Talking About Financial Matters That Affect You and Your Organization
Continuation of Benefits for Disabled Employees
Jun 28th, 2017
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.
In this article, we have outlined 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 Worker’s Compensation. In fact, many provinces have not enacted legislation even for those employees covered by Worker’s Compensation. This makes it extremely difficult to establish one set of guidelines for all employers. There are, however, some established guidelines:
• 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 Worker’s 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 Worker’s 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,
• The length of service of the individual employee and type of occupation
• The size of the company and its 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.
Recommendations 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.
The employer must continue payment of benefits for 1 year while the employee is receiving WSIB benefits or participating in an approved rehabilitation program. The employee is responsible for continuing to pay for their portion of the cost.
The employer may terminate a disabled employee if the contract of employment has been frustrated.
Human Rights (Provincial)
It would be considered discriminatory if benefits are continued for employees receiving WSIB benefits but not continued for employees receiving long term disability benefits.
FederalBenefits 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 Worker’s Compensation regulations in the province where the employee resides.