Canadian Employment Law Today

4 Canadian HR Reporter, a Thomson Reuters business 2017 CASE IN POINT: TERMINATIONS Benefits during the notice period Employers should be aware that not only is the statutory minimum notice usually not good enough, but it involves more than just wages BY LISA STAM A s every HR professional already knows, terminating an employee's employment without cause in Canada comes at a price. And ter - mination "for cause" is almost always impos- sible in the absence of fraud, violence, or sell- ing the owner's first-born child. Employment statutes in Canada require an employer to pay wages or salary for the notice period, as well as to continue benefit contri - butions. In Ontario, for example, the Employ- ment Standards Act requires an employer to continue the employee's wages and to "con- tinue to make whatever benefit contributions would be required to be made in order to maintain the employee's benefits under the plan until the end of the notice period." Statutory notice period obligations, there - fore, include the continuation of whatever benefits the employee was otherwise en- titled to, including benefits such as group health care and dental premiums, life in- surance, long-term disability (LTD), short- term disability (STD), and travel insurance. When crafting a termination package for an employee who has been terminated without cause, the package must include the contin - uation of benefits throughout the statutory notice period. e problem employers run up against is that most insurance companies recognize the statutory obligations for general benefits like health care and dental, but often refuse to insure the bigger ticket items like LTD or life insurance after an employee's last day of active employment. Ultimately, it is the employer who is le - gally obligated to provide benefits to the employee during a notice period, not the insurer. e insurer is simply obligated to satisfy the terms of the contract with the employer. e gap between what is required and what is actually insured during the notice period becomes even greater for the com - mon law notice period. Canadian employ- ment statutes set out minimum employ- ment standards. e courts will almost always award significantly more common law damages than the statutory minimum for a wrongful dismissal suit, depending on actors such as the length of the employee's service, the employee's age, and the type of work the employee performed. e case law makes it clear that an em - ployer is required to make the employee whole for the entire common law notice pe- riod. In other words, the employee will be entitled to whatever she would have earned had the termination not occurred. is in- cludes, for example, any regularly scheduled wage increases, non-discretionary bonuses tied to company performance, and the con- tinuation of all benefits. Enter the release Upon a without-cause termination, the employer will offer a settlement package. e parties have the freedom of contract to sign off on a settlement that is great- er than statutory minimums, but not as generous as common law, including some restrictions around benefits. is is the solution most often used to resolve the benefits dilemma. However, in the absence of a binding employment contract or an executed settle- ment release, the employer is exposed to the employee suing for wrongful dismissal (even after receiving a modest package) and the final details landing in the hands of the judge, who will typically be more generous than the employer. e insurance gap If the insurance company refuses to con- tinue to insure the terminated employee beyond the statutory notice period and the parties don't sign off on a release, the employer is on the hook if the terminated employee needs to access the benefits during the common law notice period, after the statutory termination notice pe- riod expires. As an example, in Egan v. Alcatel Canada Inc., the Ontario Court of Appeal upheld the notice period of nine months awarded to a director-level, senior management employ - ee with 21 months service (she was induced from prior employment). e employee was terminated without cause in July as part of a mass termination, and in November she was diagnosed with a major depressive disorder. e statutory notice period was long over when the disability arose, and all benefits, including STD and LTD, had been cancelled at the end of the statutory notice period. e employee was denied disability benefits when she applied during the common law notice period because the coverage had al - ready been cancelled. A particular problem for the employer was that the STD and LTD policies provided that the employer, not the insurer, determined when coverage was to be terminated. e Court of Appeal upheld the trial judge's find - ing that because the disability arose during the notice period, and because the employer "wrongfully discontinued her coverage prior to the onset of disability," the employer was therefore liable for any resulting loss. e employer was liable for the value of the dis - ability benefits that would otherwise have been paid — not just the benefit premiums. Also important to note in Alcatel was that the employer's obligations actually exceeded the awarded notice period. e court held that the employee was entitled to damages for the entire period of disability, regard - less of when the notice period ended. In this case, the disability ended when the employ- ee recovered six months after the notice pe- riod ended. e end result was that the em- ployer was found liable for $146,825.98, plus costs of $25,000 to the former employee. e employer got lucky here. Had the employee not recovered from her disability, the amount would continue for the length of time the insurance policy would have cov - ered her, had the policy not been terminat- ed during the notice period. is employee was 40 years old — there could have been another 25 years of liability. In Brito v. Canac Kitchens, a 55-year-old employee became permanently disabled. After 24 years of service, the employer ter - minated the employee, paid him the mini- mum statutory entitlements (32 weeks) and extended benefits for the minimum statu- tory period (the first eight weeks). e em- THE VARIOUS employment acts and codes across the country set out the minimum statutory requirements for providing termination notice or pay in lieu of notice. The required minimum statutory notice period will range from one to eight weeks, depending on the length of service of the employee and the province. Courts will almost always award more in a successful wrongful dismissal suit than the minimum required by statute, known as the common law amount. But what are an employer's legal obligations during the notice period besides payment of wages? BACKGROUND

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