At times, employers have no choice but to dismiss employees, or to lay them off—provided they are permitted to do so in the employment agreement. Sometimes, due to life circumstances, employees must take a leave.
What happens to an employees benefits during this time?
Benefits During Dismissals
When an employee is dismissed, their termination entitlements depend on whether the employee’s notice period falls under statute, common law, or contract law.
Under the Employment Standards Act, 2000 (“ESA”), upon a dismissal where the employee has been employed for at least three (3) months, employers must maintain the employee’s benefit plan contributions during the statutory notice period.
For federally regulated employees, under section 231 of the Canada Labour Code (“CLC”) and where the employer has dismissed an employee who has been employed for at least three (3) months, an employer cannot reduce the rate of wages or alter any other employment term or condition for a period of two (2) weeks.
Where a termination clause is valid and provides for more than the statutory minimums, the employment agreement or collective agreement will govern the period the employee should expect to receive their benefits.
Where a termination clause is not valid or the employment agreement is otherwise unenforceable, the common law will govern, and employees should expect to receive their benefits over the reasonable notice period.
Employees should be careful not to contract out of an employee’s statutorily mandated benefits period—an employee is entitled to their statutory minimums regardless of whether their employment is governed by statute, contract law, or common law.
In Wood v Fred Deeley Imports Ltd, 2017 ONCA 158, the Ontario Court of Appeal held that the termination clause was unenforceable as it did not provide for benefits over the statutory notice period. Due to the clause violating the ESA, the employee was entitled to common law reasonable notice—a much lengthier period than a statutory notice period.
Benefits During Temporary Layoffs
Unless contractual terms expressly outline the contrary, employers are not mandated by statute to continue benefits contributions during temporary layoffs.
In Ontario, the ESA permits a temporary layoff for up to thirteen (13) weeks. An employer can extend the temporary layoff for a period of up to thirty-five (35) weeks within a fifty-two-week (52) timeframe, if they provide the employee with proper consideration.
For federally regulated employees, layoffs can be extended beyond the typical three (3) months if the employer provides proper consideration.
Benefits During Leaves
Under the ESA, an employee taking statutory leave has the right to continue to participate in any prescribed benefit plan, pension plans, life insurance plans, accidental death plans, extended health plans, and dental plans during the leave, unless they elect in writing not to do so.
Under the CLC, an employee taking statutory leave has the right to continue to participate in pension, health, and disability benefits during the leave period.
Where the employee elects to continue making benefits contributions, the employer must continue to contribute as they would have had the employee not taken the leaave.
The above also applies to COVID-19-related emergency leaves.
Contact Us for Help
As assessing whether an employee is entitled to benefits can be tricky and may lead to common law notice entitlements or a constructive dismissal if done improperly, both employers and employees should ensure they speak to a legal professional to understand their rights and obligations.
If you are an employer or an employee seeking legal assistance, our team of experienced employment and human rights lawyers can help. Contact us at 1 (800) 771-7882, or email firstname.lastname@example.org and we would be happy to assist.
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