Capping benefit coverage for employees on long-term disability

How long is an employer obligated to cover employees who aren't coming back?

Colin Gibson
Question: We have several employees on long-term disability, some of whom may never return to work, who continue to be covered by our health and dental benefits plan. How long are we obligated to continue coverage for these employees?

Answer: Generally speaking, employers are not required to provide continued health and welfare benefit coverage to employees who are absent from work on long-term disability (LTD), unless they have made an express or implied contractual commitment to do so. Having said that, employers must be careful to ensure they do not discriminate against disabled employees, contrary to human rights legislation, by terminating the employee’s coverage while employees who are absent from work for other reasons enjoy continued benefits.

For employees who are not unionized, the employer should begin by examining its employment contracts, handbooks and policy manuals to determine whether it has made an express commitment to continue benefit coverage while an employee is on LTD and, if so, for what period of time. If no commitment exists but the employer has a consistent practice of continuing benefit coverage for employees on LTD, the practice may have become an implied term of the employer’s contractual relationships with its employees.

If an express or implied contractual term exists requiring the employer to continue benefits for employees on LTD, the unilateral discontinuance of such benefits may give rise to a claim for constructive dismissal. In order to avoid such a claim, an employer that wants to place a new limit on the length of time it will continue benefits for employees on LTD would need to either obtain the affected employees’ express agreement (in return for compensation), or provide its employees with reasonable notice of the change.

For unionized employees, the employer should review its collective agreement to determine whether it specifically provides for continued benefits for employees on LTD and, if so, for how long. If the agreement contains such a provision, the employer will expose itself to a grievance if it fails to comply.

If there are no restrictions in the collective agreement but the employer’s clear and consistent practice has been to continue benefit coverage for employees on LTD, the employer may be prevented from changing its practice until the next round of collective bargaining.

Colin G. M. Gibson is a partner with Harris and Company in Vancouver. He can be reached at [email protected] or (604) 891-2212.

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