A worker may suffer illness, accident or other condition that prevents continuance of work duties over a period of time. Such scenarios may happen at the workplace or at an extension of the workplace. In recent years, workplace stress itself has been the trigger for serious illness leading to disability claims.
An employee who becomes disabled may be eligible for financial compensation if such are included in the benefits package provided by the employer. These payments are usually fulfilled through benefits under an insurance plan. While many disability claims are handled and resolved in a straightforward manner, two major issues may arise over the length of time disability benefits may continue and over benefits that are claimed during a termination notice period.
How Long Can Disability Benefits Endure?
Provided that the employee has not signed a release waiving their entitlement to disability benefits, an employer must pay an employee’s salary for the duration of the employee’s temporary disability leave. If an employer refuses to continue paying benefits to an employee who is still disabled, the employer could be found to have wrongfully or constructively dismissed an employee and be liable for corresponding damages.
The disabled employee continues to receive these benefits until the cut-off date established by the employer or until the insurance provider removes the benefits. In some cases where the disability is prolonged, an employee’s disability benefits may be halted by the insurance company. A key example of this was seen in Honda Canada Inc. v. Keays  S.C.J. No. 40. In this case, the employee became disabled by chronic fatigue syndrome and discontinued work as a result. After a period of time, the employee’s disability benefits were stopped by the insurance company, resulting in the employee having to return to work despite still suffering from the disability.
When Extended Disability Frustrates the Employment Contract
If an employee is disabled for such an extended period of time that continued work duties becomes improbable of impossible, the employment contract may have become frustrated and the employer may then choose to terminate the employee. If frustration of contract is proved, the employer is only liable to pay the employee statutory notice and not common law notice.
However, even cases of lengthy disability may amount to “temporary” illness if recovery can be reasonably expected. These cases are not to be equated to incurable diseases or debilitating, degenerative illnesses in which recovery is not likely. The very presence of long-term disability benefits implies that lengthy disabilities may be anticipated and subsequently tolerated without necessarily equating to a frustration of the employment contract.
Ultimately, the onus may lie, not on the employee to provide medical evidence of a prognosis indicating an eventual return to work, but on the employer to prove in good faith that the employee’s lengthy absence caused by the disability has resulted in a frustration of the employment contract.
Consequences of Discontinuing a Terminated Employee’s Benefits
In most cases, disability benefits are provided by the employer’s insurance provider. However, circumstances exist in which the employer is obligated to take the place of the insurance provider by paying disability benefits to employee directly.
This can occur when an employee becomes sick or disabled during the notice period after being informed of his or her termination of employment, and the employer has wrongfully discontinued the employee’s benefits prior to the end of the notice period.
The exception to this scenario would be where, in conjunction with the termination, the employee has signed a release waiving his or her entitlement to long term disability benefits throughout the notice period.
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