Novel bid for severance denied

If an employee on disability can’t be accommodated, the employment contract isn’t viable


Should severance pay be required for employees on long-term disability who can no longer fulfill the contract of employment?

In a recent arbitration case, Mount Sinai Hospital in Toronto terminated the employment of a nurse who was unable to work for more than two and a half years. She injured her knee in a water-skiing accident and even with surgery never fully recovered. The hospital could not foresee employing her again, as it could not accommodate her disability in the workplace.

After a reasonable length of time –– beyond which a totally disabled worker is unlikely ever to return to any kind of work and where accommodation is impossible –– an employment contract becomes frustrated due to so-called “innocent” absenteeism.

According to Section 58(5)(c) of the Ontario Employment Standards Act, severance is not required for those whose total inability to work owing to an illness or injury has made the contract of employment impossible for them to carry out.

The employee, who was receiving long-term disability benefits, launched a grievance, not for reinstatement to her job, but to receive severance pay. An earlier arbitration board found that, because there was no apparent hope of her ever returning to any kind of work, the hospital had rightly concluded that her contract of employment had been frustrated. As a result, the employer was not required to provide her with severance pay.

The Ontario Nurses’ Association, the union representing the employee, asked to reconvene the hearing to argue that the Employment Standards Act contravened section 15(1) of the Canadian Charter of Rights and Freedoms and that the employee had been the victim of discrimination when she did not receive severance.

A three-person board of arbitration met to decide this case.

At issue was the role of the charter in determining whether a permanently disabled employee had been unfairly discriminated against if denied severance pay? Did the charter trump the Ontario Employment Standards Act? In a 2-1 decision, the arbitration board said it did not.

The union nominee to the board had argued that it did.

First, she observed “severance benefits do not provide and are not intended to provide income replacement.” She said that concluding there is a relationship between LTD benefits and severance pay “misconstrues and confuses the function of both benefits” in that disability payments are based on a future loss of income, but severance is based on past service.

She argued that “an employee who qualifies for long-term disability benefits has made no less of a contribution to the employer’s business through their years of work than an able-bodied employee.”

She maintained that with severance pay denied, the grievor’s past investment in her work was deemed less valuable precisely because of her disability and this was the very issue that section15 (1) of the charter was intended to address. As a result, she concluded the act contravened the charter and should not be applied and the employee was entitled to severance pay. However, the majority decided otherwise.

Writing for the majority, the chair of the arbitration board referred to the approach the Supreme Court of Canada had set out for analyzing such discrimination claims. The purpose of section 15(1) of the charter is “to prevent the violation of essential human dignity and freedom through the imposition of disadvantage, stereotyping or political or social prejudice …” But the court also required that, when there seemed to be a conflict between a law and the charter, an analysis must be made which took in “the full context surrounding the claim and the claimant.” The charter is not to be applied mechanically or formalistically.

The court provides three guidelines to aid in this process:

•whether a law unfairly compared the claimant with others in a similar situation by using personal characteristics or by failing to take into account the person’s disadvantaged position;

•whether the law treated the claimant differently as a result of using one of the unacceptable grounds for discrimination (in this case, disability); and

•whether the law looked at the people it affected through the lens of group or personal generalizations and would perpetuate a negative view of the worth or dignity of that individual because of this stereotyping.

Before applying the guidelines, the arbitration board had to decide on the most appropriate group of people to use in a comparison. The Ontario Nurses’ Association said the group should comprise able-bodied employees entitled to severance pay (under section 58(2) of the act).

The employer’s lawyer argued that the most suitable comparator group would be employees absent from work because of illness or injury but who were expected back at work and would therefore qualify for severance under section 58(5)(c) of the act.

The majority on the board agreed with the employer’s lawyer, and went on to apply the Supreme Court’s guidelines to this situation.

The arbitration chair found using the Employment Standards Act did in fact result in the grievor being given “substantially differential treatment … on the basis of one or more personal characteristics.” In addition, the grievor’s differential treatment (not being granted severance pay) was based on one of the unacceptable grounds for discrimination as listed in the charter.

However, not every distinction in how an individual is treated is a breach of the equality guarantee in the charter. If the discrimination rests on stereotyping of the individual, it is improper, but if the discrimination rests on an assessment of the person’s own abilities as an individual, then there is no breach.

Therefore, as far as the third guideline was concerned, the arbitrator found the intention of the Employment Standards Act was not to demean the grievor or anyone else with severe disabilities. Rather, its emphasis was on the viability of the employment contract. If an employee could not be accommodated in the workplace, then the employment contract was no longer viable.

In answer to the union’s argument severance should be given to compensate for the value of the grievor’s accumulated seniority and investment in her employer’s business, the arbitration chair noted the grievor would not be working in the foreseeable future. Therefore, she would not be able to use the investment and for that reason was receiving long-term disability benefits.

As a result, it was appropriate for the disabled worker to collect the long term disability benefits provided by her income replacement insurance, but she was not entitled to a settlement based on the loss of her financial investment in the workplace — an investment she could presumably never exercise again in any workplace owing to her total disability.

For more information: Mount Sinai Hospital and the Ontario Nurses’ Association, Ontario Labour Arbitration, Jane Devlin — Chair and G. R. Shaw and Mary Hart, Members, June 4, 2002.

Lorna Harris is the assistant editor of CHRR’s companion publication CLV Reports, a newsletter that reports on collective bargaining and other issues in labour relations. She can be reached at (416) 298-5141, ext. 2617 or [email protected]


Court rules nurse entitled to severance pay

The Divisional Court of Ontario has granted a permanently disabled nurse $4,000 in severance pay overturning an earlier arbitration ruling denying her this benefit.

Christine Tilley, a neo-natal nurse, injured her knee in an accident and was discharged for innocent absenteeism when the hospital could not accommodate her disability. She received long-term disability benefits but launched a grievance against her employer, Mount Sinai Hospital in Toronto, when she was denied severance.

In June 2002, a three-person arbitration board, led by Jane Devlin, denied her request for severance. A majority of its members concluded that an exemption provided by the Employment Standards Act, 2000, relating to the frustration of an employment contract due to illness or injury, was not discriminatory under the Canadian Charter of Rights and Freedoms.

The majority of that board stated that while the case succeeded in passing the first two tests for discrimination under the charter, it failed the third, which focuses on whether the withholding of severance was based on stereotyping.

In saying no, the original board reasoned that the provisions for severance do not deprive all disabled employees of severance pay, only those whose contract of employment can no longer be fulfilled.

The representative from the Ontario Nurses’ Association wrote a dissenting opinion saying the third guideline was the very nub of the issue. The Ontario Divisional Court upheld her view in its Jan. 19, 2004 decision.

The court said that the arbitration board incorrectly focused on the viability of the employment contract when it should have concentrated on the differential treatment of the disabled employee.

It added that, in any event, the non-viability of the contract was irrelevant given that severance pay is to compensate for past service. It also stated that if severely disabled employees are not allowed severance, the message is that the work done by people who later become too incapacitated to work is not as valuable as the work done by able people.

The court ruled as irrelevant the fact that Tilley was receiving long-term disability benefits, as this “is a different benefit with a different purpose” from severance pay.

It added that “to deprive a person of the benefit of employment relating to their investment in the business for which they have worked, based on severe disability, goes to the very core” of the values contemplated in the charter.

Nor did it find any pressing or substantial societal need that would deny her this benefit under Section 1 of the charter.

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