How to avoid legal pitfalls when dismissing employees with disabilities

Canadian employers face significant challenges when managing employees on disability leave or accommodation, particularly when considering legal dismissals.

The intersection of human rights law, employment standards and practical workplace realities creates a complex environment where missteps can lead to costly litigation or tribunal findings.

The employee termination may be because of continued absences, leaving a role unfilled, or performance issues that are not related to the disability. Either way, it’s a difficult area, says Graeme McFarlane, founding partner at Roper Greyell in Vancouver.

“There’s no singular answer to the question, and then it’s all situation-specific, it’s all fact-specific, it’s all employee-specific… and sometimes the answer is ‘The risk is too high.’”

Handling these issues is one of the more common queries from clients, says Marino Sveinson, partner at Pulver Crawford Munroe in Vancouver, citing the additional challenge when “invisible” disabilities such as mental health are involved.

“We definitely still get a lot of requests to advise on how to best deal with employees that are eating up a lot of resources as far as trying to manage them to do something productively or even return to work.”

Recent cases involving disabilities

Recent cases highlight the hits and misses for Canadian employers:

• The BC Human Rights Tribunal dismissed a carpenter’s complaint against Aecon and his union, finding no evidence he was fired due to his type 2 diabetes. The worker hadn’t properly disclosed his need for accommodation, and Aecon provided legitimate reasons for dismissal, including safety violations and disruptive conduct. The union was also cleared, having advised him on how to seek accommodation.
• The Canadian Human Rights Tribunal found Correctional Service Canada discriminated against a worker by failing to consider further accommodations after initial efforts. The worker, who needed reduced hours, was dismissed without meaningful dialogue about alternatives. The tribunal awarded damages for pain and suffering.
• In Zhou v. BZ Nipigon Inc., the Ontario tribunal ruled a labourer was wrongfully dismissed and denied accommodation after a workplace injury. The employer failed to respond to requests for modified duties and delayed compensation. The tribunal awarded $15,000 in damages for discrimination and failing to meet accommodation duties.
• The Ontario Human Rights Tribunal sided with the TTC after an employee claimed discrimination following his dismissal. Despite being offered modified duties after a back injury, the worker insisted he was fully disabled. Surveillance footage contradicted his claim. The tribunal found the TTC met its duty to accommodate, and the dismissal was due to misrepresentation, not disability.

The legal framework governing disability in employment is robust. In Ontario, for example, the Human Rights Code states that every employee has the right to equal treatment and protection from discrimination, including on the basis of disability. This protection extends to all aspects of employment, from hiring to firing, and encompasses both physical and mental disabilities.

Employers must meet both a procedural and substantive duty to accommodate. The procedural duty requires employers to investigate possible accommodations, gather relevant medical information, and consult with the employee. The substantive duty involves implementing reasonable accommodations, such as modifying duties or adjusting schedules, up to the point of undue hardship, according to the tribunal.

First steps with disability leaves

When an employee goes on leave for a disability, it’s reasonable for employers to re-evaluate after a couple of weeks, says Liz Keenan, partner at MathewsDinsdale in Toronto.

“I wouldn't get terribly excited unless, of course, the person has been doing this repeatedly for a number of months or a number of years, and they just do it on a cyclical basis,” she says, such as running a side business during the summer months.

“It's when you start getting extensions and extensions and extensions that employers say, ‘We’re absolutely fine with the concept but we have work to get done.’”

Once it becomes a definite problem, then it’s about managing the return to work or looking at a termination, says Keenan, who prefers the first scenario.

“Employees are entitled to be absent, and they're entitled to get treatment as they should, but the employer still has to manage the employment relationship.”

Communications: ‘Are you sure?’

One way to manage a short-term disability (STD) leave is through the insurance carrier, but that will mean a limited sharing of information, says Keenan, who recommends that employers maintain communications with the employee.

And just because a doctor’s note has been presented to the employer doesn’t mean that’s the end of it, she says.

“I discourage employers from relying strictly on paperwork from a doctor or a carrier. I've gone to numerous arbitrations with employers where they've let somebody go who has been absent for a period of time due to illness over which the employer has very little control and has no knowledge so [they think] ‘We just can't do this anymore.’”

Keenan recalls an arbitrator years ago who advised her and the client that they made the right decision — but they also missed a step.

“That has resonated with me for years and years, the step being ‘Are you sure?’” she says, which should include asking questions around the prospect of a return to work with regular attendance in their job or a modified role, or being retrained to do something else.

“If you jump to a conclusion, the next thing you're going to get is a letter, perhaps, from counsel saying, ‘Wait a second, you've terminated my client, it’s not really a case where the employee can't come back’ — which we call frustration — ‘in fact, they are being treated and they're working towards a return.’”

If an employee has already been gone for a length of time, “it doesn't hurt to take a few more weeks to ask some questions,” says Keenan.

