You give your employee almost 32 weeks pay after terminating his
employment without cause. He gets another job two weeks
later. You're off the hook, right? Maybe not.
The Ontario Superior Court of Justice in Brito v. Canac Kitchens, a Division of Kohler Canada
Co. has recently said no. Instead, you may be
required to "make the employee whole" in every respect,
not just salary. That could mean disability benefits too,
even after he starts his other job.
In this case, Luis Olguin was dismissed because of
restructuring. He was 55 years old at the time and had nearly
24 years of service. At the time his employment was
terminated, he was provided with the statutory minimum - 8 weeks
pay in lieu of notice and 23.79 weeks severance pay under the
Ontario Employment Standards Act. His benefits were
continued for the statutory minimum as well – 8
Two weeks later, Mr. Olguin started another job, albeit at a
lower payrate. More importantly, the new employer did not
provide disability benefits. So when Mr. Olguin was diagnosed
with cancer 16 months later and was no longer able to work, Mr.
Olguin had no disability benefits.
The Surprising Decision
Not so surprisingly, the judge said that Mr. Olguin was entitled
to 22 months pay in lieu of notice. Applying his "make
whole" theory, the judge said Mr. Olguin was entitled to the
difference between his pre-termination earnings and his earnings at
his new employer, less the 31.79 weeks pay he received from Canac
Kitchens, from the date of termination to the date of his
disability. This resulted in an award of approximately
The judge then considered the six month period from the date of
Mr. Olguin's disability to the end of the 22 month notice
period. He concluded that had Mr. Olguin been provided with
22 months working notice, he would have been eligible for short
term disability benefits during this six month period. Mr.
Olguin received those.
Surprisingly, that didn't end the matter. The judge
went on and awarded Mr. Olguin the long term disability (LTD)
benefits he would have been entitled to receive from Canac
Kitchens' disability insurer had he been provided with 22
months working notice. This amounted to $146,723 from the
date LTD benefits would have started to the start of the trial, and
a further $47,941 representing the present value of the LTD
benefits from the start of trial to his 65th
birthday. That's more than $200,000 in what would have
been paid by an insurer, to be paid by Canac Kitchens.
Canac Kitchens argued that the LTD benefits should stop after
two years, the start of the "any occupation"
period. Because it didn't lead any evidence that Mr.
Olguin could have worked in any occupation, it was not
successful. And the judge didn't accept its argument that
the disability insurer would not have allowed it to continue Mr.
Olguin's coverage even if it had tried to do so. That
wasn't enough to get Canac Kitchens off the hook.
What This Means for Employers
At first blush, this decision may appear consistent with the
2006 decision in
Alcatel v. Egan. In that case, the Ontario Court of
Appeal said that employers will have to step into the shoes of the
disability or life insurance carrier should it fail to provide such
benefits during the entire notice period and the individual becomes
disabled or dies. But this decision goes even further.
It says that obligation doesn't necessarily end when the
terminated employee starts another job. Instead, employers
may still be on the hook for any damages the employee doesn't
mitigate – like disability benefits in this case.
Although a decision from Ontario, it could impact judges in
provinces right across the country.
Of course, this doesn't happen in every case. It only
becomes an issue where the former employee dies or becomes
disabled. That leaves employers assessing the facts on each
termination, deciding whether to take the risk of not providing
coverage. Employers must now make that assessment even where
the former employee starts another job, if the new job doesn't
match the employee's former benefits. Complicating
matters is that most disability insurers will not allow coverage to
continue following the statutory notice period. So even if
you want to continue coverage, that may leave you looking for
alternate ways in which to do so.
Unfortunately, reasonable accommodation for employees in the workplace continues to be the source of significant litigation and even today we continue to see outrageous examples of employers behaving badly.
A former teacher at Bodwell High School has learned a valuable lesson from the B.C. Human Rights Tribunal— it is not discriminatory for an employer to offer child-related benefits to only employees with children.
We are now beginning to see reported cases involving charges and subsequent fines laid against employers for failing to provide information, instruction and supervision to protect a worker from workplace violence.
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