Interprovincial Comparisons: Benefits Upon Termination
One of the most lively issues in Ontario employment law, over the last several years, has been the impact of limiting language in termination clauses on benefits: If an employment contract provides for termination without notice upon only payment of money in accordance with Ontario's Employment Standards Act, 2000, does this suggest that benefit coverage will be terminated immediately?
That would be a problem, because the ESA itself requires employers to maintain benefit coverage through the statutory minimum notice period.
Fellow law blogger Sean Bawden has covered this issue in some detail over the course of several years. While there have been cases where the courts have generously interpreted references to the statute as implying an intention to comply with all obligations thereunder, the current state of the law appears to be that the Ontario Court of Appeal expects a great deal of clarity from such termination clauses.
Given the amount of discussion this issue has received in Ontario - almost certainly the most prolific employment law jurisdiction in the country - it may come as a surprise to Ontario employment lawyers that this entire issue is an Ontario-ism.
To the best of my knowledge, the only two jurisdictions in the country that require employers to continue benefits after termination are Ontario and the Northwest Territories. In Alberta, when you discuss the issue with somebody who works in employment law or human resources, the most common reaction will be "But insurers won't generally continue benefits past the termination date!" To which the short answer is, "They do in Ontario and NWT." Insurers in Ontario will almost always allow continuation of benefits through the statutory minimum notice period. (I have never seen any indication that this increases the cost of group insurance plans in Ontario in any noteworthy way.)
Aside from creating yet another drafting pitfall for Ontario lawyers trying to create enforceable termination clauses, this system has its advantages for all involved.
In particular, for employees suing in wrongful dismissal pursuant to the common law implied term of reasonable notice, the common law framework - which is largely consistent across most of Canada - suggests that employees are entitled to be compensated for any loss of benefits. This commonly leads to modest claims in relation to out-of-pocket expenses that should have been covered under a drug plan, dental plan, etc., but on rare occasion you see an employer held liable for loss of disability benefits, and these claims can be very substantial.
As such, when a long-service employee is dismissed in Ontario, the usual practice is that their benefit coverage will be guaranteed for up to 8 weeks. This allows time for the employee to consult a lawyer, to negotiate terms with the employer, and, in a large majority of cases, to conclude a settlement that includes a full and final release. That settlement will often include some, but not usually all, of the employee's benefits, and to the extent that such a settlement may not guarantee the employee disability coverage, the employer is protected from liability for a subsequent disability by the release.
In Alberta, by contrast, the usual practice is to terminate benefits immediately upon termination of employment, and to negotiate a settlement afterward. This may seem to hurt the employee (and it does), but in many ways it is worse for the employer: From the moment of the discontinued benefits, and until a settlement (including a full and final release) is concluded, the employer is in a precarious situation where any claims that may arise that would have been covered under the group insurance package - whether it's $100 for prescription medications, or $200,000 because of a disabling cancer diagnosis - may add to the employer's liabilities.
In other words, the result of the Alberta framework is that, by discontinuing group benefit programs without notice, the employer becomes the de facto insurer responsible for providing those benefits. And because they're not expressly required by statute to extend those benefits, the insurance market in Alberta has never seriously considered providing such extensions as part of their plans.
And yet...
Alberta's Employment Standards Code allows the termination of employees on notice, and expressly prohibits any changes to remuneration through the statutory minimum notice period. Alternatively, the employer may terminate without notice, but must provide all the "wages" the employee would have earned through the statutory notice period.
"Wages" has a broad definition within the Code, capturing essentially all remuneration outside of narrow and specific exceptions (such as overtime pay and vacation pay). It would almost certainly capture employer-paid benefits.
So, while the conventional wisdom in Alberta appears to be that an employer may terminate without notice, and immediately discontinue any benefit coverage, without necessarily offending its statutory obligations...and while Alberta's Employment Standards Code most certainly lacks the express language requiring benefit continuation that exists in Ontario and NWT...
...the requirement of s.57(1) of the Code that termination pay be "at least equal to the wages the employee would have earned" is difficult to reconcile with a proposition that the employee may entirely miss out on a significant part of the remuneration package which is not expressly carved out from the statutory definition of "wages".
Thus, there seems to be a strong public policy argument for the framework as it exists in Ontario: It creates a market where group insurance providers will almost invariably provide for benefit continuation during the statutory minimum notice period, with the result that employee claims are streamlined through the insurance contract during the statutory notice period, and that employers are not bearing the risk of significant monetary liabilities. Moreover, there is at least a cogent argument that the Code, as drafted, actually creates similar obligations anyways.
*****
Dennis Buchanan is a lawyer practicing labour and employment law and civil litigation in Edmonton, Alberta.
