Benefit Compensation Throughout The Notice Period

Many employers attempt to end benefit payments immediately upon termination, even in ‘non-cause’ or layoff situations. But exactly how legal is this practice?

Canadian Employment Law is highly focused on reasonableness when it comes to compensating employees for things such as severance or damages for employer conduct. Taking this into account, the court in Alpert v. Les Carreaux Ramca Ltée, 1992 CanLII 7748 (ON SC) explored whether an employer is required to compensate a terminated employee for benefits throughout a reasonable common law notice period, even where no expenses related to benefits (medical, dental) occurred.

The Law

As per Section 60(1)(c) of the Employment Standards Act, 2000, an employer is required to continue benefit plan contributions throughout the statutory (s.57 and 58 of the ESA) notice period. The question in Alpert, however, was whether the same principle should be applied beyond the statutory notice period, and into the reasonable common law notice period.

Alpert involved a manager-level employee of four years who was constructively dismissed following his refusal of a revised compensation package (the package was initially proposed in May of 1989, however the Plaintiff had engaged in an exchange with his employer and a counter proposal). His employer terminated him in October 1989 for not accepting the package, which included a fixed bonus, and the Plaintiff subsequently sued for wrongful dismissal.

In determining what notice the Plaintiff was entitled to, the court cited the decision in Bardal v. Globe & Mail Ltd., [1960] O.W.N. 253, 24 D.L.R. (2d) 140 (H.C.J.), which is still utilized by today’s courts in reaching a determination as to what reasonable common law notice is for terminated employees. Given the Plaintiff’s short tenure, age (48) and position of seniority, all of which had an aggravating (elongating) effect on his notice period, the court awarded nine (9) months’ notice.

The court then turned to the issue of benefits. The Plaintiff had claimed the value of his medical benefits in his Statement of Claim, a compensatory element which, at that time, had been denied under British Columbia common law wherein no expenses had actually been incurred (McKilligan v. Pacific Vocational Institute (1981), 1981 CanLII 442 (BC CA), 28 B.C.L.R. 324 (C.A.), and Sorel v. Tomenson Saunders Whitehead Ltd. (1987), 1987 CanLII 154 (BC CA), 15 B.C.L.R. (2d) 38, 16 C.C.E.L. 223 (C.A.)).

Utilizing the decision in Davidson v. Allelix Inc., Ont. C.A., Doc. No. Toronto 809/87, December 17, 1991 as a precedent, a decision in which the Plaintiff had been compensated for the value of his medical benefits, rather than exact expenses, throughout the notice period, the court in Alpert awarded the Plaintiff damages for loss of coverage under his medical plan based on his previous employer’s cost to maintain the plan throughout the nine month notice period, even though the Plaintiff had not actually incurred any medical expenses following his termination. The court also awarded the Plaintiff the value of his car allowance throughout the notice period, as well as reimbursement for his costs incurred during his search for new employment.

Advice for Employers

The common law and ESA both allow for benefit continuation throughout the notice period. If you are unsure about your obligations with regards to this, or other aspects of entitlement when dismissing an employee, contact Monkhouse Law today for a free consultation. A failure to provide benefits continuation throughout a notice period, or to contemplate it in an employment contract can result in future liability.

This is why all contracts, old and new, should be reviewed by an employment lawyer.  

Advice for Employees

Your employer should be generally continuing your benefits, bonuses and other perks throughout a notice period wherein you are terminated without cause. If you have concerns about your entitlements following termination, or are otherwise concerned with a denial of these aspects on the part of your employer contact Monkhouse Law today for a free consultation.

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