An Employers Dilemma! To Continue or not to Continue Benefits When an Employee is on Leave?
During a Paid leave
Employees are entitled to paid leave by law. Therefore, employers must maintain their employee’s benefits during the period of the leave, subject to any cost-sharing arrangement already in place for most jurisdictions.
According to the Employment Standards Act (ESA), an employee on pregnancy, parental, sick, family responsibility, bereavement, declared emergency, family caregiver, family medical, critical illness, organ donor, domestic or sexual violence, child death, or crime-related child disappearance leave has the right to continue to participate in pension plans, life insurance plans, accidental death plans, extended health plans, and dental plans during the leave.
During an Unpaid Leave
An employee on any of the ESA leave listed above is entitled to continue to participate in pension plans, life insurance plans, accidental death plans, extended health plans, dental plans, and any prescribed type of benefit plan that is related to his or her employment unless he or she elects in writing not to do so. Hence, unless the employee advises in writing to the contrary, the employer must assume that the employee will continue to participate in the benefit plans, and therefore both the employer and the employee will continue to make their respective contributions.
Where an employee is on sick leave (which is generally an unpaid leave), an employer must continue to contribute towards the employee’s benefit plans until the employee elects in writing not to continue to participate in the plan.
During a Non-ESA Leave
Where an employee takes a non-ESA leave, it is at the employers’ discretion to maintain benefits. However, one caution is with sick leave because employers must be careful under human rights legislation not to discriminate against an employee due to a disability.
When an employee becomes unable to do their jobs due to a sickness or disability, it is recommended that employers not immediately cut off benefits even when an employee is on an extended sick leave. This is because employers have the duty to inquire and to provide the employee with accommodation to the point of undue hardship or the employer may be exposed to a human rights claim.
Unlike the strict provision under the ESA that requires employers to continue benefits when an employee is on paid leave, or in some cases on unpaid leave, employers are not strictly required by statute to continue benefits or pension plan contributions during temporary layoff periods unless there are contractual terms to the contrary.
In relation to pension plans, an employer’s refusal to continue an employee’s pension benefit contributions (and subject to the plan language) during a layoff does not mean that the employee loses the value of their previous contributions to date, the employer can legally suspend any further contributions or benefit continuation throughout the layoff period.
During a Termination Notice Period
According to the ESA, an employee who is given working notice upon termination without cause is entitled to the continuation of benefits throughout the statutory notice period. Also, where an employee has been terminated without notice, an employer is entitled to pay the employee termination pay in a lump sum equal to the amount the employee would have been entitled to receive had notice been given in accordance with the ESA. Further, the employer must continue to make whatever benefit plan contributions would be required to be made in order to maintain the benefits to which the employee would have been entitled had he or she continued to be employed during the period of notice that he or she would otherwise have been entitled to receive.
Because employees are entitled to be made whole during the reasonable notice period (even when an employee is terminated on the spot without cause), an employer that fails to continue a dismissed employee benefits during the reasonable notice period could risk becoming a dismissed employee de facto insurance provider. Therefore, as confirmed in the case of Alcatel Canada Inc. v. Egan at para 26, the fact that an employer may have terminated the dismissed employee’s insurance benefits does not necessarily eliminate the employee’s legal entitlement to those benefits. The employer may find itself legally responsible for paying the employee short-term or long-term disability benefits or the employee’s estate life insurance benefits if the employer discontinues these benefits during the notice period.
Employers are advised to continue to contribute to a dismissed employee benefit plan when a leave under the ESA is exercised and during a reasonable notice period (except for a non-ESA leave or layoff) unless the employee elects in writing not to continue to participate in the plan.
Call Mackenzie Law today if you have any questions about ESA leave and benefit continuation during an ESA or non-ESA Leave. We offer employers and employees free consultation.
Disclaimer: The contents of this blog are intended to provide a general guide on the subject matter and is not a substitute for legal advice. A lawyer should be consulted for your specific circumstances.