Losing your job while you are on sick leave, Short-Term Disability (STD), or Long-Term Disability (LTD) can be devastating. Many employees wrongly assume that because they are unable to work, they have no legal rights. In Ontario, that is often not the case.
Although an employer may terminate employment in certain circumstances, employees on medical leave continue to have important rights under the Employment Standards Act, 2000, the Ontario Human Rights Code, and the common law. Depending on the circumstances, an employee may be entitled to significant compensation.
Can an Employer Terminate You While You Are on Sick Leave, STD or LTD?
Yes, but an employer cannot dismiss an employee because of a disability or simply because the employee is absent due to illness. Employers have a legal duty to accommodate disabilities to the point of undue hardship. If employment is terminated, the employer must still comply with statutory and common law obligations unless there is just cause or another recognized legal basis for ending the employment relationship.
Compensation That May Be Available
Depending on the facts, compensation may include:
• Termination pay and severance pay under the Employment Standards Act.
• Common law reasonable notice damages.
• Lost salary and employment benefits during the notice period.
• Compensation for bonuses, commissions, RSUs, stock options or incentive plans.
• Human rights damages for discrimination based on disability.
• Aggravated damages where the employer acted in bad faith.
• Punitive damages in exceptional cases.
• Interest and, where appropriate, costs.
Employees on STD and LTD
Employees receiving STD or LTD benefits often continue to have wrongful dismissal claims. The interaction between disability benefits and severance can be complex and depends on the wording of the employment agreement, the disability plan, and the circumstances of the termination. In many cases, employees should not assume that accepting the employer’s first offer fully protects their entitlement to disability benefits or compensation.
Frustration of Contract
Some employers argue that a lengthy illness has frustrated the employment contract. Frustration is a narrow legal doctrine. It generally requires evidence that the employee is unlikely to return to work within the foreseeable future despite accommodation. It does not arise merely because an employee has been absent for several months.
Important Supreme Court of Canada Decisions
Several Supreme Court of Canada decisions continue to shape disability and termination law.
Honda Canada Inc. v. Keays, 2008 SCC 39, confirmed that employers owe employees a duty of good faith in the manner of dismissal. The Court clarified that damages resulting from the manner of dismissal only arise where the employer engaged in conduct during the course of dismissal that is in bad faith. The main difference between these damages and punitive damages is that these are meant to compensate the employee rather than punish the employer.
Hydro-Québec v. Syndicat des employé-e-s de techniques professionnelles et de bureau d’Hydro-Québec, 2008 SCC 43, explains that employers must accommodate employees with disabilities to the point of undue hardship. However, accommodation is not limitless. The employer’s duty to accommodate ends where the employee is no longer able to fulfill the basic obligations associated with the employment relationship for the foreseeable future.
McGill University Health Centre (Montreal General Hospital) v. Syndicat des employés de l’Hôpital général de Montréal, 2007 SCC 4, says that a court should not rely on contractual accommodation provisions blindly, but that those provisions should be used to help interpret what is reasonable accommodation within the circumstances. This is because the duty to accommodate varies depending on the specific needs of an employee, and the specific circumstances at hand. The case also serves as a reminder that you cannot contract out of minimum human rights standards.
Ontario Cases
Ontario courts have also repeatedly recognized that employees dismissed while on medical leave may be entitled to substantial common law notice and, where appropriate, damages under the Human Rights Code. Whether a dismissal is lawful depends upon the employee’s medical prognosis, the employer’s accommodation efforts, the employment contract, and the surrounding circumstances.
Frequently Asked Questions
Can I receive severance while on LTD?
Yes. Many employees receiving LTD benefits remain entitled to severance or common law notice damages.
Can I be fired while receiving STD benefits?
Possibly, but your employer cannot terminate your employment because of your disability or ignore its accommodation obligations.
Should I sign my severance package?
Not before obtaining legal advice. Many initial offers are substantially less than an employee’s legal entitlement.
Can I recover human rights damages?
If disability discrimination contributed to the dismissal or the employer failed to accommodate your disability, additional compensation may be available.
Contact Landy Marr Kats LLP
If you have been fired while on sick leave, STD or LTD, it is important to obtain legal advice promptly. Every case depends on its own facts, including your employment agreement, compensation, medical circumstances, benefit plan and the employer’s reasons for termination.
The employment lawyers at Landy Marr Kats LLP regularly represent employees throughout Ontario in wrongful dismissal and disability-related claims. We can review your severance package, explain your legal rights and help determine whether you are entitled to additional compensation.
We act on a contingency fee basis, meaning you pay no legal fees unless we recover compensation for you.