eCaseNote 2006 No. 07

DISMISSAL NOT DISPOSAL – EMPLOYEE DISABILITY COVERAGE AFTER TERMINATION

Egan v. Alcatel Canada Inc., [2006] O.J. No. 34

In early 2006, the Ontario Court of Appeal released a decision on a case involving an employer who had discontinued paying disability benefits to a terminated employee during her reasonable notice period. We believe a brief summary would be of interest to any of our employer clients.

In the Egan case, Mary Egan was a senior marketing employee of Bell Canada until October 2000, when she commenced employment with Alcatel Canada Inc. She was encouraged to seek employment with Alcatel by two of her former colleagues from Bell who had moved to Alcatel. The two former colleagues shared a bonus from Alcatel when she was hired. In July 2002, Egan was dismissed as part of a mass termination, and was given 12 weeks salary as required by statute for a reasonable notice period.

The Ontario Court determined that 12 weeks was not a reasonable notice period in light of the assurances made by Alcatel when she was encouraged to work for them, and in light of the fact that she was largely persuaded by two of her former colleagues; both of whom shared a bonus upon her hiring. The trial judge had awarded her full salary for 9 months, which he deemed to be a proper notice period. He did not award any damages for disability benefits because such an award, coupled with her salary, would have allowed her to recover doubly.

The Court of Appeal determined that Egan was entitled to her salary up until the onset of her disability, and that she was then entitled to her short term and long term disability benefits until date her disability ended. This determination was based on the fact that had her employment continued with Alcatel, Egan would have earned her full salary until the onset of her disability, and then would have commenced receiving disability benefits. The fact that Egan was terminated should not have impacted her insurance coverage. The court stated:

Had Alcatel given Ms. Egan working notice of nine months, the disability coverage would still have been in effect when she became disabled on October 1, 2002, and would have continued to be available until October 1, 2003, when the period of disability ended.

Alcatel wrongfully cancelled Egan’s coverage, and therefore had to step into the shoes of the insurer and pay Egan damages equivalent to the disability benefits to which she would have been entitled. Had the onset of her disability occurred outside the reasonable notice period, the employer would not have been responsible for the disability coverage.

Readers should note that even though an employee may be terminated, they are still deemed to be an employee for the length of their notice period, and therefore their employer would be wise to maintain their coverage throughout the notice period. Failure to maintain coverage for an employee who becomes disabled during the notice period may well leave the employer responsible for paying his or her disability payments until the employee recovers.



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