One issue which is often neglected in employment law matters is the medical status of a person being terminated. This is an important issue for both employer and employee. Frail employee health can raise two important insurance issues: disability and life, both with a significant impact for workplace parties.

Disability Claims

Claims for the loss of disability benefits can be quite substantial. From the employer’s perspective, these claims can be very difficult to defend.

The fundamentals of a claim for loss of disability benefits are twofold.

Disability Within the Statutory Period

The first is based on the deeming provision of the Employment Standards Act which requires that all employer provided benefits continue for the statutory minimum period of up to 8 weeks. The employer should be careful to ensure there is compliance with this provision. Disability claims which originate during this period will be made against the disability insurance provider.

Similarly, an employee facing a medical issue should be sure to prove that the onset of their disability was timely (i.e. within the statutory notice period). Proof of a medical diagnosis in this period will be the best evidence. An important point to note is that the medical disability may originate after an employee’s termination and a claim may yet still be made.

If that is the case, the employee will be allowed a claim against the disability provider under the policy terms. Usually this allows for coverage for “own occupation” held at the time of termination for 2 years, typically from the onset of coverage. Often there is an elimination period of 6 months prior to the commencement of this period of “own occupation” benefits.

After two years, the claim is usually based on the ability to work in any job for which the employee is reasonably skilled and qualified. If no income level is set by the policy, this is usually interpreted to be 2/3 of prior income.

So long as there is insurance coverage in place by a disability within the statutory period and these terms are met and the medical disability is continual, benefits will be eligible until age 65.

Depending on whether the insurance premiums are paid by the employee directly or indirectly, there may even be a severance claim without deduction of disability benefits. This being said, it can be a complicated matter, as the policy of insurance may deal with the insurer’s right of recovery of sums paid by the employer in the period of disability. This is known as the “right of subrogation”.

Disability Within the Common Law Period

Where the medical issue arises within the common law notice period, that is, after the expiry of the statutory notice period, it is no longer the responsibility of the disability insurer, but rather that of the employer.

The employee will argue that had notice been provided, his or her medical issue would normally have been insured and hence look to the employer for recovery of all sums which normally would have been provided. The same tests of insurance eligibility will apply. Such claims may be quite  significant, given a serious medical issue.

Apart from negotiating a general release, the employer will stand in the shoes of the disability insurer. The employer can be placed in a very difficult position, particularly where the medical disability is completely unanticipated.

Life Insurance

Term life insurance provided by an employer is usually convertible by the employee on termination without the need to pass medical tests or underwriting. The employer should be careful to advise the employee of the right to do so. Premiums are usually adjusted based on age. The employer may even agree to pay the increased premium cost for the period of fair notice. In such cases, if the employee passes away in the notice period, there will be no claim.

Similarly, a death within the statutory notice period will allow a life insurance claim against the insurance provider.

Human Rights Issues

To make matters even more complex, if an employer’s termination decision was influenced, not due to, but rather simply influenced by a medical disability, the employee could seek a human rights remedy which may include reinstatement, arguably to non-active employment. This could include a claim for all employment benefits such as drug expenses, pension contributions, and similar perquisites of employment.

Difficult Issues Require Clear Advice

The law on this subject is not predictable. Both employer and employee should take legal advice on any termination in which the employee’s health is possibly suspect. The failure to do so may result in significant liability to the employer or the missing of a life changing claim for an employee.

If you have questions about employment and disability, contact the offices of Toronto employment lawyers Grosman Gale Fletcher Hopkins. We regularly advise employees and employers on workplace issues. Contact us online or by phone at 416 364 9599 to schedule a consultation.

 


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