Negligent misrepresentation by employer leads to 40 months’ LTD benefits

Employer’s benefits brochure didn’t reflect reality when newly-hired employee’s medical condition worsened

A British Columbia company must pay more than $90,000 to an employee with a medical condition for misrepresenting its long-term disability (LTD) benefits before the employee accepted a job with it, the B.C. Supreme Court has ruled.

At the age of nine, the employee, Cary Feldstein, was diagnosed with cystic fibrosis. Due to his condition, Feldstein would not accept employment unless it offered “sufficient and appropriate LTD benefits,” which were not conditional on the absence of any pre-existing health conditions.

Feldstein was terminated from his previous employer with six months’ working notice and immediately began looking for new work. During this time, he obtained an interview with Vancouver tech company 364 Northern Development Corp., which led to a second interview. During the second interview, Feldstein informed the company of his cystic fibrosis condition and inquired whether it offered employee benefits, requesting a brochure outlining such benefits. The company eventually provided Feldstein with a booklet outlining the employee benefits, following which Feldstein asked a few questions including what constituted “proof of good health” with respect to LTD benefits. 364 Development Corp. informed Feldstein that “proof of good health” was related to the three-month waiting period needed in order to have the plan in effect.” Relying upon this representation, Feldstein accepted employment with 364 Development Corp.

About one year after starting work with 364 Development Corp., Feldstein’s lung functions declined due to his condition. After numerous forms of communication between Feldstein, the company and the benefit provider, Feldstein was approved for LTD benefits. However, the benefits were approved at a rate of $1,000 per month instead of the expected $4,660 monthly benefit. This shortfall in benefits was due to 364 Development Corp. failing to fill out a health questionnaire when Feldstein initially enrolled in the benefits he started his employment with the company. This monthly amount was reduced by the $963.44 Feldstein received per month in Canada Pension Plan benefits, for a net monthly amount of $37.

Feldstein initiated legal proceedings against 364 Development Corp. for negligent misrepresentation.

After determining that Feldstein’s version of events was credible, the B.C. Supreme Court found that his “claim in negligent misrepresentation should succeed.” The court arrived at this decision by finding that: the company owed a duty of care to Feldstein “as an employer making representations to a prospective employee in the court of pre-employment discussions;” the statement made by the company that “proof of good health is related to the three-month waiting period needed in order to have the plan in effect” was “inaccurate, untrue, and misleading;” that the above statement was negligently made by the company to Feldstein; and, that Feldstein “reasonably relied on the impugned statement in opting to accept (the company’s) offer of employment.”

364 Development Corp. was ordered to pay Feldstein $83,336.90 for the loss of LTD benefits for a period of 40 months and $10,000 for mental distress.

Lessons for employers

The above decision demonstrates the importance for employers to accurately represent to their employees and potential employees the terms of their employment, including benefits. Failure to do so may result in a reasonable reliance by an employee or potential employee on the inaccurate statement, and associated damages. Should an employer not fully understand any of the terms of employment with the employee or those offered to a potential employee, full knowledge and information should first be obtained.

Lessons for employees

Employees should be aware of the above decision as it demonstrates the potential recourse they may have should a negligent representation be made by their employer or potential employer when discussing the terms of their employment.

For more information see:

Feldstein v. 364 Northern Development Corp., 2016 CarswellBC 159 (B.C. S.C.).

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