In Feldstein v. 364 Northern Development Corp., the British Columbia Supreme Court determined that an employer negligently represented the details of Long Term Disability (LTD) benefits to a potential employee and awarded damages in the amount of $93,336.80 as a result.
At the age of nine, the Employee was diagnosed with cystic fibrosis. Due to his condition, the Employee would not accept employment unless it offered “sufficient and appropriate LTD benefits”, which were not conditional on the absence of any pre-existing health conditions. The Employee was terminated from his previous employer with 6 months’ working notice and immediately began looking for new work. The Employee obtained an interview with the Employer, which led to a second interview. During the second interview, the Employee claimed that he informed the Employer of his cystic fibrosis condition and inquired whether the Employer offered employee benefits and requested a brochure outlining such benefits. The Employee was eventually provided with a booklet outlining the employee benefits, following which the Employee asked the Employer a few questions, including, what constituted “Proof of Good Health” with respect to Long Term Disability benefits. The Employer informed the Employee that “Proof of Good Health is related to the three month waiting period needed in order to have the plan in effect”. Relying upon this representation, the Employee accepted employment with the Employer.
Approximately 1 year after commencing his employment with the Employer, the Employee’s lung functioning declined due to his condition. After numerous forms of communication between the Employee, the Employer and the benefit provider, the Employee was approved for Long Term Disability benefits, however, only at a rate of $1,000.00 per month instead of the expected $4,660.00 monthly benefit. This shortfall in benefits was due to the Employee failing to fill out a health questionnaire when he initially enrolled in the benefits at the time of commencing his employment with the Employer. This monthly amount was reduced by the $963.44 the Employee received per month in Canada Pension Plan benefits, for a net amount of $37.00 per month.
The Employee initiated legal proceedings against the Employer for negligent misrepresentation.
After determining that the Employee’s version of events was credible, the British Columbia Supreme Court found that the Employee’s “claim in negligent misrepresentation should succeed”. The Court arrived at this decision by finding that: the Employer owed a duty of care to the Employee “as an employer making representations to a prospective employee in the court of pre-employment discussions”; the statement made by the Employer that “Proof of Good Health is related to the three month waiting period needed in order to have the plan in effect” was “inaccurate, untrue, and misleading”; that the above statement was negligently made by the Employer to the Employee; and, that the Employee “reasonably relied on the impugned statement in opting to accept [the Employer’s] offer of employment”.
As a result, the Employee was awarded $83,336.90 for the loss of long term disability benefits for a period of 40 months and $10,000.00 for mental distress.
Lessons for Employers
The above decision demonstrates the importance for Employers to accurately represent to their employees and potential employees the terms of their employment, including benefits. Failure to do so may result in a reasonable reliance by an employee and or potential employee on the inaccurate statement, and damages as a result. Should an Employer not fully understand any of the terms of employment with the employee or those offered to a potential employee, full knowledge and information should first be obtained.
Lessons for Employees
Employees should be aware of the above decision as it demonstrates the potential recourse they may have should a negligent representation be made by their employer or potential employer when discussing the terms of their employment. In the event of misrepresentations being made, Employees should immediately obtain assistance from Employment Law counsel to discuss their options.
Minken Employment Lawyers is your source for expert advice and advocacy on today’s employment law issues. Whether you are an employer or an employee, we can help. Contact us to see how.
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