Canada: Employer Obligations To Disabled Employees

Last Updated: March 21 2007

Article by Connie Reeve, © 2007, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Pension & Employee Benefits, February 2007

What are the practical and legal considerations in an employer’s obligation to accommodate people with disability to the point of undue hardship? Canadian human rights legislation prohibits employers from discriminating against individuals based on disability, which is broadly defined in the legislation to include physical and mental impairment.

Employers, however, frequently have questions about their obligation to accommodate people with disability, as the law has developed, "to the point of undue hardship." It is important for employers to understand some practical considerations in dealing with disabled employees, the legal restrictions on terminating a disabled employee, and considerations for disabled employees in the context of a corporate transaction.


Courts and human rights tribunals have agreed the duty to accommodate persons with disabilities means that "accommodation" must be provided such that it respects the dignity of the person so long as providing it does not create undue hardship.

Undue hardship must be considered on a case-by-case basis that considers: financial costs; size of the employer’s operations; risks to health and safety of the employee, other employees and the public; morale of other employees; and the impact of a co-worker’s accommodation measures on other employees’ rights, among other factors.

In the recent well-publicized decision of Keays v. Honda Canada Inc., the Ontario Court of Appeal upheld a trial judge’s award of 24-months’ pay in lieu of notice to an employee terminated by Honda Canada after a diagnosis of chronic fatigue syndrome (CFS) made it difficult for him to attend work regularly. The Court of Appeal reduced the punitive damages award against Honda to CAD 100,000, but did not fundamentally disagree with the trial judge’s assessment of Honda Canada’s conduct.

The Keays decision arose out of Honda Canada’s decision to terminate the employee after his refusal to attend a meeting with the company’s doctor regarding his continued absences from work, which Honda was already advised related to his CFS. Before this meeting, Honda advised Keays it no longer accepted that he had a disability requiring him to be absent. In addition to the award of pay in lieu of notice (nine months of which was added to the "reasonable notice" period because of Honda Canada’s bad faith conduct), the trial judge also awarded Keays CAD 500,000 in punitive damages, because of the discrimination and harassment he had endured at Honda. This case illustrates the financial impact of a failure to act in good faith in dealing with an employee with a disability. Therefore, it is more important than ever that managers and HR professionals work with employees and medical practitioners to ensure each employee is treated respectfully and the employer takes appropriate steps to manage each disability case on its merits. Also:

1. Make sure you ask for and receive the information you need to evaluate any accommodation needs. Although an employer has no right to look into the employee’s medical file, when accommodation is requested, an employer has the right to obtain sufficient information of the employee’s limitations to properly fulfil the duty to accommodate. Recent human rights tribunal decisions underscore that the employee and his or her medical advisors have obligations to bring the relevant facts to the employer’s attention, including, if necessary the nature and severity of the diagnosis.

2. Don’t dismiss a disability because of lack of understanding. In Keays, the employee suffered from chronic fatigue syndrome that required him to be absent from work for four or so days a month. His employer was highly sceptical about the legitimacy of the illness, even in the face of reliable evidence to support the diagnosis of CFS. If you question the validity of an employee’s claim to be disabled, you can request an independent medical evaluation from an expert in the relevant field. Before you do so, however, try to work collaboratively with the employee’s physician.

3. Assess accommodation individually for each employee with a disability. Seriously consider all reasonable options. Keep notes of what accommodation measures are requested, considered and tried. Assess why certain measures were not successful. Evaluate the situation at several stages of the accommodation plan. Often, the process of developing an accommodation plan takes time. Developing a plan may also involve other experts, such as occupational therapists or consultants on office or plant ergonomics.

4. Assist in the application process for short or long-term disability insurance. An employer is obliged to ensure the employee has the information he or she needs to apply for disability benefits or to appeal a decision to deny disability benefits. A best practice is regular follow-up reminding an employee of any time limitations.

5. Review your attendance management program. An attendance management program needs to be consistent with human rights legislation. It cannot treat non-culpable absences, such as disability-related absences, the same as culpable absenteeism. Do not discipline an employee for absenteeism related to a disability.

6. Accommodation includes a requirement to re-employ employees absent from work due to a disability if they can fulfil the essential duties of their pre-disability job with reasonable accommodation. The legislation does not establish a rule as to how long an employee with a disability may be absent before the duty to accommodate (by keeping their pre-disability job available) has been met. Important factors are the length of the absence and the employer’s ability to predict when it will end. It is noteworthy that an Ontario Human Rights Commission Policy on accommodation takes the position that people who return to work after an absence related to a disability are protected by the Human Rights Code and they generally have the right to return to their pre-disability job.

An employer’s duty to accommodate has procedural and substantive factors. On the procedural side, an employer has an obligation to undertake a thorough and good faith analysis of any situation where accommodation may be required. In this respect, an employer must ensure it understands an employee’s needs and makes an effort to consider the implementation of all reasonable measures to meet those needs.

On the substantive side, an employer has an obligation to implement accommodation measures, where to do so would not lead to an undue hardship. In assessing whether the implementation of accommodation measures would result in an undue hardship to the employer, factors to consider include the costs of the accommodation, health and safety implications of the accommodation, size of the employer’s operations, its resources and flexibility, as well as factors relating to workplace morale and the disruption of rights provided for under a collective agreement.


