Continuation of Benefits beyond the ESA notice period

Terminating an employee is not a pleasant task, nor is it without numerous considerations. Terminations that are ‘not for cause’ represent the vast majority of terminations in the workplace. Making the case for a ‘for cause’ termination is difficult. And, in most cases, an employer can terminate whomever they wish by providing the proper notice and/or pay in lieu. Simply put, terminations without cause are easier and less risky.

Nevertheless, employers still manage to get themselves in hot water because many simply do not understand their obligations at termination. Perhaps the most common error in delivering the required terms of a termination package, is precisely what is not provided, namely continuation of benefits or benefit premiums.

Ontario’s Employment Standards Act (the “ESA”) requires that an employee be provided working notice at termination. This working notice is calculated based on years of service and is up to a maximum of 8 weeks. During this period, the terms of the employment contract and renumeration must remain the same as before the notice was given. The ESA specifically speaks to benefits during the notice period:

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.

The ESA provides the employer the right to pay the worker in lieu of providing working notice. This is a desired practice for most employers. However, a simple but critical false assumption that employers often make is that by providing pay in lieu of notice the employer relinquishes the obligation to keep the employee whole. Many employers provide a shorter benefit period or deny employees benefits altogether. This is in contravention of the ESA.

And the continuation of benefits or the payment of premiums may not end with this notice period. If an employee feels as though they are entitled to common law consideration, in addition to their ESA entitlement, they could seek to lengthen the notice period. The extension of benefits beyond the statutory notice period is a problem for employers as many benefit companies, contractually, will only extend benefits to ‘active employees.’

The case law is clear that an employer is required to make the employee whole for the duration of the common law notice period. This means that the employee would be entitled to all that they would receive as if they were still actively employed, including benefits.

The extension of benefits beyond the statutory notice period is a problem for employers as many benefit companies, contractually, will only extend benefits to ‘active employees.’ Hence, it is critical for all employers to have a well-worded employment agreement with termination provisions that will stick.

Termination clauses can limit notice to minimal entitlements under employment standards law.

Unfortunately for employers, restrictive convents in employment agreements, even when well written, are subject to interpretation and there still is uncertainty in the law as to whether a termination clause will be enforceable.

Because case law is packed with termination clauses that have been shot down, re-written, or ruled unenforceable by the Courts, it is advisable that employers seek the advice of an HR professional or employment lawyer when developing their employment agreement.

Employers need professional and on-going HR services to ensure they effectively and safely manage the hiring and terminations of employees. HRprimed can help! Whether you require on-site expertise, interactive e-learning training or expert on-call HR advice at your fingertips, HRprimed provides expert HR support at an affordable cost that will surprise you. 

Should you have questions or require assistance, please contact Darcy Michaud at 888-609-2071 x 250 or email [email protected]