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Should Employee Benefits Continue During the Notice Period?

Should Employee Benefits Continue During the Notice Period?

In Ontario, the Employment Standards Act, 2000, requires an employer to continue all benefits during the notice period on termination of employment without cause.  Meaning that on termination, an employee is entitled to all extended health and dental benefits that they had during their employment during the ESA notice period.  This is not the case in British Columbia and here benefits terminate generally on the date of termination, unless gratuitously extended by the employer.  In Ontario, section 60(1)(c) of the Employment Standards Act, 2000, it states:

60 (1) During a notice periodthe 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.

Ontario Courts have gone even further in recent years and have consistently held that employee benefits should continue through the entire notice period, not just the legislated Employment Standards Act minimum notice periods.

In both Ontario and B.C., the respective Employment Standards Act legislation in each province requires employers to provide terminated employees with a minimum period of notice which maxes out at eight weeks in both provinces. However, on a without cause termination, the Courts across Canada have consistently maintained that the Employment Standards Act notice requirements are just the minimums and generally augment the notice requirement to 2 – 6 weeks per year of employment, depending on a number of circumstances.

Requirement of Employers

The requirement of employers to continue the employee’s benefits through the entire notice period is not without its problems.  While the continuation of extended health and dental coverage throughout the notice period is generally permissible by the benefit provider if premiums are maintained, the same cannot be said for other benefits like Long Term Disability.  Generally, Long Term Disability has a requirement that the employee be “actively employed” for the policy to be valid.  If the employee has been terminated and is not working during the notice period, they cannot be said to be “actively employed” negating coverage.  Further, many Long Term Disability providers refuse to provide coverage continuation for terminated employees, even if the employer is prepared to pay the premiums for such coverage.  This creates a gap in the legal requirements of the employers and the ability to comply with such requirements.  Essentially, the Courts in Ontario (at least for now), are requiring employers to keep employees in the same position during the entire notice period had they would have been if they had not been terminated.  As such, it appears that if a terminated employee (in Ontario) was provided extended health and dental coverage and Long Term Disability Coverage while employed those benefits would have to continue during the notice period whether the provider agrees to provide coverage or not.  If the provider refuses to provide coverage, then the employer would be required to either finance and reasonably similar benefit plan from a third party provider for the terminated employee or at least compensate the terminated employee with compensation for the loss of these benefits.

Employee Benefits | Doak Shirreff Kelowna Lawyers

Risk To Employees

While this has some practicality issues with regard to coverage, there is also a significant risk to an employee if the terminated employee becomes permanently disabled during the notice period and there is no Long Term Disability coverage available and the legislation and courts require such coverage, then the employer could be liable for the losses suffered by the now disabled employee.  These could be incredibly high-value claims against employers.

In my opinion, it is reasonable to continue extended health and dental benefits to terminated employees throughout the entire reasonable notice period.  Employees should, during the notice period be provided exactly the same remuneration level, benefit entitlement and be provided non-discretionary bonuses during the entire notice period.

However, what is the upper limit of employee benefits? Should cellular phone or car allowances also continue?  What if the employee was provided free lunch or gym memberships?  Should those benefits also continue?

In my opinion, British Columbia will eventually follow Ontario and amend its Employment Standards Act to require employee benefits to continue at least through the ESA minimum notice period, but with such changes to the Employment Standards Act, it is reasonably foreseeable that the Courts would also follow suit and require such benefits to continue throughout the entire notice period.

Scott Chambers is an Employment and Human Resources lawyer at Doak Shirreff Lawyers LLP.  Scott can be reached at [email protected] or 250-979-2527.  You can also follow Scott on Twitter at @DSEmploymentLaw and on LinkedIn.