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Failure to Continue Benefits During Notice Period Costs Employer $200,000
March 8, 2012

The Ontario Court of Appeal recently released a judgment upholding an award granting a wrongfully dismissed employee significant damages in lieu of disability benefits he had lost on termination.

After 24 years of service, the employee was dismissed without cause due to restructuring by his employer, Canac. During his employment, Canac provided the employee with short-term and long-term disability benefit coverage. On termination, Canac paid the employee the statutory minimum of 8 weeks’ notice and discontinued his benefits following expiry of the notice period. Although the plaintiff promptly found new employment, his new job paid substantially less and provided no benefits.

Several months later, the plaintiff contracted laryngeal cancer and became disabled. He brought an action for wrongful dismissal, in which the proper notice period and his entitlement to benefit coverage during that period were at issue. At trial, the judge found that the plaintiff was entitled to 22 months notice, and to the benefit coverage he would have retained but for his employer’s failure to provide adequate notice of termination. The judge characterized the employer’s discontinuance of benefits after 8 weeks as a gamble the employer had lost. The plaintiff’s damages for the loss of his STD and LTD benefits came to approximately $200,000.

At the beginning of 2012, the Ontario Court of Appeal upheld the award of damages for the loss of the STD and LTD coverage, although varying the portion of the award which dealt with punitive damages. The Court of Appeal confirmed there was sufficient evidence for the trial judge to have determined that the plaintiff would have qualified for benefits under the STD and LTD plans. As a result, he was entitled to damages for their loss.

This case serves as a reminder of the importance of a valid employment contract containing terms which expressly address the parties’ obligations upon termination of employment. In addition, employers must ensure that any severance package negotiated upon termination includes a full and final release from the employee, including release from all claims for disability benefits.

Brito v. Canac Kitchens, 2011 ONSC 1011

Brito v. Canac Kitchens, 2012 ONCA 61