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By Henry Dinsdale and Jeff Goodman Disability benefits and reasonable notice Employer gambles on former employee's health and loses at Ontario Court of Appeal. I n theory, the law is ing an employee with everything he or she would have received had they remained employed up to their last day. In practice, however, this rule is rarely followed to the letter of the law. In the specific case of extending disabil- ity benefits throughout the reasonable notice period, for example, employers must know that any decision not employee who has been terminat- ed without cause must be "made whole" throughout the reasonable notice period. This means provid- clear: an do so gambles on a former employee's health. As the following case demon- strates, this can have disastrous finan- cial consequences. to Background of the case In Brito v. Canac Kitchens, a group of employees sued its former employer after being dismissed during a restructur- ing. However, only one employee, Luis Romero Olguin, pursued his claim to trial. worked for the employer for 24 years. Following his dismissal, the employer paid him an amount representing the minimum statutory requirement for pay in lieu of notice and severance (32 weeks' salary), as well as associated benefits for a period of eight weeks. This meant the plaintiff did not receive common law notice of The plaintiff was 55 years old and had lary, did not have his benefits extended throughout this notice period, as required termination, and, by corol- by law. The plaintiff never signed a release. He found another job within two weeks of his termination but his new employer did not provide employees with disability benefit coverage. Sixteen months after the plaintiff start- ed his new job, he was diagnosed with cancer. Following invasive surgery, che- motherapy, and radiation, he was com- pletely disabled and unable to work. He sued his former employer for pay in lieu of reasonable notice, and more impor- tantly, the short- and long-term disability benefits he would have been able to claim under the company benefit plan had he not been wrongfully dismissed. At trial, the late justice Randy Echlin fixed the reasonable notice period at 22 months. This notice period captured the plaintiff ' quent date of total disability. Because the employer did not extend disability ben- efits throughout the reasonable notice period, the employer was liable for the loss. The plaintiff was awarded damages equal to the value of short-term disabil- ity benefits for 17 weeks (the plan maxi- mum), and long-term disability benefits thereafter until the age of 65 (again, the plan maximum), which, combined, amounted to more than $200,000. On appeal, the employer argued that s illness, surgery, and subse- there was insufficient evidence before the trial judge to warrant a finding of "total disability, had failed to mitigate his damages by not securing a private insurance plan follow- ing his termination of employment. Both " and in any event, the employee arguments were rejected. With respect to the mitigation argument in particular, the Court of Appeal noted that "[t]here can be no obligation to mitigate damages by finding alternate employment where the employee is totally incapable of working. The Court of Appeal upheld the trial judge' damages and lost disability benefits. s award for both wrongful dismissal Key lessons for in-house counsel Brito v. Canac Kitchens is an example of what may happen when, in the words of justice Echlin, an employer "chose[s] to go the 'bare minimum' route . . . [by pro- viding] only the statutory minimums in pay and benefits," thereby "gambl[ing] that [the employee] would get another job and stay well. employer lost that gamble, and between damage and costs awards, was ordered to pay more than $400,000 in costs and damages for the termination of an employee who earned $70,000 per year. Recognizing that not all carriers will " In this case, the " be prepared to extend disability benefits throughout the notice period, special measures should be taken for employees who pose the highest risk for illness, such as employees of advanced age and those who have suffered health conditions in the past. If a carrier still refuses to extend coverage, consider offering a generous severance package with a release that contains specific reference to lost dis- ability benefits. Out of an abundance of caution, the combination of including information on how to convert group disability coverage to individual coverage, in tandem with extra amounts offered in specific refer- ence to funding this individual coverage and the execution of a release should pro- vide strong protection from the claim of a former employee who has subsequently become disabled. IH Henry Dinsdale and Jeff Goodman are labour and employment law partners with Heenan Blaikie LLP in Toronto. INHOUSE WWW.CANADIANLAWYERMAG.COM/INHOUSE AUGUST/SEPTEMBER 2012 • 9

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