Can an employer put caps on benefits for absent workers?

Our broker has recommended, as a cost-saving measure, a time-limit cap on benefits when someone is absent from work, something that will impact workers on long-term disability. Is this legal?

Question: I have a question concerning company policies with respect to benefit caps. Our broker has recommended, as a cost-saving measure, a time-limit cap on benefits when someone is absent from work. So, for example, if an employee is absent for more than one year they would be removed from the health and dental portion of the benefit plan as a corporate policy. Even though not explicitly stated, this would most impact someone on long-term disability who may have expensive drug claim needs. Could this expose us to a lawsuit in terms of human rights and perceived discrimination based on disability?

Answer: Generally, Canadian human rights legislation prohibits employers from discriminating against any person with respect to employment or a term or condition of employment on the basis of a prohibited ground. Disability, both mental and physical, is uniformly considered a prohibited ground of discrimination.

But it is not unlawful to establish a term of employment that treats employees differently on the basis of disability if that term is based on a bona fide occupational requirement and the employee has been offered accommodation to the point of undue hardship.

The application of human rights legislation to entitlements under insurance policies was canvassed in Gibbs v. Battleford and District Co-Operative where the Supreme Court of Canada considered an employee’s complaint that her employer’s long-term disability policy discriminated against her on the basis that she suffered from a mental, rather than a physical, disability. The court said the entitlement to disability insurance was a term or condition of employment.

The Ontario Court of Appeal squarely addressed the issue of whether an employer could discontinue premium contributions for employees on an extended absence while making full contributions on behalf of active employees. In O.N.A. v. Orillia Soldiers Memorial Hospital, the nurses’ union argued that nurses on unpaid leave were treated differently than active employees, and such differential treatment constituted discrimination if disability was the reason for the absence.

On the issue of whether the employer’s policy drew a distinction between disabled employees and other employees, the court held that employer contributions to benefit plans were a form of compensation received in exchange for work. Disabled nurses were legitimately denied employer contributions because they were not providing services to their employer in exchange for such compensation.

The court then considered whether the neutral rule that the employer would contribute toward premium coverage of nurses in active employment had a discriminatory effect upon the nurses on the basis of disability. It was argued the rule had the effect of requiring a group of employees, identified by handicap, to assume the burden of paying the entire contribution for benefits to maintain their coverage.

Notwithstanding this apparent differential treatment, the court held that the employer’s policy, which required work in exchange for compensation, was a reasonable and bona fide occupational requirement. There was nothing that the employer could do to place nurses on long-term unpaid leave of absence in a position where they could perform the work.

While any difference in compensation between groups of employees based on the amount of actual services performed is permissible, it is wise to implement a policy that preserves disabled employees’ ability to continue to make payments for premiums at their own expense. While there is no obligation to accommodate individuals where the differential treatment relates to compensation for actual work performed, as long as the employment relationship subsists, facilitating continued participation in the benefit plan is a reasonable accommodation for disabled employees.

In your particular case, it would be difficult to provide a definitive answer without having had the opportunity to read the actual policy and to assess how it would impact disabled employees. It is clearly a situation where some caution would be in order. You may want to have your legal counsel conduct a more detailed review of the plan and its potential impact.

For more information see:

Gibbs v. Battlefords & District Co-operative Ltd., 1996 CarswellSask 603, 24 C.C.E.L. (2d) 167 (S.C.C.)

O.N.A. v. Orillia Soldiers Memorial Hospital, 1999 CarswellOnt 28, 40 C.C.E.L. (2d) 263 (Ont. C.A.)

Brian Kenny is a partner with MacPherson Leslie and Tyerman LLP in Regina. He can be reached at (306) 347-8421 or bkenny@mlt.com.

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