This post does not contain legal advice, but only general legal information. It does not create a solicitor-client relationship with any readers. If you have a legal issue or potential issue, please consult a lawyer.
That would be a problem, because the ESA itself requires employers to maintain benefit coverage through the statutory minimum notice period.
Fellow law blogger Sean Bawden has covered this issue in some detail over the course of several years. While there have been cases where the courts have generously interpreted references to the statute as implying an intention to comply with all obligations thereunder, the current state of the law appears to be that the Ontario Court of Appeal expects a great deal of clarity from such termination clauses.
Given the amount of discussion this issue has received in Ontario - almost certainly the most prolific employment law jurisdiction in the country - it may come as a surprise to Ontario employment lawyers that this entire issue is an Ontario-ism.
To the best of my knowledge, the only two jurisdictions in the country that require employers to continue benefits after termination are Ontario and the Northwest Territories. In Alberta, when you discuss the issue with somebody who works in employment law or human resources, the most common reaction will be "But insurers won't generally continue benefits past the termination date!" To which the short answer is, "They do in Ontario and NWT." Insurers in Ontario will almost always allow continuation of benefits through the statutory minimum notice period. (I have never seen any indication that this increases the cost of group insurance plans in Ontario in any noteworthy way.)
Aside from creating yet another drafting pitfall for Ontario lawyers trying to create enforceable termination clauses, this system has its advantages for all involved.
In particular, for employees suing in wrongful dismissal pursuant to the common law implied term of reasonable notice, the common law framework - which is largely consistent across most of Canada - suggests that employees are entitled to be compensated for any loss of benefits. This commonly leads to modest claims in relation to out-of-pocket expenses that should have been covered under a drug plan, dental plan, etc., but on rare occasion you see an employer held liable for loss of disability benefits, and these claims can be very substantial.
As such, when a long-service employee is dismissed in Ontario, the usual practice is that their benefit coverage will be guaranteed for up to 8 weeks. This allows time for the employee to consult a lawyer, to negotiate terms with the employer, and, in a large majority of cases, to conclude a settlement that includes a full and final release. That settlement will often include some, but not usually all, of the employee's benefits, and to the extent that such a settlement may not guarantee the employee disability coverage, the employer is protected from liability for a subsequent disability by the release.
In Alberta, by contrast, the usual practice is to terminate benefits immediately upon termination of employment, and to negotiate a settlement afterward. This may seem to hurt the employee (and it does), but in many ways it is worse for the employer: From the moment of the discontinued benefits, and until a settlement (including a full and final release) is concluded, the employer is in a precarious situation where any claims that may arise that would have been covered under the group insurance package - whether it's $100 for prescription medications, or $200,000 because of a disabling cancer diagnosis - may add to the employer's liabilities.
In other words, the result of the Alberta framework is that, by discontinuing group benefit programs without notice, the employer becomes the de facto insurer responsible for providing those benefits. And because they're not expressly required by statute to extend those benefits, the insurance market in Alberta has never seriously considered providing such extensions as part of their plans.
And yet...
Alberta's Employment Standards Code allows the termination of employees on notice, and expressly prohibits any changes to remuneration through the statutory minimum notice period. Alternatively, the employer may terminate without notice, but must provide all the "wages" the employee would have earned through the statutory notice period.
"Wages" has a broad definition within the Code, capturing essentially all remuneration outside of narrow and specific exceptions (such as overtime pay and vacation pay). It would almost certainly capture employer-paid benefits.
So, while the conventional wisdom in Alberta appears to be that an employer may terminate without notice, and immediately discontinue any benefit coverage, without necessarily offending its statutory obligations...and while Alberta's Employment Standards Code most certainly lacks the express language requiring benefit continuation that exists in Ontario and NWT...
...the requirement of s.57(1) of the Code that termination pay be "at least equal to the wages the employee would have earned" is difficult to reconcile with a proposition that the employee may entirely miss out on a significant part of the remuneration package which is not expressly carved out from the statutory definition of "wages".
Thus, there seems to be a strong public policy argument for the framework as it exists in Ontario: It creates a market where group insurance providers will almost invariably provide for benefit continuation during the statutory minimum notice period, with the result that employee claims are streamlined through the insurance contract during the statutory notice period, and that employers are not bearing the risk of significant monetary liabilities. Moreover, there is at least a cogent argument that the Code, as drafted, actually creates similar obligations anyways.
*****
Dennis Buchanan is a lawyer practicing labour and employment law and civil litigation in Edmonton, Alberta.
This post does not contain legal advice, but only general legal information. It does not create a solicitor-client relationship with any readers. If you have a legal issue or potential issue, please consult a lawyer.
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