Few workplace scenarios are more fraught than losing a job or feeling forced to leave one, while battling a serious mental health disability. The recent Ontario Superior Court of Justice decision in Fawcett v. Sun Life Assurance Company of Canada sits squarely at that painful intersection.

Employee’s LTD Benefits Terminated Post-Resignation

The plaintiff was a 17-year employee of the Children’s Hospital of Eastern Ontario (CHEO). In early 2018, she was approved for LTD benefits, administered by Sun Life, due to anxiety and depression arising directly from her workplace atmosphere. By the fall of 2018, Sun Life had placed her on a gradual return-to-work program aimed at returning her to her same position at CHEO.

On October 15, 2018, the employee submitted a resignation letter to CHEO, effective immediately. She then travelled to Thailand for nearly five months. Sun Life terminated her LTD benefits, and the litigation that followed raised three core disputes: (1) whether CHEO negligently misrepresented her options during an alleged telephone call, inducing her to resign; (2) whether the court even had jurisdiction over her claim against CHEO given that she was a unionized employee; and (3) whether Sun Life breached its policy or negligently misrepresented her options under that policy.

Both defendants (Sun Life and CHEO) moved for summary judgment to dismiss the claims against them. The employee brought cross-motions (often called “boomerang” motions) seeking judgment in her favour against both. The results were split: CHEO won its motion outright on a jurisdictional ground, while Sun Life’s motion to dismiss was denied, meaning the claim against the insurer survives and must proceed to trial.

Why Unionized Employees Face a Different Legal Road

One of the most practically important holdings in Fawcett is the court’s ruling that it lacked jurisdiction over the employee’s claim against her employer, CHEO. This outcome will surprise many employees who assume that a negligent misrepresentation claim (sounding in tort rather than contract) can always be brought before the Superior Court. In the unionized context, that assumption is wrong.

The Court applied the well-established framework from the Supreme Court of Canada Northern Regional Health Authority v. Horrocks. The test asks a deceptively simple question: what is the essential character of the dispute? If that essential character arises from the interpretation, application, administration, or violation of the collective agreement, then section 48(1) of Ontario’s Labour Relations Act grants exclusive jurisdiction to a labour arbitrator, and the Superior Court has none.

The employee argued that her claim was really about the administration of her LTD benefits plan and a misrepresentation about those benefits. The Court was not persuaded. It found that the essential character of the employee’s dispute was her resignation and the resulting termination of her employment, not the administration of benefits. Benefits issues were characterized as secondary.

Collective Agreement Addressed Discharge and Termination

Crucially, the collective agreement at CHEO contained standard provisions governing discharge, discipline, and grievance procedures, and expressly stated that an employee who resigns loses all seniority and is deemed to have terminated. Once the court found that what really mattered was whether she had been wrongly induced to end her employment, the established legal tests required it to step aside and defer to the arbitral regime.

The Alleged Phone Call: When Credibility Becomes the Whole Case

Even though CHEO won its jurisdictional motion, the Court addressed the merits in the alternative, and this analysis offers important lessons about how negligent misrepresentation claims are evaluated when the evidence is thin and contradictory. The entire claim against CHEO rested on a single alleged phone call on October 15, 2018, during which the employee says a CHEO HR representative told her that her only two options were to resign or return to work in the same position. No witness, note, or record corroborates that this conversation took place, let alone what was said.

Against that uncorroborated allegation stands a formidable body of contrary evidence. On at least six occasions before October 15, 2018, the employee told her treating physician that she planned to quit and travel. She made similar statements to her kinesiologist, occupational therapist, and Sun Life representatives, on two occasions each. On the very morning she sent the resignation letter, she met her family doctor, who recorded that she “felt like a million bucks”, had cashed her pension, booked a one-way ticket, and planned to backpack across Southeast Asia. The physician noted no signs of mania, psychosis, or impaired judgment. The following day, when she contacted Sun Life, she made no mention of any phone call with CHEO. She similarly failed to reference the call when Sun Life wrote in November 2018 to confirm that her benefits had ended. The first time she asserted that CHEO had wrongfully induced her resignation was in the statement of claim dated November 6, 2020 — over two years later.

The Court declined to resolve the credibility question on summary judgment, correctly holding that assessing witness credibility requires a trial. However, his analysis is a pointed reminder that summary judgment can and should be used to dispose of claims where there is no genuine issue, and that courts do examine the quality of the evidence on these motions. In negligent misrepresentation claims, the plaintiff must prove: (1) a duty of care based on a “special relationship”; (2) an inaccurate representation made carelessly; (3) reasonable reliance by the plaintiff; and (4) resulting detriment. Where the only evidence of the representation is the plaintiff’s own assertion, and where extensive contemporaneous records contradict the plausibility of that assertion, a court at trial will face a very difficult credibility determination.

Sun Life and the LTD Policy: Genuine Issues That Survive to Trial

While CHEO succeeded entirely, Sun Life’s motion to dismiss was denied. The Court found that there is a genuine issue requiring a trial on the claim against the insurer. The core question, one that could have significant implications for how disability insurers in Ontario administer return-to-work programs, is whether Sun Life singularly and improperly focused on returning the employee to her exact prior position at CHEO, even though the evidence it possessed suggested that the workplace environment at CHEO was the very source of her disability.

Sun Life’s LTD policy defined total disability, during the first 24 months, as being unable to perform the essential duties of the employee’s “own occupation”, and notably defined that occupation broadly to include work “in any workplace, including a different department or location with the same employer or with another employer.” The employee argued that this language obligated Sun Life to explore whether she could return to a comparable occupation elsewhere, rather than insisting on the same desk at CHEO.

Sun Life defended its position on several grounds, including that the employee had freely and knowingly chosen to resign and travel to Thailand, that she acknowledged at discovery that she understood Thailand would end her benefits, that her treating physician had not objected to the return-to-work plan (and was deemed to have approved it by not responding to Sun Life’s deadline), and that the policy contained an explicit exclusion denying benefits for absences from Canada exceeding four months.

These are substantial defences. However, the Court held that the trial will need to probe whether Sun Life’s conduct in administering the claim complied with both the policy terms and its duty of good faith — and whether any negligent misrepresentation was made to the plaintiff about her options. The outcome at trial is uncertain, but the decision confirms that disability insurers are not shielded from judicial scrutiny when claimants allege that a narrowly administered return-to-work program was driven more by cost-saving than by the employee’s actual functional capacity and rehabilitation.

Have Questions About Your Employment Benefit Rights in Toronto? Contact Grosman Gale Fletcher Hopkins LLP

Whether you are a worker in Toronto, Ottawa, Mississauga, Hamilton, or anywhere across the GTA or Ontario, the experienced labour and employment lawyers of Grosman Gale Fletcher Hopkins LLP can help you understand your rights under your employment health or disability insurance policy, collective agreement, or employment contract, before you make a decision you cannot take back. To schedule a confidential consultation, please contact us online or call (416) 364-9599.