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Are Employees on LTD Entitled to Severance on Closure?
November 26, 2015
Author(s): Lana Tsang

In a recent BC arbitral decision, the arbitrator had to determine whether an employer was required to pay severance to employees in receipt of Long Term Disability (LTD) benefits when they shut down their operations.

The employer notified employees that its operation in Houston, BC was going to close and all employees working at that time would receive severance pay in accordance with the severance provisions of the collective agreement. Five employees who were off work and in receipt of LTD benefits were notified that their LTD benefits would continue after the closure and, if they were subsequently cleared to return to work, severance would be paid at that point in time.

Three of the five employees were later medically cleared to return to work and since no work existed and the operation was closed, they were paid severance in accordance with the terms of the collective agreement. The employer agreed that if and when the remaining two employees ceased to be eligible for LTD, they would at that point be eligible for severance since there was no employment to return to. The two remaining employees claimed that such treatment was discriminatory.

After considering the severance terms in the collective agreement, the arbitrator observed that not every difference in treatment constitutes discrimination. Further, the two employees receiving LTD benefits were treated in accordance with the terms of the collective agreement in light of their employment status at the time of the closure.  As a result, the arbitrator concluded that discrimination was not established because the employees at the time of the closure continued to receive LTD benefits, and would be eligible for severance if and when they were deemed fit to return to work.

Although consideration of the specific collective agreement terms was integral to the arbitrator’s decision, this is an interesting case for employers to consider in advance of a closure.

Houston Forest Product, a Division of West Fraser Mills Ltd. v. Steelworkers’ Union, Local 1-424 (Severance Pay), [2015] B.C.C.A.A.A. No. 92 (Sanderson, Q.C.)

Questions relating to the content of this article may be directed to Donald Jordan, Q.C.