Yes, You Can Still be Fired if You Are on Long-Term Disability. But Companies Must Beware

An employer can also terminate at any time for just cause without any severance. The courts have set a high bar as to what constitutes just cause, which they have called the “capital punishment” of employment law. The onus is on the employer to prove that the misconduct was so egregious that it was impossible for the employment relationship to continue.

You may wonder how an employee off on LTD leave can ever be fired for just cause. Fireable offences committed before going on leave, but discovered after, can give rise to just cause. You can also be fired for misconduct while on leave, such as fraudulently submitting medical expenses.

After lengthy absences, employers may try to claim frustration of contract as the reason to terminate employment. An employment contract can be found to be frustrated when, due to disability, it is nearly impossible for the employee to perform their contractual obligations, not only then but for an indefinite period prospectively. Arguments for frustration are rarely successful. Again, the courts set a high bar for the employer to meet as it must be proven that there is no reasonable likelihood of the employee being able to return to work within any reasonable time.

In Naccarato v. Costco , the employee was off work due to depression for four years. His doctor could not predict when he would be able to return. Costco argued frustration and lost, with Naccarato awarded 10-months’ pay and legal costs.

However, if the high bar of showing frustration can be met, it will often be economically more attractive. In successful cases of frustration, the employer need only pay the statutory minimums set out in the ESA. Because ESA minimum entitlements are capped at up to 34 weeks, but 24 months at common law, employees are encouraged to seek counsel to fight any such termination based on frustration.

Employers should generally be wary of terminating an employee on LTD. If it can be shown that the termination was in any way motivated by the employee’s disability and frustration does not apply, the employer opens themselves up to heavy financial penalties. Ontario’s Human Rights Code protects employees from discrimination due to disability. It provides that the employer must accommodate the employee to the point of undue hardship. If these rights are breached, the employer can be required to pay punitive and/or aggravated damages, or even required to reinstate the employee with back pay. Back pay alone can amount to many more months than a court would award in wrongful dismissal damages.

So, while it is possible to be fired while on LTD, employers should be wary. Optics can play a significant role before a judge. Even if you fire someone for a legitimate business reason, such as restructuring, if that occurs when the employee just applied for LTD or shortly thereafter, it may be difficult to show that the termination was in no way discriminatory, with the onus on the employer to prove this.

If you are fired while on LTD and believe you are owed severance or may have a claim for additional damages for discrimination, it is important to talk to a lawyer. In many cases the insurer will be able to deduct any severance you receive from your benefits. An employment lawyer with LTD experience may be able to negotiate a settlement with your employer which will minimize this clawback.