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The ties that bind

A dismissed employee’s presence might be felt for quite awhile if she needs benefits during the notice period

By Jeffrey R. Smith

“Reasonable notice” — there’s a phrase that can be a pain to employers.

If an employee is causing problems at work, but maybe not enough to meet the high bar for just cause, or maybe she’s just not working out, that phrase has to be a top concern for an employer. Most employers are well aware they can’t simply let someone go — they have to provide the employee with sufficient notice so the employee can look for similar work. Often, rather than provide working notice, employers simply pay the employee for the time they would have worked during the notice period, referred to as pay lieu of notice. When an employee wins a wrongful dismissal suit, the damages usually consist of an amount of money equivalent to pay in lieu of what would be a reasonable notice period, based on several factors.

However, amounts equivalent to an employee’s earnings during a reasonable notice period may not always be the end of the employer’s responsibility. The notice period is still a period of time. For a long-term employee, the reasonable notice period can be a long time and a lot can happen during that time. If the employee finds a job during the notice period, that can be good news for the employer because it might not be on the hook for the full notice period. However, if something bad happens, such as an injury that would be normally be covered by the employer’s benefits, the price of reasonable notice might go up.

A couple of months ago, the Ontario Superior Court of Justice found a 24-year employee of Canac Kitchens was entitled to 22 months’ notice after he was dismissed and paid only the minimum eight weeks’ statutory pay in lieu of notice and severance. However, 16 months after the employee was dismissed, he underwent surgery for cancer, followed by treatment. The employee had no disability benefits, as Canac’s benefits had run out after the statutory eight-week period.

The court found Canac Kitchens should have offered “its loyal, long-term employee” disability benefits through the 22-month notice period. Though many insurers won’t provide coverage to non-employees, the court said some form of replacement coverage should have been offered. Canac Kitchens was on the hook for short-term disability benefits from the time of the former employee’s operation, then long-term disability benefits to the age of 65, which the employee would have been eligible for if he was still covered for the period of reasonable notice.

So what’s the best way to avoid this kind of liability? The period of reasonable notice can be a long time for long-term employees who are dismissed. The best way may be to simply continue benefits to the end of the notice period. At least that way, the employer can be prepared for providing benefits if something happens during the notice period. But if an employer provides full pay in lieu of notice for a reasonable period, should it be allowed to consider the book on a dismissed employee closed, or should it still be on the hook for benefits during the reasonable notice period? Is there a way to fully cut the cord on a dismissed employee without worrying about obligations during the notice period without breaking the bank?

Jeffrey R. Smith is the editor of Canadian Employment Law Today, a publication that looks at workplace law from a business perspective. For more information, visit www.employmentlawtoday.com.

Jeffrey R. Smith

Jeffrey R. Smith is the editor of Canadian Employment Law Today, a publication that looks at workplace law from a business perspective.
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