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Ontario court strikes down legislation denying severance pay to disabled employees
August 16, 2005

The Ontario Court of Appeal has held that a provision of Ontario’s Employment Standards Act which denied severance pay to certain disabled employees is unconstitutional.

The decision concerned a nurse who suffered from depression and an eating disorder. She was unable to return to work despite several attempts, and her employer, a hospital, ultimately dismissed her for innocent absenteeism.

The Ontario legislation required employers with a payroll of $2.5 million or more to pay severance to employees with five or more years of service, including employees who were absent because of illness or injury. Employers were not required to make this payment, however, if the employee’s employment contract had “been frustrated by that illness or injury”.

The hospital relied on this provision in refusing to pay severance. An arbitrator upheld the hospital’s decision, but was overturned by the Ontario Divisional Court, which held the provision to be contrary to the equality provisions of the Charter of Rights and Freedoms.

The Court of Appeal upheld the Divisional Court’s decision. It held that one of the purposes of severance pay is to assist employees while they seek new work. The legislative provision in question perpetuated the stereotype that disabled persons cannot fully participate in the workforce, and was based on an improper assumption that individuals whose employment had been frustrated by disability are unlikely to ever participate in the workforce again.

The Court concluded that the exception in the legislation therefore was discriminatory contrary to section 15 of the Charter and could not be justified as a reasonable limit on equality rights under section 1. The Court held that section 58(5)(c) of the Act is therefore of no force and effect.

British Columbia’s Employment Standards Act does not include a provision similar to the Ontario Act. Moreover, the Court did not address the common law doctrine of frustration of contract.

Nonetheless, the decision highlights the pitfalls of differentiating between employees absent due to illness or injury and other employees when making decisions concerning dismissals, layoffs and common law severance offers. Human rights tribunals or labour arbitrators applying human rights legislation, for instance, may be influenced by the Court’s comments regarding stereotypes about the ability of disabled individuals to participate in the workplace.

Ontario Nurses Association v. Mount Sinai Hospital, May 4, 2005, Ontario Court of Appeal.