In Ramotar v Trader Corporation ( No Canlii cite yet ) Deputy Judge K. Qureshi of the Toronto Small Claims Court reviewed a termination provision which had the following language :
“If your employment is terminated without cause, the Company will continue your group insurance benefit coverage for such period as the Employment Standards Act, 2000 shall require, provided such coverage is available from the insurer.”
The Deputy Judge found that as the employee would still be entitled to payment in lieu of such benefits if the insurance company did not cover the claim, the whole clause was illegal as it was not in compliance with the ESA.
My Commentary;
Presumably the Deputy Judge was referring to Section 60 (1) (c) and (3) of the ESA which reads as follows:
60.(1) Requirements during notice period. During a notice period. required under Section 57 or 58, the employer,
(c) shall continue to make whatever benefit plan contributions would be required to be made in order to maintain the employee’s benefits under the plan until the end of the notice period .
(3) Benefit Plan Contributions : If an employer fails to contribute to a benefit plan contrary to clause (1) (c), an amount equal to the amount he employer should have contributed shall be deemed to be unpaid wages for the purpose of Section 103.
Note that the employer is not required to provide the coverage, only to pay the premium cost to the insurance company.
But if the employer fails to make the necessary premium payment and as a result the employee incurs an expense or a loss that would have been covered , then the employee can pursue a civil action against the employer. I once had a case where the employer failed to continue my clients’ $100,000 life insurance policy after his termination. My client died during the ESA notice period and after the insurance company denied coverage, we successfully sued the employer and got them to pay the $100,000.
This obligation to maintain benefits continues under the common law throughout the reasonable notice period. This can lead to huge negative consequences when an employee becomes disabled during the common law notice period. The employer cannot, under the terms of most group disability plans , continue to provide for LTD coverage after the statutory notice period. Therefore if the employee were to become totally disabled during the common law notice period, the employer steps into the shoes of the LTD insurer and is on the hook for what could be a sum well in excess of responsible notice.
See Prince v. T. Eaton Co. Limited, 1992 CanLII 5968 (BC CA)
For a copy off this case, email me at barry@barryfisher.ca
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1) The “without cause” clause had a fatal error of saying ” we may terminate your employment at any time,”. applying the law of stare decisis , Justice Sproat applied the trial decision in Dufault v. The Corporation of the Township of Ignace and said :12] ” I must apply Dufault, as none of the reasons to depart from a prior decision referenced in Spruce Mills are applicable. As such, the “without cause” termination provision is unenforceable.”This should put to rest the argument that because the Court of Appeal in Dufault did not address the issue of “at any time ” it somehow is not the law of the land. This case confirms that the law is made by trial judges , unless overturned by a higher court .
2) The “with cause” clause was as follows:
3. Termination with cause: we may terminate your employment at any time for just cause, without prior notice or compensation of any kind, except any minimum compensation or entitlements prescribed by the Employment Standards Act. Just cause includes the following conduct:
a. Poor performance, after having been notified in writing of the required standard;
b. Dishonesty relevant to your employment (such as misleading statements, falsifying documents and misrepresenting your qualifications for the position you were hired for);
c. Theft, misappropriation or improper use of the company’s property;
d. Violent or harassing conduct towards other employees or customers;
e. Intentional or grossly negligent disclosure of privileged or confidential information about the company;
f. Any conduct which would constitute just cause under the common law or statute.
Justice Sproat found that the clause was not saved by the addition of the language ” except any minimum compensation or entitlements prescribed by the Employment Standards Act. ”
Instead he said :
[19] ” The potential unfairness of a termination provision of the sort at issue is that the employer has described in detail the contractual standard of just cause but given no detail or explanation of the ESA wilful misconduct standard, and that it differs from the contractual standard. Given that many employees will not be familiar with the ESA provisions, many employees would assume that they had no entitlement if they breached the contractual standards.”
The lesson here is for a clause to be enforceable, it must be compliant with the ESA on its face. You cannot say something illegal and try to cover it up with a provision that says except or unless the ESA says otherwise.
For a copy of this case, email me at barry@barryfisher.ca
To book a mediation, go to www.barryfisher.ca
To access the Wrongful Dismissal Database go to www.wddonline.ca