Fired Stelco worker awarded $350,000

Court holds company responsible for LTD benefits until worker turns 65 — case underscores importance of continuing benefits during the notice period

When it comes to firing a worker without cause, companies often focus on the amount of reasonable notice they should pay the employee — not surprising, because that’s often the most significant issue. But employers should also continue benefits coverage during the notice period because the amount of reasonable notice might be a pittance compared to what the employer could be on the hook for if the worker becomes disabled during the notice period.

That was the case in a recent decision involving Lake Erie Steel Company, one of Stelco’s associated companies, when it fired a worker with a significant absenteeism problem. Not only was the worker awarded reasonable notice, but the court also ordered Stelco to pay her hundreds of thousands of dollars in long-term disability payments because she became completely disabled during the notice period.

The case

Deborah Held started working for Stelco in 1979 as a typist. She switched jobs within the company a number of times until 1983 when she became a plant security guard, a position she held until she was let go on Sept. 13, 1996.

On that day she was fired on the spot. She was offered about nine months’ severance in return for signing a release. Held refused to sign the release, and launched a wrongful dismissal suit.

Poor attendance record

Held suffered from a variety of recurring health problems, including polyarthritis, depression, fibromyalgia, insomnia, hypothyroidism and hypoglycemia. She missed a lot of time over the years because of illness.

On March 22, 1996, she went off work because of illness. Early in September 1996 she received clearance from her physician to return to work. She was able to do her work, subject to a temporary five-pound weight lifting restriction because of a broken wrist. Dennis McCleary, superintendent of plant protection, told her to go see a company doctor. She saw the doctor, got his clearance and came in to see McCleary on Sept. 13.

In the meantime, McCleary had decided to terminate her employment and had received clearance from his superiors to do so. When she came in, McCleary told Held her employment was being terminated because of absenteeism.

Held said the sudden termination came as a shock and was emotionally devastating. She had never been suspended or given a written warning for disciplinary reasons. But she had been warned on several occasions that her absenteeism was putting her job in jeopardy.

Amount of notice

Cause was not an issue in this case. Though it was alleged originally, termination for cause was dropped by Stelco before the trial. So the court turned its attention to how much notice Held should have been given.

Stelco took the position the appropriate notice period was 10 months.

“We are going to say the range is nine to 12 months,” Stelco’s lawyer said. “There is no science to this. But we are going to ask you that in the circumstances of this case, we should go to the lower end of the range and that is why we say 10 months is appropriate.”

Held was seeking a total of 21 months’ notice — 15 months for reasonable notice and a six-month extension for the way the dismissal was handled.

The court settled on 12 months as an appropriate notice period, taking into account the fact she was 43, her fragile state of health and her dim employment prospects.

No extension for bad-faith conduct

But it refused to extend the notice period for the way the dismissal was handled.

The court said Stelco simply didn’t act in bad faith. McCleary had very little information about Held’s various illnesses, and was simply concerned that she wasn’t showing up for work.

“Whether it (her illness) was legit or whether it wasn’t, that wasn’t my problem,” he said in cross-examination. “My problem was that she couldn’t come to work.”

McCleary’s concern was not with the nature of her illnesses, but with the failure of an employee to show up for work, the court said. It said one of McCleary’s problems was that her doctor’s notes were fairly cryptic and did not contain much information as to the precise nature of her medical problems.

The court was provided with 11 doctors’ notes. Only one of them provided any clue to the diagnosis, and it simply said “costo chronditis.” The earliest note, dated May 11, 1992, was typical of most of the notes. It read, simply: “Unable to return to work until at least June 15/92.”

“Having regard to the information available to him, Mr. McCleary’s behaviour must be regarded as remarkably tolerant,” the court said.

But McCleary violated Stelco’s termination policy by failing to advise Held of the right to appeal her termination. The policy required him, as her immediate supervisor, to inform her she had a “right of appeal and review by the next higher level of supervision” of her termination.

There were also a number of other transgressions by Stelco, but the court said there was nothing to suggest anything but sloppy business practices or heavy handedness — there simply wasn’t any bad faith so it refused to lengthen the notice period.

Stelco, not insurer, held responsible for LTD benefits

But where the case got really interesting is when the court turned its attention to the damages flowing from the wrongful dismissal. Since Stelco breached the contract of employment by failing to give reasonable notice of termination, it was therefore liable for the damages flowing from that breach, the court said.

The court said Held would likely have remained at Stelco until she was hospitalized on Aug. 11, 1997 — a period that was within the 12 months’ notice the court determined she was entitled to. Since she had been an employee for between 15 and 20 years, she would have had the benefit of Stelco’s salary continuance for the seven months provided by that plan.

After Aug. 11 she was, in the opinion of her doctor, unable to maintain employment, even on a part-time basis. She would then have taken advantage of Stelco’s long-term disability plan which was administered by Sun Life. But the court said Held had no claim against Sun Life.

“It was not Sun Life that breached her employment contract,” the court said. “It was Stelco and I see no reason why the damage claim should not succeed as against Stelco. To permit Stelco to avoid legal responsibility for these health costs would be to permit it to benefit by its breach of the employment contract with (Held.)”

Therefore, Stelco was responsible for her long-term disability benefits from the date she was disabled until she turned 65 in 2018.

The court then tallied up the amount it awarded Held:

•$1,252 for earned vacation pay;

•$41,139.02 for lost salary;

•$7,060.14 for lost health-care benefits;

•$25,732.22 for lost salary continuance;

•$118,584.53 for lost long-term disability benefits; and

•$161,007.73 for future long-term disability benefits.

The total damages awarded to Held was $354,778.84. From that amount, the court deducted $33,581.11 representing the amount she had received from Stelco and in mitigating her damages, for a net award of $321,197.73.

For more information see:

Stelco Inc., Re, 2005 CarswellOnt 5177 (Ont. S.C.J.)

Advice for employers: Don’t stop benefits

If there’s one point this case should drive home for employers, it’s this — employers should not stop benefits coverage during the notice period, said Natalie MacDonald, an employment lawyer with Grosman, Grosman and Gale in Toronto.

Had Stelco continued Deborah Held’s benefits — especially long-term disability coverage — she would have been covered by Sun Life when she became completely disabled. She could have then filed a claim for LTD benefits with Sun Life and the onus would have been off Stelco.

During the notice period, the employer should continue to provide the employee with everything she would be entitled to if she were still a regular employee, said MacDonald.

Attendance record

Deborah Held’s attendance record was introduced as evidence in this trial. According to Stelco she missed more than 3,200 hours of work between 1992 and September 1996:

•1992: 908 hours (114 eight-hour days);

•1993: 160 hours (19.5 days);

•1994: 952 hours (119 days);

•1995: 232 hours (29 days); and

•1996: 980 hours (123 days) through September.

Held usually worked 12-hour days and said a memo prepared by her manager to support her termination exaggerated her absenteeism because it converted the hours into eight-hour days.

Though the court agreed the memo was a bit misleading, it dismissed the argument because the memo set up the exact number of hours and it was easy to convert into 12-hour days.

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