New rules could impact STD, LTD plans, say legal experts
As of Dec. 18, new claims for employment insurance (EI) sickness benefits will be available for 26 weeks – up from the previous 15 weeks.
These benefits are paid at 55% of an applicant’s average weekly insurable earnings, to a maximum entitlement of $638 for 2022.
The change is part of the Ottawa’s broader commitment to reform the EI program, having begun a two-year consultation in August 2021, with the aim to build a system that’s “more flexible, fairer and better suited to the needs of today's workers.”
To align with this change, the maximum length of unpaid medical leave available to federally regulated private sector employees has been increased from 17 to 27 weeks under the Canada Labour Code.
The government also announced the extension will only apply to EI sickness benefits so it will not have any “immediate impact” on the requirements that wage loss replacement plans must meet to qualify for a premium reduction under the Premium Reduction Program (PRP).
“These requirements will remain unchanged for the time being.”
Filling in the gap
Short-term disability often fills in the gap before long-term disability kicks, “so these benefits will, in effect, replace that for some employers,” says Robert Richler, lawyer and HR advisor at Bernardi Human Resource Law in Mississauga, Ont.
It's obviously good news for employees, he says, especially those who don't have access to an STD or LTD plan and are without income for several weeks
A typical STD plan is offered for 26 weeks or 180 days, and then at that point, the person is eligible to apply for long-term disability, says Stephanie Kalinowski, pension and benefits lawyer at Hicks Morley in Toronto.
“Before, if an employee who isn't covered by an STD program becomes ill, they could apply for employment insurance, which was 15 weeks plus the waiting period. And so now, with EI increasing — and then for federally regulated employees at any rate, the leave is also increasing to match that — it means that they can obviously be on EI and have some income protection for a longer period of time, so covering more serious illnesses or injuries.”
However, if someone qualifies for their employer's STD program, they're generally on an approved leave of absence at the same time, she says, “so in some ways, for a lot of the population, there isn't necessarily going to be an obvious or immediate change.”
But employers may want to consider if they want to keep their short-term disability plans, says Richler, “given that now there's more money available to employees to make up the difference.”
It also depends on the type of roles involved because the payment is limited to $638 per week from the government, he says.
“With short-term disability, oftentimes it's a higher level. So, I think some employers may question whether they’d want to have it anymore, but others may still view it as a benefit for their employees to have.”
In 2021, an Alberta company and its benefits provider overreached in the medical information sought to support STD claims, an arbitration board has ruled.
As for long-term disability, it’s likely that employers are still going to want that benefit because it can go indefinitely, he says.
“Oftentimes, it picks up after the EI benefits come to an end or right as they’re coming to the end, and takes you out for two years in your own occupation. And if you're not able to do any other occupation after those two years, it can take you right up until 65. So I think that's still something that employees and employers are going to want to have in place, even with this change.”
An Ontario arbitrator recently upheld a company’s LTD benefit plan that stopped at age 65 as not discriminatory, while quashing a life insurance policy that changed for employees at the same age.
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Unionized workplaces
Another consideration for employers involves collective agreements. That’s because some employers have registered Supplemental Unemployment Benefit Plans (SUBPs) for sickness where they top up the EI.
“Those are often in collective agreements, so those are something that needs to be examined as well, because they would have typically been calibrated to align with the 15 weeks of EI plus the waiting period,” says Kalinowski.
“If now EI is available for longer than that, there is the question of whether the employer is going to extend the top-up — or maybe the wording already picks that up, which might have been unintentional.”
A similar concern came up with changes to extend the length to EI available for pregnancy and parental leave, she says, so “you always need to go back and review your top-up plans as well.”
Certain elements in those agreements may need to be reworked, depending on how they’re written, says Richler.
“That may be something that may be in the next round of collective bargaining, or even if there's openings for it within the existing [one] that may need to be addressed.”
An Alberta employer didn’t have to accommodate a worker to the point of undue hardship until the worker provided sufficient medical information, the Alberta Human Rights Tribunal has ruled.
Should employers be offering STD and LTD plans?
Given the changes announced by Ottawa, it might be a good time for employers to reconsider – or consider for the first time – the merits of offering these disability plans.
For some industries, LTD is not a typical benefit, for a variety of reasons, such as the Canada Pension Plan disability for employees who have a more serious and longer illness, says Kalinowski.
“For lower-income employees, it might make more sense to use that, rather than pay extra out of their pocket for it.”
These plans are “definitely not super cheap” so who pays for it — the employee or the employer — can make a big difference, says Richler.
“Sometimes it's completely paid for by the employer; sometimes it's completely paid for by the employee. And the benefit can be taxable or non-taxable, depending on who pays for it.”
