As mentioned in our section, bonuses on termination, an employer is required to pay an employee all forms of compensation that would have been received had the employee continued work during the reasonable notice period. This includes, among other forms of compensation, salary, benefits, commissions, pension contributions, stock options, car allowances, etc.

Accordingly, and in accordance with the Employment Standards Act (ESA), an employee is entitled to benefits continuation for the statutory notice period (equivalent to one-week per year worked up to a maximum of 8 weeks). The ESA reads as follows: “During the notice period under section 57 or 58, the employer shall continue to make whatever benefit plan contributions would be required to be made in order the maintain the employee’s benefits under the plan until the end of the notice period.”

“During the notice period under section 57 or 58, the employer shall continue to make whatever benefit plan contributions would be required to be made in order the maintain the employee’s benefits under the plan until the end of the notice period.”

What Happens to Disability Insurance Coverage on Termination?

Some of our clients that have been terminated from employment were injured or ill around the date of termination and may be involved in disputes with their long-term disability (LTD) insurance provider. In addition, many employers’ will attempt to refuse to extend disability insurance coverage throughout the reasonable notice period.  However, case law in Ontario suggests that LTD coverage ought to be continued during the entire reasonable notice period, not only the statutory notice period, or else an employer will be forced to step into the shoes of the insurer, and pay out disability benefits should the terminated employee satisfy the test for disability during the notice period.

Long-Term Disability (LTD) policies often require the employee to be actively at work in order to remain covered. Accordingly, when an employee is terminated, an insurance carrier will often terminate benefit coverage.

Given that all benefits are to be continued during the notice period, and insurers will typically terminate LTD coverage, the obligation is on the employer to ensure that the terminated employee still have disability insurance coverage.  We have seen employers provide subsidies for replacement disability coverage, or they have continued to pay premiums unilaterally to ensure the employee remains covered during the notice period, or, they may try to structure the Full and Final Release of your severance package in a manner that releases them from all obligations to maintain continuous coverage for LTD benefits beyond the statutory notice period.

Employers are especially careful around the issue of LTD benefits as recent cases, including Brito v. Canac Kitchens, have found that if an employee becomes disabled during the notice period when the insurer has pulled coverage, the employer may become liable for the payment of disability benefits, which can amount to 100’s of thousands of dollars if the terminated employee remains totally disabled from their employment (pursuant to the terms of the insurance policy) until the age of 65.

Employers are required to continue all forms of compensation during the reasonable notice period in your severance package. For a free review of the severance package, contact our employment law firm to determine whether you have received a fair offer.