Is an employer obligated to pay wages of staff on short-term disability?

Question: Our company does not offer short- or long-term disability benefits to employees. One of our employees has provided us with medical documentation which states she will not be able to return to work for two months. Is the company obliged to pay her wages?

Answer: Whether or not the employer is required to pay an employee while she is off from work because of a short-term disability depends on whether she was hired on the basis of a promise of performance.

Where she has been hired on the basis of actual performance, she is not entitled to receive wages while temporarily absent due to illness. An employee is considered to have been hired based on actual performance if there is a direct relationship between the work she does and the pay she receives. For example hourly-wage employees or those paid according to piece-work will generally not have a right to be paid for the time they are off from work.

But where an employer promises to pay an employee in exchange for her promise to perform her duties, the employer’s obligations are considered to continue during the period of illness. Therefore the employer must continue to pay the employee during her absence. Generally, employees who have been hired based on a promise of performance are those whose salary is paid on a weekly, monthly or annual basis such as professionals or business executives.

If an employer wants to take steps to ensure it is not obligated to pay an employee while the employee is on short-term disability, the employer should specify in the employment contract that payment of salary to the employee is in exchange for active services or performance by the employee.

Peter Israel is counsel to Goodman and Carr LLP in Toronto and is head of the firm’s Human Resource Management Group. Peter can be reached at pisrael@goodmancarr.com or (416) 595-2323.

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