'Termination is virtually always on the table'

Recently Canada Life was vindicated after firing an employee in 2019 for benefits fraud.

The initial investigation found the individual had submitted benefits claims for items never received — including TENS units and braces. The ex-employee then argued before the Human Rights Tribunal of Ontario that the fraud, if committed, was her husband's doing, not hers.

But in May 2026, the tribunal dismissed the application, finding the termination was rightly based on conclusions about the applicant's own conduct, not her family relationships.

While a good news story for employers, the case highlights how quickly a benefits fraud matter can escalate into complex human rights territory — and why HR should strive to get the process right from the start.

“Not handling one of these [cases] correctly could be potentially so expensive — an ounce of prevention is key, says Ryan Conlin, a partner at Stringer Management Lawyers.

How fraud typically happens

Benefits fraud runs a wide spectrum, according to Conlin. At the more serious end are large, organized schemes involving clinics submitting claims for services that were never provided — high-profile cases have surfaced over the years at institutions including the TTC and major hospitals. Those cases, he says, are the exception.

Then there are instances where people who aren’t eligible for the benefits under the terms of a plan, such as an employee’s daughter, make false claims, says Conlin.

Far more common — roughly 80% of cases in his estimation — is misrepresentation of a medical condition to collect loss-of-income benefits.

“They're claiming some sort of severe disability when in fact they're working somewhere else or they're perfectly capable of doing those things,” he says.

A third category, illustrated by the Canada Life case, involves benefits being claimed for goods or services that were never received, with reimbursements flowing into the employee's own bank account.

Start with a clear policy

The first line of defence is straightforward, according to Conlin: a policy that explicitly requires honesty from employees and puts them on notice that providing misleading information — or failing to report a material change in circumstances — is prohibited.

"Just because the claim was true at one point doesn't mean you can, if you get better, sit at home and keep collecting benefits, typically," he says.

Having employees sign an acknowledgment at onboarding that they received and understood the policy is best practice, says Conlin.

“The failure to have such a document is not fatal — I mean… it would be difficult for someone in most circumstances to assert they didn't know that committing fraud was wrong,” he says, but if an employee later argues they weren't aware of the consequences, that may work in their favour and allow for a less serious penalty.

Investigating: tread carefully

When fraud is suspected — often triggered by an anonymous tip or something a manager observed — HR should first assess what evidence they have before taking action, says Conlin.

The classic example, he says, is someone off on a back injury claim being spotted lifting a case of beer. That alone may not be enough to launch a full investigation. A restriction against lifting over 10 pounds is generally meant in the context of repetitive workplace activity, not a single momentary effort, he notes.

“The warning I always give about surveillance… is just to be cautious and it's not the be-all and the end-all.”

A clearer trigger would be someone claiming to be essentially bedridden who is then observed doing something like roofing their house, says Conlin. In those more clear-cut cases, surveillance may be warranted.

“You always want to make sure that who you're dealing with is a licensed investigator and not just a freelancer — those people know what the rules are and know you can film someone in a public place and that evidence is readily admissible in a legal proceeding.”

For unionized employers the picture is more complicated, he says: some arbitrators have questioned whether employer surveillance was reasonable in the circumstances, and admissibility is not guaranteed. Unionized employers should seek legal advice before proceeding, he says.

For suspected large-scale schemes involving multiple employees and a provider, the appropriate step is bringing in forensic investigators through a law firm, as the matter may well be criminal, says Conlin.

Risks of false allegations

HR must be confident before formally alleging fraud and must be careful to distinguish genuine misconduct from errors or misunderstandings, says Conlin. Canada is one of the most diverse societies in the world, he notes, and some employees may be navigating benefits forms in a second or third language, or may come from backgrounds where workplace benefits are an unfamiliar concept.

"We have to be sure that what was done was not intentional — fraud is intentional," he says. "A dispute about benefit entitlement or errors on a form are not necessarily fraudulent."

Making fraud allegations that cannot be substantiated exposes employers to enhanced damages in wrongful dismissal, labour arbitration or human rights proceedings, says Conlin. Defamation is a separate risk if the allegations are published more broadly.

On the medical privacy side

Employee privacy is a big consideration in Canada. If fraud is suspected, HR should not expect to have access to an employee's medical records, according to Conlin.

“They're entitled to information strictly for the purposes of meeting their legal accommodation obligations, which is what the person is capable of doing, the restrictions… and when are they likely able to return, what's their prognosis to return to full duties?”

That said, if an employer has information raising concerns about the validity of a claim, they should pass it along to the provider, who can factor it into their own assessment, he says.

Giving employees chance to respond

Once an investigation concludes, giving the employee an opportunity to respond is not optional — it is a legal necessity, according to Conlin.

Failing to do so constitutes a breach of the procedural duty to accommodate under human rights law, and can attract damages regardless of whether the underlying fraud allegation was ultimately correct.

"It’ll just make your case difficult because what if the employee had something good to say, and you didn't use it?" he says. "You have to give them a chance to give their side of the story."

The Canada Life case illustrates what that process should look like in practice. Before any termination decision was made, the investigator interviewed the applicant directly, confronted her with specific evidence including video footage, and recorded her responses — giving her the opportunity to explain herself at each step.

Discipline and termination

For employers considering termination, the strength of the case depends on factors such as the duration of the fraud, whether it was a single incident or an ongoing pattern, and the degree of misrepresentation, says Conlin. Employees in positions of trust — such as managers — face a much stronger case for dismissal.

"Termination is virtually always on the table when it comes to fraud," he says, citing the options of just cause or wilful misconduct.

In a unionized context, the stakes are considerably higher. Not only can costs include years of back wages and general damages, but reinstatement is a routine remedy — meaning the same employee could return to the workplace.

“Not only could you owe this person a couple of years of wages, general damages, you can then have them back. Which is a routine remedy in a unionized environment… so you really have the worst of all worlds,” says Conlin.

And while that remedy is also available under human rights legislation for non-unionized workplaces, it’s not usually pursued or implemented, he adds.