Termination of group benefit coverage for employees on leave

Can you tell me if an employer is able to terminate group benefit coverage for an employee who is absent from work and is not collecting short- or long-term disability?

Colin Gibson

Question: Can you tell me if an employer is able to terminate group benefit coverage for an employee who is absent from work and is not collecting short- or long-term disability? We have situations where the employee does not have medical evidence that is supported by our insurer, but they do have a doctor’s note stating that they will be off work indefinitely or sometimes for weeks. Do we have to continue benefits in these circumstances?

Answer: Decisions regarding ill or disabled employees must be made carefully in order to avoid violating the employee’s rights under the Human Rights Code or engaging in conduct that may be considered unfair or in bad faith and give rise to Wallace damages for wrongful dismissal. Legal advice should always be sought in these types of situations.

Where an employee is absent from work for alleged medical reasons, but has been denied weekly indemnity or disability benefits by the insurance carrier, the employer’s first step will usually be to require the employee either to return to work or supply satisfactory medical evidence to substantiate his continued absence.

If the employee’s physician provides a report confirming his inability to work for medical reasons, the employer may decide (and indeed may be required) to place the employee on an unpaid leave of absence pending the outcome of the employee’s appeal of the insurer’s decision. In limited circumstances, the employer may be able to require the employee to submit to an independent medical examination.

If the employee is placed on an unpaid leave of absence, must the employer continue his group benefit coverage during the leave? This will depend on whether the employee has a contractual or collective agreement right to receive benefit coverage during an unpaid leave.

Nothing in the British Columbia Employment Standards Act (ESA) requires an employer to provide benefit coverage to an employee.

However, where an employer agrees or chooses to provide such coverage and later revokes it unilaterally, the Director of Employment Standards may consider this to be a substantial alteration of conditions of employment under s. 66 of the ESA, thereby triggering a termination of employment and an obligation to pay compensation for length of service (such as severance pay) under s. 63.

Similarly, the unilateral discontinuance of benefits for employees on leave may be a constructive dismissal at common law if it is an express or implied term of the employment contract that persons with employment status are entitled to benefit coverage.

For unionized employees, the collective agreement will typically spell out the circumstances under which bargaining unit employees are entitled to benefit coverage.

For non-union employees, one option for the employer may be to provide the individual with reasonable notice that his benefit coverage will terminate on a specified future date.

Depending upon the length of the employee’s absence and the prognosis for his return to work, the employer may be able to terminate the employment relationship for frustration of contract (non-union employees) or non-culpable absenteeism (unionized employees). Again, these options must be considered and implemented carefully.

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

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