Termination of Employees on Long Term Disability

Termination of Employees on Long Term DisabilityQuestion: How long should/must an employer keep an individual in employment when that individual has been off on long term disability?

Answer: It depends… really!

Key Concepts in Law

Workplace Safety and Insurance Board

The employer must continue payment of benefits for one year following the date of injury so long as the employer made such contributions at the time of injury, the employee pays his/her portion of benefits (if any), the employee is away from work due to the injury and the employee is cooperating in the work integration process.

Employment Standards

The employer must maintain benefits coverage for eligible employees upon termination for the duration of the statutory notice period.

Common Law

The employer may terminate a disabled employee (and his/her benefits) if the contract of employment has been frustrated, by solely providing statutory entitlements upon termination.

Human Rights Code

Employer must accommodate a disabled employee to the point of undue hardship.

Statutory Notice Periods

Length of Employment
Notice Required
3 months or more but less than 1 year 1 week
1 year or more but less than 3 years 2 weeks
3 years or more but less than 4 years 3 weeks
4 years or more but less than 5 Years 4 weeks
5 years or more but less than 6 years 5 weeks
6 years or more but less than 7 years 6 weeks
7 years or more but less than 8 years 7 weeks
8 years or more 8 weeks

Key Principles:

Frustration of a Contract of Employment:

Frustration of contract occurs when an employment contract cannot be fulfilled as a result of events out of the control or both parties. An illness or disability of a permanent nature may constitute frustration of an employment contract, but not a temporary illness or disability. To establish frustration of contract, the employer must show:

  • through medical and/or other compelling evidence that there is a reasonable likelihood that the employee’s illness or disability will prevent him/her from fulfilling the basic obligations of their position for the foreseeable future (see Naccarato v Costco Wholesale Canada Ltd.), and
  • that the illness or disability is of such a nature that a return to work is not possible even with accommodation (see Gahagan v James Campbell Inc.)

While courts have typically held that the length of an absence from the workplace is relevant to establishing frustration of contract, it is not sufficient in itself to make the case in the absence of supporting medical evidence that the employee will be unable to return in the foreseeable future. Further, as seen in Naccarato, the length of absence may vary between occupations based on its impact on the employer’s business.

If frustration of contract is established, then the employer can terminate an employee’s employment by giving statutory notice and covering benefits for that period.

Undue Hardship (Duty to Accommodate):

Human Rights legislation requires an employer to accommodate a disabled employee to the point of undue hardship. In the event that a case of frustration cannot be proven, the employer must be prepared to either make accommodation or argue undue hardship.

There are 3 considerations in assessing whether accommodation would cause undue hardship: cost, outside sources of funding, if any, and health and safety requirements, if any. This is an extremely difficult standard to meet.

Key Strategies:

  • Address accommodation in the HR policies so that they can be consistently applied.
  • Address termination due to long term disability in the HR policies to demonstrate the non-discriminatory nature of these decisions. The policies should encompass both a timeframe and process for establishing frustration of contract such as required medical evidence and other conditions such as an employee¡¦s cooperation with the disability management program.
  • The policy should cover the provision of notice and benefits for the statutory notice period.
  • Establish a review date through the policy such as LTD change of definition date.
  • Implement a rigourous disability (and return to work) management process.
  • Document, document, document.

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