Undue hardship and accommodation

Disability carriers can be reluctant to share updates, so it may be up to the employer to try and get additional information in all situations that relate to a disability, says McFarlane.

“If you’re terminating because of that, you have to make sure that you have reached the point of undue hardship and the duty to accommodate.”

In rare cases, the doctor will say the person is never coming back to the workforce, which is “the best answer for the employer” because that leads to frustration, he says, “and if the contract is frustrated, there's no liability anymore at all flowing to the employer.”

However, McFarlane adds that recent cases have suggested the doctrine of frustration may no longer be available to employers.

“The mere fact that you have an LTD policy at all, cases have suggested that that might mean you can never avail yourself of the doctrine of frustration because you contemplated disability at the time you formed the employment contract by providing an LTD policy,” he says.

Tread carefully: frustration of employment

However, employers often get it wrong in taking the position that they can’t continue the employment relationship any longer — which is considered frustration, meaning the relationship ends by no fault of anybody — and not realizing that there are still obligations involved, around contracts and employment standards, says Keenan.

“That's an area where employers struggle, [thinking]: ‘Oh, they haven't been to work in three years, we need to end that, we need to get them off our books.’ And I'll say, ‘Yes, that's a good idea, but it will cost money,’” she says.

“Under the legislation, frustration is treated as a termination for the purposes of a termination without cause for the person of providing these entitlements.”

Hearing this advice, many employers are inclined to let the issue sit for longer instead of acting, says Keenan, but “that just lengthens their period of service, unless they're quitting.”

Termination and compensation

If there’s no possibility of frustration, “the permutations and adjustments of pretty much every other situation are going to depend on the individual circumstance of the employee,” says McFarlane.

If, for example, an employer is told a person can come back to work with accommodations, but no guarantees they can work regularly ever again, the employer may claim undue hardship.

“Let's assume that we get there — you've satisfied your accommodation exercise, you've collected all the medical information you have, you've looked at your organization to determine whether or not there is something that the person may or may be able to do, given the information you have at the time — then you can terminate without a human rights complaint, successfully.”

However, that still means the employer is liable for pay in lieu of notice and severance. But if the person is also on long-term disability benefits, they don’t get a double recovery, he says.

“If the notice period is, let's say, a year, then the payments for that year that they may get during LTD period are offset... so become reduced.”

And sometimes the employer will wait to avoid paying additional severance, so they let the policy run its course, such as ending at age 65, says McFarlane. Then, if the employee still says they can’t come back to work, it’s deemed a resignation and no severance pay is owed, he says.

“A lot of the time, employers just say, ‘You know what? This is too much of a hassle to me: It's not costing me any money while they're on LTD — because you don't have to continue paying premiums and a lot of times other benefits [because] the employer gets what's called a premium holiday while they're on claims — so it actually doesn't cost employers anything, in some cases, nothing at all… for employees to remain on disability, except for the administrative hassle of keeping them on the books.”

Performance-based termination and disabilities

Another huge area related to disabilities is performance-related employee termination. While it can be done, it’s also not an easy endeavour, according to McFarlane.

“It’s situationally specific,” he says, but if employee is known to have a mental illness, for example, the employer has a duty to inquire. That can include asking about their performance issues and requesting further information from a medical professional, if necessary.

“If the doctor doesn't respond or the employee doesn't respond, and you still have these performance issues that are leading down to non-culpable termination for performance issues or culpable termination for performance issues, you might have to arrange for them to go to an IME, an independent medical examination, which causes all sorts of other problems.

“So that's a last resort to use, but it is something that you might need to do, if termination is a potential outcome.”

Duty to inquire and performance issues

Sveinson agrees that the duty to inquire is a hugely important area, particularly if issues are suspected; for example, if someone says they’re stressed at work.

“It should trigger the employer, at least, according to a lot of the adjudicators, to say, ‘Well, what's going on? Is there some something in your personal life, let alone a disability?’” he says.

“Many mental health conditions could be linked in some manner to performance deficiencies, or at least alleged to be that, if the employer hasn't, before they pulled the trigger, inquired into that: ‘Is there something going on here with these performance deficiencies?’ That's a big risk point that we're still seeing.”

Also key? Documentation, says Sveinson, whether it’s a disability leave, maternity leave or parental leave. Often, the replacement worker is doing a great job but the employer hasn’t documented previous performance issues with the employee on leave, so a dismissal is problematic, he says.

“The documentation is still very important, especially if... in dealing with what were the performance issues that were coming up, there then becomes a medical issue or a medical leave or some other type of leave that's protected. Because if it hasn't been documented, then yes, there's a high degree of onus on the employer to prove that… legitimate performance issues were occurring before, we just didn't document them.”

If, however, the employer has approached the employee about the performance issues, and the employee had an opportunity to disclose their medical condition, says Sveinson, “that’s obviously going to be very helpful to the employer.”