Obligation to continue coverage during strike or layoff
Question: How would benefits and employees' pensions be affected by a strike or layoff? For example, are employers obligated to continue coverage during the strike (in the case of unionized workers) or layoff (for both union and non-union employees)? I know in the non-union context, employers can be on the hook if an employee becomes disabled during the reasonable notice period. Could similar liabilities arise for unionized employees during a strike or layoff?
Answer: There is no single answer to this question. Whether an employer must continue benefits and pension and benefits plan premiums during a legal strike or lockout will depend upon the governing labour legislation, the terms of the collective agreements before and after the work stoppage, any back-to-work agreement negotiated by the parties, the facts surrounding a particular claim for benefits and, possibly, past practice in similar situations.
Generally speaking, the commencement of a legal strike or lockout will terminate a collective agreement but not the employment status of the striking or locked out employees. However, the rights attached to employee status differ when a collective agreement is not in force. As no work is being performed during a work stoppage, wages and benefits premised upon the actual performance of work are not being earned or accrued. Without more, an employer would be justified in ceasing to pay benefits premiums, pension contributions and the like, in the same manner as it ceases to pay wages to employees who are locked out or on strike. Whether the employer would ultimately become responsible for payment of premiums would depend on the terms negotiated by the parties and whether those terms could be interpreted as imposing an obligation on the employer to make retroactive payments.
However, many jurisdictions have enacted legislation that limits an employer’s ability to cease payment and accrual of employee benefits during a strike or lockout. The Canada Labour Code prohibits an employer from denying pension rights or benefits to which an employee would otherwise be entitled but for the cessation of the employee’s work as a result of a legal strike or lockout as well as from cancelling or threatening to cancel insurance plans — including medical, dental, disability, life or other insurance plans — and from denying employee benefits under those plans in the event of a legal strike or lockout where the employees’ bargaining agent has paid or offered to pay the amounts necessary to continue the plans.
The Alberta Labour Relations Code prohibits an employer from denying any “pension rights or benefits or insurance rights or benefits to which the employee would be entitled but for the cessation of work by the employee as the result of a legal strike or lockout or strike.” This provision has been interpreted as preserving accrued medical, dental, disability, life or other insurance benefits but excluding uninsured sick leave. The act also requires an employer to accept insurance premiums from the bargaining agent to continue an insurance scheme during a strike or lockout.
British Columbia legislation also requires the employer to accept payment tendered by the bargaining agent during a work stoppage and prohibits denial of a benefit described in that subsection. However, it permits a trade union and an employer to agree in writing to specifically exclude this provision.
The Saskatchewan Trade Union Act makes it an unfair labour practice to deny or threaten to deny any pension, health or medical rights or benefits the employee enjoyed prior to a work stoppage or to her exercising of any such right.
As the legislation varies from jurisdiction to jurisdiction, it is important the particular language of the relevant statute be examined in the context of all of the surrounding circumstances to determine the extent to which employee benefits are protected during a work stoppage.
Note that, with respect to the payment of benefits to employees absent during a work stoppage, the situation of an employee already absent at the time of a work stoppage differs from that of an employee whose claim arises after it begins. In the former case, arbitrators have typically applied the “fundamental reason for the absence doctrine” to prevent the employer from cutting off benefits to an absent employee when the bargaining unit strikes or is locked out. Under this doctrine, the absent employee remains absent due to illness or disability and is not re-characterized as a striking or locked out employee.
The rights of non-union employees are less defined. Without an express or implied contractual right or statutory authorization, the layoff of a non-union employee may actually constitute constructive dismissal. However, some jurisdictions do permit temporary layoffs. For example, the Alberta Employment Standards Code authorizes an employer to implement a temporary 60-day layoff that does not terminate the employment relationship until the expiry of the stipulated period. The legislation does not expressly require continuation of benefits during 60-day period but, given the magnitude of potential liability, it is crucial the circumstances of the individual case be assessed to determine whether a layoff can be implemented without breaching the employment contract and what contractual or legislative provisions might apply to determine whether any or all benefits should be continued.
This caution is equally true with respect to a cessation of benefits in a unionized labour environment. Should an employer allow its employees’ health insurance to lapse in circumstances subsequently determined to be in breach of a collective agreement or statutory prohibition, the damages could well encompass losses sustained by employees as consequence of the breach.
