Court of Appeal Affirms Employers’ Obligation to Pay Disability Benefits for Disability occurring after Termination

Court House Legislation

In Brito v Canac Kitchens, the Ontario Court of Appeal upheld the Ontario Superior Court of Justice’s decision that the employee be awarded damages for loss of disability benefits for a disability occurring after termination and within the common law notice period.


The employee, Mr. Luis Romero Olguin, was terminated without cause by his employer, Canac Kitchens, after 22 years of service at age 55.  Mr. Olguin was only paid the statutory minimum amount of 8 weeks’ pay in lieu of notice with benefits only being continued throughout this period. Within the 22 month common law notice period for termination, Mr. Olguin was diagnosed with cancer, becoming totally disabled and unable to work. Mr. Olguin brought an action for wrongful dismissal, and among other things, sought damages representing his loss of disability benefits.  At Trial Justice Echlin awarded Mr. Olguin 22 months’ pay in lieu of notice and almost $200,000.00 in damages in lieu of short-term disability and long-term disability benefits, including the present value of the remainder of his LTD entitlements until age 65, along with punitive damages in the sum of $15,000.00 and costs of $125,000.00.

Ontario Court of Appeal’s Decision

The issues for the Court of Appeal were the awarding of damages for disability benefits, mitigation and punitive damages. The Court of Appeal agreed with Justice Echlin’s decision that the definition of being totally disabled under Canac Kitchens’ sponsored disability benefits plan was met and therefore upheld the award of damages for lost disability benefits. Additionally, the Court of Appeal believed that the evidence presented at Trial by Mr. Olguin was sufficient to satisfy the evidentiary burden to establish total disability. As to Canac Kitchens’ submission that Mr. Olguin failed to mitigate his damages by not undertaking job re-training efforts or by seeking alternative employment after his short term disability benefits expired, the Court of Appeal clarified, “there can be no obligation to mitigate damages by finding alternate employment where the employee is totally incapable of working.” Regarding the award of punitive damages, the Court of Appeal found that since Mr. Olguin did not claim punitive damages in his Statement of Claim or propose this amendment up to or during Trial that this award should not be upheld. Further, the Court of Appeal awarded Mr. Olguin $20,000.00 in costs as he was substantially successful on appeal.

Impact of Decision on Employers

Employers should contact their Insurers to determine whether their damages for loss of disability benefits can extend far beyond the end of the reasonable notice period; ensure that they have well drafted Hiring Letters or Employment Agreements that limit the extension of disability benefits; and, that they obtain signed Releases from terminated employees which provide for the cessation of disability benefits.

Impact of Decision on Employees

Employees should not sign Releases that contain a clause which permit for the cessation of disability benefits, especially if there is any likelihood that they may become disabled during the common law notice period, in which event they should also place the Employer and Insurer on notice of a potential claim for benefits. Additionally, Employees should have their Hiring Letters or Employment Agreements reviewed.

Minken Employment Lawyers is your source for expert advice and advocacy on today’s employment law issues. Whether you are an employer or employee, we can help. Contact us to see how.

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