LEGAL EYE: Your $200,000 termination risk

LEGAL EYE: Your $200,000 termination risk

LEGAL EYE: Your $200,000 termination risk

When Canac Kitchens terminated Mr Brito, age 55, after 24 years of employment, they gave him pay in lieu of notice at the statutory minimum of 32 weekse, and continued his benefits for eight weeks. He found a lower-paying job without long-term disability (LTD) coverage within two weeks, but when he was diagnosed with cancer a year and a half later he sued for damages for wrongful dismissal and associated benefits.

The judge found that the common law period of notice was 22 months, meaning Brito should have been covered by Canac’s benefit programme for almost two years after termination. The Court awarded Brito damages for lost employment income for 22 months, short-term disability benefits for 17 weeks and LTD benefits thereafter to the age of 65.  He also received $90,000 for legal costs and $15,000 for ‘ancillary’ damages on account of the employer’s wrongful conduct.

“The minimum is almost never good enough, unless the contract provides that. I think that’s a common misconception,” says Filion Wakely Thorup Angeletti associate Deborah Hudson. “A contract is the first level of protection for an employer and the second level would be after termination, if the employer offers a package that is great than the statutory notice period.”

Without a clearly outlined employment contract, the company was liable for the common law notice period. Because Brito got sick within the 22 months designated by the court, the company had to cover his LTD for almost 10 more years.

Key to the decision was the length of time Brito was employed by Canac Kitchens, but even a worker who was only employed for a year might be entitled to common law notice of four to six weeks, much more than the one-week statutory minimum. Judges look at factors such as age, length of service, salary and position and how long it takes to find another job.

The court emphasised its belief that Canac Kitchens “chose to go the ‘bare minimum’ route” – a hint to employers about how they might avoid this problem for themselves. By offering a reasonable termination package, beyond the statutory minimum, an employer could ask a worker to sign a legally enforceable release.

“In this case, if the employer had offered something reasonable – even somewhere between 12 and 14 months – the employee might have signed off on it and not been able to be successful in an action,” Hudson says.

Reduce your liability

  1. Coverage during statutory notice period
    Ensure STD and LTD coverage continues during the statutory notice period, at a minimum.
  2. Bridge coverage
    Employers can also inquire about obtaining ‘bridge’ coverage during the common law notice period, although this option may not be practical as it can be very costly and employees must qualify on an individual basis. 
  3. Employment contract
    A legally enforceable and carefully drafted employment contract may also mitigate liabilities relating to disability benefits.  
  4. Release
    A legally enforceable release can protect an employer from liability for benefits.  Consider offering a favourable severance package in exchange for a signed release to limit future liability for disability benefits during the common law notice period.





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