Long-Term Disability and the Effects on Severance Pay

For Canadians who receive long-term disability (LTD), it’s important to understand their rights and responsibilities in the employment relationship. It’s also important for their employers to understand the laws.

What happens if an employee is terminated while on long-term disability benefits?

What can you do if an LTD claim is denied?

Employment laws afford certain legal rights to workers in all provinces and those who have become disabled during their employment are entitled to certain protections.

Disputes are relatively common for employees, especially for those claiming for long periods — whether it’s with an employer or LTD insurer.

By improving your knowledge of long-term disability laws, you can help avoid unnecessary disputes or potentially claim compensation if your rights have been violated.

Disability caused by a toxic workplace

Not all long-term disability cases involve physical disability. Some employees claim that their disability was caused by a toxic workplace.

Even if you have a valid claim, it may be knocked back by an LTD insurer if it believes the disability is “situational” rather than a “generalized condition”. It could also be considered an “employment issue” rather than an “LTD issue”.

There is an understandable reluctance from insurers for LTD insurance to be considered “bad workplace” insurance but this may complicate valid claims for LTD due to a toxic workplace. Success may be more likely with a constructive dismissal claim against your employer but this judgement should be made only after talking with a qualified lawyer.

If you can prove that a toxic workplace environment led to a disabling condition such as severe anxiety, depression or PTSD, you may have a stronger LTD insurance claim if you can prove that the condition has become “generalized” (i.e., you are unable to work anywhere because of the condition caused by the toxic workplace).

In such a situation, it’s best to discuss your legal options with an experienced employment/long-term disability lawyer.

Can you be terminated while on long-term disability?

You cannot be fired for cause while claiming LTD benefits in Canada.

If you are terminated while on long-term disability or while applying for it, your employer may be violating the Human Rights Code.

It is important to be aware of your human rights when assessing a potential claim because damages can extend far beyond what you might be awarded for wrongful dismissal based on lack of notice or severance pay.

The employer may claim that the employment contract is “frustrated” which means that an intervening event has rendered the contract unable to be fulfilled. The disabled employee’s inability to perform job duties would be cited as the “intervening event” but this would require significant medical proof that the employee was unable to return to work.

There are differences between the tests applied to unionized and non-unionized employees but a judge will need to assess whether the disabled worker had a reasonable prospect of recovering and returning to work in a reasonable timeframe.

An experienced employment and disability lawyer can help you assess your legal position and ensure that if you are entitled to claim, you don’t settle for anything less than you deserve from your employer.

How termination impacts a long-term disability claim

The Court of Appeal reversed some of the College’s findings, concluding that while Jinnah’s steps to collect unpaid accounts may have been aggressive, for the most part they did not constitute unprofessional conduct.

The Court found, however, that the appeal panel correctly held Jinnah engaged in conduct that harmed the integrity of the profession by informing her patient that she would sue if the patient defamed her in pursuing a complaint. In the Court’s view, “a dentist whose conduct assessed objectively discourages a patient from making a complaint to the College or pursuing an existing complaint” has engaged in unprofessional conduct.

In addition, although Jinnah’s billing and collection practices were found overall to not warrant sanction, the Court did emphasize that a College’s mandate to supervise the conduct of its members includes regulation not only of the quality of medical services provided, but also of business practices:

[69]  The College must be able to regulate the business practices of dentists to ensure that dentists are ethical, honest and beyond reproach. Persons who deal with dentists expect them to be persons of good moral character who abide by a code of ethics that promotes sound business practices.

[…] [71]  In order to protect the public interest, the College must have the authority to regulate the knowledge and skills dentists possess – to protect consumers of dental services from unskilled practitioners – and the business side of the dental practice – to ensure that patients are informed in plain English of the dental services that their dentists have performed and the cost of these services, have their questions about their bills answered politely, promptly and accurately, and are, in general, treated fairly and with respect. [Emphasis added]

The Court noted that the definition of “unprofessional conduct” found at s  1(1)(pp)(xii) of the Act includes “conduct that harms the integrity of the regulated profession”, and affirmed that a dentist’s billing and collections practices may fall within this terminology.

Moreover, the Court indicated that delegating business tasks to others does not take away the dentist’s responsibility to ensure those tasks are properly carried out.

[73]  The fact that dentists invariably delegate business tasks – scheduling and billing, for example – to others in their offices does not insulate the dentist from the responsibility for the manner in which these workers discharge these assignments. It simply means that dentists must provide their staff with the training and supervision needed to reduce to a sufficiently low degree the risk that their behavior will adversely affect the dentist’s reputation. […]

How a long-term disability denial impacts your job

It’s not usually an employer who denies a long-term disability claim. It’s the LTD insurer. So, a denial of a claim should not impact your job.

If you find that your role or responsibilities change as a result of your disability and you suspect that your employer is attempting to “force you out”, this could be a matter for a constructive dismissal case and you should take legal advice.

Disabled before losing your job

If you had long-term disability coverage when you became disabled, you should be able to apply for and claim LTD if you become disabled before losing your job.

If you apply for LTD after your employment was terminated but were disabled during the period of your employment, your claim should be paid by the insurer. If it’s not, speak to one of our lawyers.

Disabled after being let go

If you’re disabled after you’ve been let go from your job, a notice period should apply to the LTD coverage.

If your employer kept the coverage and your disability occurred during this period (and the policy allows it), you should still be eligible for long-term disability payments.

LTD policies often require you to be “actively working” when you become disabled so if you’ve been let go and later become disabled (even if your employer kept the coverage), your claim may be denied.

Employer denies your long-term disability (LTD)

Large companies like banks and other major employers in Canada may pay long-term disability benefits rather than insurers.

The claims may be managed externally by an insurance company but the ultimate decision on whether to pay a claim or not rests with the employer.

If your claim is denied by your employer, speak to an employment lawyer experienced in LTD claims. There may be other employment issues at play in addition to the denial of the disability claim and it’s important to take legal advice to protect your rights.

Whether you are considering a long-term disability claim, have already been denied LTD by an insurer or have any other employment issues, a Taylor Janis LLP employment lawyer can help.

We can advise you of your options during a confidential 30-minute telephone or video consultation.