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Myths and misunderstandings regarding employees on leave

Myth Busted

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As more employees spend time on leaves of absence, employers seem to be struggling to understand their rights and obligations.

First, there seems to be widespread belief that employees on leave are somehow entitled to more protection than their colleagues who remain actively at work. In recent years, many organizations have seen downsizing or “right-sizing”, with the result that a number of positions and even entire departments were eliminated. However, many organizations were under the false impression that they could not terminate the employment of an individual on leave. As a result, they might dismiss 11 out 12 people in a department that was eliminated, but maintain the 12th employee on payroll as they were on leave and deemed to be “untouchable” at the time.

It is certainly true that an employee cannot be dismissed, or otherwise penalized, due to the fact that they have taken leave. However, the fact that they are on leave does not protect them from any legitimate and unrelated termination of their employment. Simply put, employees on leave are not entitled to greater protection than their colleagues that are at work.

Needless to say, however, the employer should be prepared to prove that the dismissal was entirely unrelated to the taking of leave or the underlying cause (for example, a pregnancy or disability). The onus will effectively fall on the employer, if the termination is challenged, to prove their case. Furthermore, even if only a very small part of the reason for the dismissal was the taking of leave or a protected ground under human rights legislation, then the employer will face liability.

There is also widespread confusion regarding what happens when the individual is ready to return to work at the end of their leave. In most cases, the employer will have an obligation to return the individual to the same position that they held prior to the period of leave. This does not mean a similar position, or a position of the same pay grade. What it means is that if the position that the individual previously held still exists, they must be put back into that position.

I have seen situations where employers attempt to circumvent this obligation by renaming the position, or modifying the job duties ever so slightly and then deeming it to be a new position. Courts and tribunals will assess the reality of the situation. If the purported elimination of the position is found to be a sham, then the employer will be penalized. If the position that the individual held prior to their leave truly no longer exists, then the obligation will usually be to put them into a “comparable position”.

An issue that I am often asked about has to do with employees that are on medical or disability leave for extended periods of time. There are various myths out there regarding how long an employer has to wait before they can deem the contract to be “frustrated” and terminate the relationship. The most common myth is that the employer must wait two years. This seems to have its genesis in the fact that most disability insurance policies provide that benefits will be paid during the first two years if an individual is unable to perform their current job. However, after two years, most policies change and will only pay benefits if the individual is unable to perform any job. What often happens is that the employer learns that the individual on leave has had their disability benefits cut off. The employer then concludes that they are entitled to terminate the employment relationship or, alternatively, to insist that the employee is no longer disabled and must therefore return work. If they do not, the employer then threatens to terminate the employment relationship or “deem the individual to have abandoned their employment”. Either way, they are mistaken.

It is important for employers to understand that eligibility for disability benefits and entitlement to medical leave are two very different concepts. It is entirely possible that an employee will not be entitled to disability benefits, but will still be disabled in the sense that they cannot return to work. As we all know, employers have a duty to accommodate the disabled worker to the point of undue hardship. This can include allowing them to remain on medical leave.

So when can an employer deem the employment contract to have been frustrated by the employee’s inability to work?  There is no black and white rule. There are many cases in which employees have been off work for years and the courts have said that the contract had not yet been frustrated. The courts will assess whether there is any reasonable likelihood that the individual will be able to return to work in the reasonably foreseeable future. If there is, then it is unlikely that the court will conclude that the contract of employment had been frustrated.

This was an issue that the court faced in a recent case involving Costco. The employee, Mr. Naccarato, had been off work for approximately five years. Costco terminated Mr. Naccarato’s employment based primarily on his family doctor’s report, which indicated that it would not be possible to state when Mr. Naccarato could return to work. Not surprisingly, Mr. Naccarato sued for wrongful dismissal. Costco lost, primarily because there was no medical evidence to support a conclusion that there was no reasonable likelihood that Mr. Naccarato could return to work in the reasonably foreseeable future. Furthermore, in light of the large-scale operation of Costco, there was no basis upon which to conclude that his ongoing absence hurt the company in any meaningful way. As a result, continuing to accommodate him by allowing him to remain on leave did not constitute undue hardship.

In all cases, employers should be aware of their rights and obligations and not make any assumptions.

Stuart Rudner
Miller Thomson LLP

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Stuart Rudner

Employment Lawyer at Rudner MacDonald LLP
Stuart Rudner is a leading HR Lawyer and a founding partner of Rudner MacDonald LLP, a firm specializing in Canadian Employment Law. He provides clients with strategic advice regarding all aspects of the employment relationship, and represents them before courts, mediators and tribunals. He is the author of You’re Fired! Just Cause for Dismissal in Canada, a textbook and database of summary dismissal cases published by Carswell. Read more
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3 thoughts on “Myths and misunderstandings regarding employees on leave
  • Kellie Auld says:

    I am so happy to see this article! I recently advised an employer that he could let go of someone on maternity leave because it was very clear that it had nothing whatsoever to do with her being on leave. The question I told him to ask himself is, if that person were here, working today; what would your decision be and why? If you can clearly show that the termination would have occurred regardless, then he fact that this person is on leave for maternity has no relevance to the decision.

  • Karen,

    As I mention in the article, it is important to distinguish between eligibility for disability benefits and inability to work. In many cases, benefits will be denied, but the employee will still be unable to return to their position. If that is the case, then they would be entitled to accommodation. If a return to work, on regular or modified duties, is not viable, then a leave of absence would be appropriate. In that case, benefits must continue on the same basis as they were provided before. In other words, if the employer paid 100% of the premiums before, they must continue to do so. Ultimately, the contract of employment may be frustrated, as discussed in the article.

  • Karen Swolfs says:

    Hi Stuart, great article! If the employee is not entitled to disability benefits (let’s say the insurance company declined the disability claim) and the employee does not return to work, is the employer required to maintain their benefits? Now the employee technically falls under the “not actively at work” definition of the insurance contract. And, if the employer keeps the benefits inforce, can the employer require the employee to pay 100% of the cost of the benefits?