Continuation
of Benefits for Disabled Employees
Kevin
Routley,
Partner, Employee Benefits & Pensions
One
of the questions most commonly asked by our clients is:
“How
long do we have to continue benefits for an employee who
is no longer actively at work due to illness or injury?”
Unfortunately,
there is no definitive answer and each situation must be
carefully examined on an individual case basis.
This
is illustrated on the Chart for Ontario below which outlines
the position of the Worker’s Compensation Boards,
Labour Standards Boards and Human Rights Commissions for
each province, as well for federally regulated companies.
Clearly there is a lack of formally defined regulations
for continuation of benefits for employees absent from work
due to illness or injury who are not covered by Workers’
Compensation. In fact, many provinces have not enacted legislation
even for those employees covered by Workers’ Compensation.
This makes it extremely difficult to establish one set of
guidelines for all employers. There are; however, some established:
-
Any
benefits promised by reason of a legitimate disability
must be continued. Therefore, sick pay or disability benefits
must be continued and the employee’s eligibility
in the future for long-term disability (LTD) benefits
cannot be impaired. Normally, LTD premiums are waived
upon the commencement of benefits.
-
If
an employee is disabled and receiving Workers’ Compensation
benefits, an application for LTD should also be submitted
in order to establish eligibility for these benefits.
This is important in the event that Workers’ Compensation
benefits terminate in the future.
-
Many
Life and Accident insurance policies contain a waiver
of premium provision due to disability. This provides
continuation of benefit coverage without premium payment
until the earlier of recovery, death or the employee reaching
age 65. Ideally, the waiver of premium clause in the life,
accident and long-term disability insurance policies should
be consistent.
Under
the terms and conditions of a standard group insurance contract,
benefit coverage other than that covered through a waiver
of premium clause, (e.g. Health and Dental benefits) cannot
be provided to an employee past the date of termination
of employment. An employer may terminate an employee whose
contract of employment has become impossible to perform
or been “frustrated” because of the illness
or injury; for just cause; or after giving reasonable notice
of termination based on the employment standards legislation
in the applicable province. Benefits must be continued during
the statutory notice period in all provinces.
The
key issue therefore, in deciding when a disabled employee’s
health and dental benefits can be discontinued is dependent
on when and if their employment can be terminated.
This
in turn is dependent on a number of factors:
-
The nature and expected duration
of disability,
-
Length of service of the individual employee and type
of occupation
-
Size of the company and ability to accommodate employment
requirements and limitations of the disabled employee.
Prior
to terminating the employment of a disabled employee, legal
counsel should be obtained. Employers may be vulnerable
to court action unless undue hardship can be proven (particularly
for employers with more than 20 employees) or the employer
has made every effort to accommodate the return of the disabled
employee to the workforce.
Recommendation
to Employers
We recommend
that all employers develop a formal policy with respect
to continuation of benefits for disabled employees, which
precludes individual selection. This policy should be based
on the guidelines applicable in the province in which the
employee is a resident and should be clearly communicated
to all staff members. If you would like to ensure that a
formal policy is in place, please contact your Employee
Benefits Specialist.
Ontario
– Statutory Regulations
WSIB
Labour Standards Human Rights (Provincial)
Employer
must continue payment of benefits for 1 year while employee
is receiving WSIB benefits or participating in an approved
rehabilitation program. Employee is responsible to continue
paying their portion of the cost.. Employer may terminate
a disabled employee if the contract of employment has been
frustrated. It would be considered discriminatory if benefits
are continued for employees receiving WSIB benefits but
not continued for employees receiving long term disability
benefits.
Federal
Benefits
must be continued for at least 12 weeks for employees with
more than 3 months’ continuous service. If return
to employment is impossible after this period, the employer
is encouraged to match Workers’ Compensation regulations
in the province where the employee resides.
KEEPING A CONSISTENT DEFINITION OF DISABILITY
Life
and accident insurance policies normally contain a “waiver
of premium due to disability” provision, which would
guarantee continuation of benefit coverage until the earlier
of recovery or the employee reaching age 65.
Ideally,
the waiver of premium clause in the life, accident and long-term
disability insurance policies should be consistent. However,
some life and accident insurance waiver of premium clauses
are activated by the employee’s inability to perform
any occupation while the LTD policy’s provision is
activated by the inability of the employee to perform their
own occupation.
Therefore,
it is possible for the employee to be approved for waiver
of premium under the LTD policy but to be declined for waiver
of premium under the life and accident insurance policies.
If an
employee has been declined for waiver of premium through
the life and accident policies, the insurer may have a time
limitation on the continuation of benefits on a premium-paying
basis. Other benefits such as Health and Dental benefits
can normally continue indefinitely, but only with premium
payment.
THE
NEXT STEP IS YOURS. TAKE THE FIRST STEP ON THE
RIGHT PATH.
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US TODAY!