The Human Rights Code recognizes there are circumstances under which individuals become so disabled they are not capable of performing or fulfilling the essential duties or requirements of a position.

In these cases, the duty to accommodate is not engaged and it would not discriminatory to terminate the employee’s employment under the Code. At common law, the doctrine of frustration can apply to the contract of employment in cases where an employee is unable to work because of a disabling illness. The question at common law is whether the disability prevents the performance of the essential functions of the employee’s job for a period sufficient to say that, in a practical or business sense, the object of the employment has been frustrated.

A recent decision of the British Columbia Court of Appeal, Wightman Estate v. 2774046 Canada Inc., affirms the doctrine of frustration of contract is still available to employers in appropriate circumstances. Before Wightman, there had been some doubt whether the doctrine of frustration of contract would apply in circumstances where the parties to the employment contract had contemplated the possibility of an employee’s long-term disability by providing for long-term disability insurance as part of the benefits attendant to employment. In Wightman, the Court of Appeal held, notwithstanding that the parties contemplated the possibility of an employee’s disabling illness and provided for that event with long-term disability insurance, the parties did not contemplate or provide that the employment relationship would continue indefinitely despite the employee’s illness and his inability to ever return to active employment.

The proof required to establish frustration of contract is that the employee’s incapacity at the time the dismissal decision is taken is of such a nature that it is likely to continue for an indefinite period. As a result, further performance of the employee’s obligations in the future would be impossible. Factors to consider are the nature of the illness, how long it has already continued and the prospects of recovery. Another factor considered in prior cases is the length of the employment relationship before the onset of the disability.

The Appeal Court concluded – based on the nature of Wightman’s illness, his 21-month absence from work and the fact his prognosis was such that he would not have been able to return to work in the future – that the employment contract was frustrated by the employee’s total disability. As a consequence, Wightman was not entitled to notice of dismissal or damages in lieu.

Notwithstanding this common law position, amendments to an Ontario regulation under the Employment Standards Act, 2000 does require that employees whose employment is terminated by reason of frustration of contract (arising from an illness or injury suffered by the employee) receive notice of termination or termination pay and severance pay, where applicable.


In the case of a share transaction, there is no change to the identity of the employer so all employees, including those who are on short or long-term disability, continue in employment with the company whose shares are purchased. Such employees continue to receive benefits under the benefit plans established by the employing company.

In some cases, the question of moving a group of acquired employees into new benefits plans does arise. For example, where the new owner of the shares wants to integrate the business into an existing business with different benefit plans. In these cases, care must be taken with respect to employees who have qualified for disability insurance benefits under an existing policy of insurance or are in the qualifying period. In these circumstances, consideration should be given to reasonable transition arrangements to avoid any negative impact on the employee’s entitlement to disability insurance coverage.

In an asset purchase, it is increasingly common for a buyer and seller to agree the buyer will make offers of employment to employees who are on disability leave conditional on the employee being able to return to active employment. This arrangement allows the employee to remain on long-term disability under the seller’s plans and continue to receive from the seller’s other benefits programs any employment benefits the employee enjoys while on a disability leave. When and if the disabled employee is able to return to active employment, the employee is then able to meet the condition contained in the original offer extended by buyer and can do so on whatever terms were provided in the offer letter. In these circumstances, the buyer will have responsibility for accommodating the disabled employee on his or her return to work, if such accommodation is required.

While these accommodation obligations can be significant, a purchaser of assets who refuses to offer employment to disabled employees in circumstances where all other employees of the business receive offers of employment runs a serious risk that its actions will be found to be a breach of applicable human rights legislation.

In Fenton v. Rona Revy Inc., a B.C. Human Rights Tribunal found the purchaser of the assets of a business in breach of the Human Rights Code for refusing to offer employment to Fenton because she was on long-term disability (LTD) at the date the sale closed. Under the agreement of purchase and sale, the purchaser, Rona, had agreed to offer employment to almost all the seller’s employees, excluding those on "authorized long-term leave." All other employees, including those on maternity leave, paternity leave, adoption leave, workers compensation and short-term disability were offered employment.

Rona argued it was not discriminatory for an employer to decline to hire a person who is not medically fit to perform duties at the time the employer is hiring. This argument was rejected by the tribunal. Rona also argued it did not offer employment to those on long-term disability benefits because of the possibility the employees’ long-term disability benefits would be jeopardized by accepting jobs with Rona. It offered no evidence to the tribunal this would actually have been the case.

Accordingly, Rona failed to establish the exclusion of employees on long-term disability was reasonably necessary or that it would have caused Rona undue hardship to accommodate the employees on LTD on an individual basis. Fenton was awarded damages for loss of income and CAD 10,000 for the injury she suffered to her feelings, dignity and self-respect.

Finally, where an employment relationship is subject to a collective agreement, the matter is more complicated because of the successor-employer provisions of labour legislation. As successor employer, the buyer becomes obligated under the collective agreement to all the employees covered by the collective agreement, including the disabled employees. Nevertheless, in the purchase and sale agreement, transitional arrangements can be created to permit the employees to continue to receive benefits under the seller’s long-term disability insurance plan and deal with the costs associated with providing benefits for such employees.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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