefits until the end of the minimum notice period provided for under the Employment Standards Act (ESA) whether or not the employer provides the employee with actual notice of termination.

Is the employer also required to continue benefit plan contributions throughout the common law “reasonable notice period” which is almost always longer than the ESA notice period? Ontario’s Court of Appeal recently answered this question.

Brito v. Canac Kitchens : The Facts

Canac Kitchen terminated Mr. Brito’s employment after 24 years service. Within two weeks, Mr. Brito, 55 years old, found another job however his new employer did not provide short-term or long-term disability benefits. About 1 ½ years later, Mr. Brito was diagnosed with cancer which resulted in surgery, chemotherapy and a total disability.

The Decision

Mr. Brito claimed that Canac should have continued his long-term disability coverage throughout the common law reasonable notice period. The trial judge agreed. He found that Mr. Brito should have received 22 months notice of termination and because the total disability took place during the reasonable notice period he was entitled to receive, among other damages, an amount equal to the LTD benefits he would have received from the date he became totally disabled within the meaning of Canac’s LTD policy until he turned 65 years old.

Lessons To Be Learned

1. An employer’s obligation to continue benefits for a terminated employee is not limited to the minimum notice period under the Employment Standards Act.

2. Most LTD plans do not allow an employer to continue LTD coverage for a terminated employee beyond the ESA minimum notice period. The chance of a person becoming totally disabled may be small  however the employer’s potential legal exposure is usually HUGE.

3. Reaching an early settlement with a terminated employee where the person agrees to release the employer from this kind of damage claim as a term of settlement is one way to limit the legal exposure associated with this kind of claim.

If you have any questions about an employer’s obligations to a terminated employee, please call us at 1–888-640-1728 or email us at [email protected]

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