Canadian Employment Law Today

ployee partially mitigated his losses by find- ing a new job, but the new employer did not offer disability coverage. About a year-and- a-half into the new job, the employee was diagnosed with cancer of the larynx. e employee underwent extended treatment including several surgeries, chemoradiation and insertion of a tracheostomy tube. e employee eventually sued his first em - ployer for wrongful dismissal and associated benefits, including LTD and STD benefits that he would have received had the benefits not been cancelled at the end of the statutory no - tice period. e court awarded the employee damages for lost income for 22 months, STD benefits for 17 weeks, and LTD benefits to age 65, plus legal costs. To be clear, the employee was awarded not just the monthly benefit pre - miums, but the cost of the underlying benefits themselves for 10 years. is was all at a price tag to the employer of over $200,000, plus $125,000 for costs at trial. e $15,000 of punitive damages was reversed on appeal, but the appeal court awarded the employee a further $20,000 for costs. e total cost of maintaining the monthly benefit contributions for the full 22 months would have been under $10,000, without having to pull in any lawyers. Some employers are reluctant to continue the "expensive" premiums during a notice period and are willing to gamble that the employee will stay well. But should anything happen to the terminated employee during the common law notice period and there is no executed release, as the above cases in - dicate, those premiums all of a sudden look like a bargain. Contracting out of the statute A proactive way to avoid the above scenar- ios is to enter into an employment contract when the employee starts. While this doesn't solve the problem of a 20-year employee who started at the company without an employ - ment contract, it does provide clarity for new and future employees. e vast majority of employment law cases are disputes around termination entitlements, and a reasonable and clearly drafted termination provision can usually avoid the problem upfront. Provided the parties exceed the mini - mum statutory standards for termination and severance payments, the termination provision can carve out and contain the en- titlements on termination. For example, if the contract provides three weeks of salary for every year of service, it is permissible for the contract to then provide that benefits will cease two months after the last day of active employment. Case law continues to emphasize the im - portance of expressly stating the time period during which benefits will be continued. Earlier this year, in Wood v. Deeley Imports, the Ontario Court of Appeal set aside a contract termination provision that failed to expressly provide for benefits during at least the minimum statutory period (see page 1 story). Rather, the termination provi - sion stated that the employee would get two weeks for each year of service, and that the "payments and notice period provided for in this paragraph are inclusive of your en - titlement to notice, pay in lieu of notice and severance pay pursuant to the Employment Standards Act, 2000." e court held that on its plain wording, the clause excluded the employer's obligation to contribute to the employee's benefit plans during the notice period. e court rejected the employer's arguments that the obligation is implied, and because the employer did pay the benefit contributions, the statute was not breached. e court found that the actual con - tributions to benefits should have no bearing on whether the termination clause itself con- travenes the statute. In other words, an em- ployer cannot correct the defect after the fact. Should you contract out of providing benefits during the notice period? As long as the provision in the employ- ment contract exceeds the statutory minimum, freedom of contract prevails. From a practical point of view, however, if the insurance company permits, provid- ing benefits during the full contractual notice period is often highly desirable for the employee, especially if he has a family or health issues. For the employer, con- tinuing to pay monthly premiums may be a small price to pay for a co-operative former employee who doesn't try to chal- lenge the contract on some other basis. For more information see: • Egan v. Alcatel Canada Inc., 2006 Carswel- lOnt 28 (Ont. C.A.). • Brito v. Canac Kitchens, 2012 CarswellOnt 760 (Ont. C.A.). • Wood v. Fred Deeley Imports Ltd., 2017 Car - swellOnt 2408 (Ont. C.A.). Canadian HR Reporter, a Thomson Reuters business 2017 April 12, 2017 | Canadian Employment Law Today ABOUT THE AUTHOR Lisa Stam Lisa Stam is founder of Spring Law, a virtual law firm advising exclusively on workplace legal issues for employers and executives. She practices all aspects of employment, labour, privacy, and human rights law, with a particular interest in legal issues arising from technology in the workplace. Lisa can be reached at lstam@springlaw.ca. CREDIT: TOMMASO79/SHUTTERSTOCK

• Cover