THE EMPLOYERS' EDGE
Court of Appeal Upholds 200k Damage Award for Failure to Continue Disability Coverage During Former Employee’s Assessed Notice Period
You may recall CCP reporting on a decision of the Superior Court of Justice last year that awarded a wrongfully dismissed employee compensation for disability coverage to which he should have been entitled in the amount of $200,000, as well as $15,000 for ancillary damages (click here to read our August 4, 2011 blog). The employer, Canac Kitchens, appealed both damage awards to the Court of Appeal for Ontario, disputing the amount of the disability-related damages and the punitive nature of the ancillary damages.
In a brief and straightforward decision the Court of Appeal upheld the trial judge’s reasoning in all respects related to the disability-related damages. The reasoning of the trial judge, as affirmed by the Court of Appeal, was that the plaintiff became totally disabled during the reasonable notice period and should therefore be compensated for the value of the benefits to which he would have been entitled during that notice period.
With respect to the ancillary damages the Court of Appeal found that the trial judge had erred in awarding those damages and overturned that aspect of the award. This no doubt came as small consolation to Canac Kitchens, though, in the face of the significant liability imposed by the main award.
The Court of Appeal’s endorsement of the original award in Brito et al v. Canac Kitchens serves as an even more poignant reminder of the risk that employers face in not negotiating a mutually agreeable termination package at the time of dismissal. If the issue of income replacement is not addressed at the time of termination and the employee becomes disabled during the notice period, the employer could be liable for anything that might happen from that point to retirement.
The way to avoid this potential exposure is to both have a valid employment agreement that addresses the issue and to ensure that any termination or severance package properly addresses the issue and provides the employer with a full and final release, including all claims for disability benefits, from the employee. The lawyers at CCP can assist you in determining and negotiating reasonable termination packages, drafting and obtaining enforceable releases, and of course getting it right up front with the drafting of employment agreements to limit liability when dismissing employees.
Please Note: This blog has been prepared as an informational service for our clients and other interested parties. It is not intended to constitute legal advice, a complete statement of the law or opinion on any subject. Although we endeavour to ensure the accuracy of the content, no one should act upon the information provided without a thorough examination of the law after the facts of a specific situation are fully considered.