How long should employer continue to pay for sick employee?

How long do you think an employer should have to hold a job open and continue paying for benefits for a disabled employee? One year? Two? Five?
An employee we will call Regan worked for four years for a ten-person manufacturing company when she became disabled as a result of a back injury. About a year after the initial injury she tried to go back to work but even with modified duties she has to leave as a result of back pain within a few days.
Regan’s employer had a disability insurance policy and she was paid 66% of her wages while she was off. Every few months she sent a note from her doctor to the employer confirming that she was still unable to perform any duties. After four years had passed, Regan was still collecting disability payments from the insurance company.
Regan got a letter in the mail from the employer indicating that since she had not been at work (except for a few days) for four years and there was no reasonable prospect of her returning to work in the foreseeable future, the employer was taking the position that her employment contract has been frustrated. Her medical/dental benefits coverage would end in eight weeks.
Keep in mind that this does not mean Regan stops getting disability payments. What matters is that you had insurance the day you became disabled. If terminating a disabled employee excused the insurance company from paying out the monthly disability benefits, insurance companies would go around bribing employers to terminate disabled employees. That’s not the way it works. Once Regan has become entitled, she continues to get paid as long as she medically qualifies for those payments.
When an employer takes the position that an employment relationship is at an end because of “frustration”, another way of looking at it is like a no-fault termination. It’s not the employer’s fault that Regan cannot report to work and it’s not Regan’s fault either. Regan will no doubt be distressed that her medical/dental coverage is coming to an end but we have to consider the employer’s point of view.
Imagine that Regan only worked for the company for five months instead of four years. Outside of unionized environments, there is no requirement that employer’s provide benefits coverage at all. Many employees working in small businesses or organizations don’t have benefits coverage. If an employer does provide benefits, there is a cost. Some employers pay 100%, some employers pay half of the cost. If you were running a small business and a five-month employee became permanently disabled, would you consider it your responsibility to cover the cost of her benefits until she reached the age of 65 and keep her job available for her return all that time?
Although you will not find this written in stone anywhere, the general rule of thumb is that after about two to two and a half years, if an employee still does not have any prospect of healing sufficiently to return to work in some manner, the employer can take the position that the contract is frustrated. By the time Regan was terminated, she had eight years of seniority. Since the employer kept her on as an employee, the time off counts. Regan was entitled to eight weeks termination pay as required by the Employment Standards Act as a minimum payment and continuation of her benefits for that period.  Regan has  no right to bring a claim for pay in lieu of notice over and above that amount because the courts will not award pay in lieu of notice over and above the minimums when there is a frustration of contract.
In Regan’s case, the company waited far longer than it had to.
If the employer only pays half of the cost of the premiums, they have a right to require the employee to continue paying the other half while they are off on disability. The employee must be warned that failure to pay their part will lead to the discontinuance of their benefits.
Unfortunately, for people in Regan’s situation, once they’re past the two-year mark, the best they can do is keep their head down, keep sending in those premium payments to the employer and hope that everyone’s too busy to take a look at their file.
As published in the Hamilton Spectator, October 18, 2010
Ed Canning
Ed Canning
P: 905.572.5809