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A very expensive case of bad-faith termination and sick pay fraud


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I recently read an interesting case about sick pay fraud and bad-faith termination. After reading the employer’s version of what happened, I was pretty convinced that the employer was justified in terminating the accused employee, and would be successful at arbitration. But when I read all the facts of the case, it became clear why the labour arbitrator decided that the termination was unjustified: the employer acted in a completely inappropriate fashion.

The employee was a 47-year-old fleet coordinator who had worked for the employer for about 23 years with no disciplinary record. She hurt herself at work, while exiting a sub-utility vehicle, and eventually required knee surgery for a torn meniscus. After trying to return to work sooner than she could handle, she ultimately obtained a doctor’s note to take sick leave for four weeks. She had to undergo physiotherapy for six months.

Due to a problem with sick pay fraud at the company, the employer decided to use surveillance on the employee while she was on leave. The employer noticed that on a couple of occasions, the employee visited several stores on foot in a brief time span, demonstrating “no discomfort with either leg”.

As a result of the surveillance, the employer requested information from the employee’s physician as to why she required four weeks of recuperation and whether she could return earlier with or without restrictions. The employee got a note from her physiotherapist that stated she was progressing, but “would significantly benefit from one more week off from work”. The employer received the note, but did not take it seriously.

The employee responded by obtaining a note from her surgeon permitting her to return to work with restrictions. The employer kept an eye on her when she returned to work. She was observed leaving the workplace and limping slightly on her right leg and then continuing to walk with “quite a severe limp on her right leg”. She drove to a community mailbox where she was again observed to “limp quite heavily”.

Two days later, the employer called the employee into a meeting and gave her the opportunity to “come clean”. She did not know what to say. The employer felt that if the employee had told the truth or shown some remorse she would have been given another chance; however, she said nothing, and as a result, the employer suspended her for sick leave fraud and continued dishonesty during the investigation.

A few days later, the employer terminated the employee for defrauding the sick leave plan and for her continued dishonesty.

According to the employee, she had a meniscus tear that caused pain, swelling, difficulty with weight-bearing, an altered gait and weakness. There were reasons why she was able to go to the stores the few times she was seen on the surveillance: she was being diligent with her physiotherapy exercises and felt well enough to run some errands. Her balance was improving, but the healing process was not complete. On the other hand, the reason she was having trouble walking on her first day back to work was that she stopped taking painkillers once she started working, and she had not been given modified—sedentary—duties.

The arbitrator found that the employer had to establish that the employee was dishonest in reporting her absences and under questioning, and that her dishonesty resulted in a loss of trust, which made it impossible to continue the employment relationship.

Simply put, the employer failed to do this.

The employer:

  • Did not rely on any medical evidence, but simply on its own observations from video surveillance and a meeting with the employee
  • Assumed that the employee was faking a limp on her return to work
  • Did not consider that the employee remained at home for lengthy periods and engaged in few outside activities while under surveillance; the fact that she was at home most of the time could have prompted further medical inquiries
  • Refused to inquire into the employee’s condition on her first day back when she was apparently limping and displaying an abnormal gait
  • Failed to understand that gait disturbance is outside the expertise of an ordinary person; subtle shifts in posture and gait to accommodate an injury may not be readily apparent, and are not apparent to the untrained eye
  • Did not provide the employee with modified work duties on her return
  • Rejected a valid physiotherapist’s note for reasons that were not credible
  • Came to the meeting with a preconception that the employee was dishonest
  • Failed to consider the employee’s seniority and good work record when disciplining her
  • Ignored a collective agreement clause that allowed sick leave pay upon the mere signing of a statement that an employee was unable to perform duties
  • Did not follow the procedure permitting the employer where it had “reasonable cause to suspect an abuse of sick leave” to challenge the employee’s claimed entitlement by obtaining an opinion or statement from a qualified medical practitioner verifying the employee’s absence
  • Acted unreasonably and in bad faith toward the employee

Thus, the employee did not lie or defraud the sick plan system, and was entitled to significant damage awards.

The arbitrator stated, “Employees are not like tissues to be used up and then thrown out at a whim into the bin of low level employment or unemployment”.

I’m wondering: has your company ever had an employee who committed sick pay fraud? How did the company gather evidence and come to the conclusion that the employee committed the offence?

Christina Catenacci
First Reference Human Resources and Compliance Assistant Editor

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Christina Catenacci

Christina Catenacci, BA, LLB, LLM, was called to the Ontario Bar in 2002 and has since been a member of the Ontario Bar Association. Christina worked as an editor with First Reference between February 2005 and August 2015, working on publications including The Human Resources Advisor (Ontario, Western and Atlantic editions), HRinfodesk discussing topics in Labour and Employment Law. Christina has decided to pursue a PhD at the University of Western Ontario beginning in the fall of 2015. Read more
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One thought on “A very expensive case of bad-faith termination and sick pay fraud
  • Sam says:

    What a great article!
    An interesting read, and great to see justice for an employee who did nothing wrong.
    Thanks for bringing these points to light, and helping me understand an employer’s responsibility in these situations!