Terry Zavitz

Terry Zavitz

If an employee is off work for two years due to a disability, should the employer terminate benefits if there is a company policy that states benefits will be terminated for an employee on leave longer than two years? The points to consider and a review of relevant legal cases was the basis of the webinar presented by Empire Life last month, with speaker George Vassos LLB of Kuretzky, Vassos and Henderson from Toronto.

The answer, like so many answers when it comes to employee situations, is that it depends. The termination of benefits is closely linked to whether there is a frustration of the employment contract due to the employee’s disability. If the contract is frustrated, the employee can be terminated with benefits ending after the statutory minimum notice period. It is interesting to note that the Employment Standards Act, 2000, Ontario Regulation 288/01, states employees are not entitled to severance pay if the contract of employment has become frustrated.

Whether the courts would consider a contract as being frustrated, depends on the prognosis and medical evidence showing that the employee is unlikely to be able to return to work in the foreseeable future. Other factors such as, the period of time the employee worked for the employer, and the nature of the position, also have an impact on the decision. It is up to the employer to prove the contract is frustrated. The fact that the employee has been off for 18 months or 5 years is irrelevant. The courts ruled in Marshall vs Harland (Eng.) that a frustration of contract did exist after the employee had been off for 18 months, whereas, in Naccarato vs Costco (Ontario), the court ruled the contract was not frustrated after the employee had been off work for 5 years.

The bottom line is that every case is unique and the benefits for a disabled employee should not be terminated, regardless of company policy, without consulting an employment lawyer.