Employer permitted to terminate employees receiving LTD benefits

No prospect of employees returning to work meant no further accommodation was possible
By Jessica Bungay & Amy Gough Farnworth
|employmentlawtoday.com|Last Updated: 08/08/2017
Employment law
The decision, Brunswick Smelter and USW, Local 7085 (Haché), Re, provides a useful precedent for employers embroiled in such a dilemma. Google Street View

A recent New Brunswick Labour Adjudication decision addressed the sensitive issue of terminating permanently disabled employees on long-term disability leave (LTD). The decision, Brunswick Smelter and USW, Local 7085 (Haché), Re, provides a useful precedent for employers embroiled in such a dilemma.

Eight employees were terminated, on a non-disciplinary basis, by the employer after it was determined that the employees were totally and permanently disabled and never able return to the workplace or any gainful employment. All of the terminations were grieved; however, six of the grievances were resolved in advance of the arbitration hearing. Thus, the hearing dealt with the termination of two employees. The two employees had been on an extended medical leave for six and eight years respectively.

The termination had no impact on the employees’ long-term disability benefits, which would continue until age 65 so long as the employees remained disabled. However, the “employee” benefits that had been provided by the employer ceased upon termination. These benefits included pension contribution payments and health benefits.

The union claimed the employees were unjustly dismissed and subjected to disability discrimination. The union further claimed that the language of the pension, health benefit and collective agreements acted to fetter the employer’s ability to terminate the employees. The union sought the employees’ reinstatement as “employees” under the collective agreement so they could retain the health benefits and pension contributions associated with employment status.

The employer took the position that the employees’ non-culpable absenteeism resulted in frustration of the employment contract. There was no dispute that neither of the employees would ever be able to perform any work, so the employer maintained that termination was justified, due to undue hardship and accommodation was impossible. 

Prior to terminating the employees, the employer had independently verified the medical prognosis by obtaining medical documentation directly from the employees. The employer conducted an accommodation assessment and concluded that continuing to employ totally and permanently disabled workers was undue hardship. The evidence was clear that both employees were totally and permanently disabled. There was no possibility of the employees ever returning to any work. The arbitrator held that the employer had accommodated the employees to the point of undue hardship and further accommodation was impossible. The arbitrator fully endorsed the systematic and individualized review of each employee’s medical information and circumstances completed by the employer to confirm undue hardship in each case. The language of the collective agreement did not fetter the rights of the employer to terminate employees who were totally and permanently disabled and for which undue hardship had been established. The grievances were dismissed.

This decision reinforces the limits of an employer’s duty to accommodate. In this case, the terminations of these totally and permanently disabled workers was fully justified, resulting in the cessation of significant employer obligations for pension contributions and health benefits for employees who would never be able to return to work as a result of their extensive disabilities.

What this means for employers

Employers with employees who have been absent from the workplace for a significant period of time due to medical reasons should independently verify the medical prognosis of the employees by obtaining an up-to-date medical report from the employee’s treating physician. The employer can then use this information to conduct an individualized review of the employee’s circumstances to determine if any accommodation is possible. Prior to severing the employment relationship, employers should consult with legal counsel to determine if undue hardship has been established.

For more information see:

  • Brunswick Smelter and USW, Local 7085 (Haché), Re, 2017 CarswellNB 139 (N.B. Labour & Employment Bd.).

Jessica R.W. Bungay is an associate in the Fredericton office of Cox & Palmer, practicing employment, labour, human rights, and administrative law. She can be reached at (506) 453-9612 or jbungay@coxandpalmer.com. Amy R. Gough Farnworth is counsel in the Fredericton office of Cox & Palmer with expertise in management-side labour, employment, and human rights law. She can be reached at (506) 453-9615 or agoughfarnworth@coxandpalmer.com.

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Comments (3)

Benefits after Disability Ceases at 6538/3/2017 1:32:14 PMOur LTD policy ceases at 65 and there is disagreement amongst the department as to whether we can terminate health benefits at that time. I think because the employee is no longer approved for LTD and is not returning to work, that we can terminate the benefits. Other colleagues disagree...thoughts?
ms28/4/2017 11:39:22 AMIs there an appeal process? This seems to lay the groundwork for other mean-spirited despicable employers. My own has this in the works, working with the union. What happens to these people in the USW now?
appealing and frustration of contract - Administrator18/23/2017 10:00:33 AMIn most jurisdictions there is a mechanism in place to appeal, so that is likely an option for this if the employees choose to pursue it.

The issue is essentially accommodation. Employer must accommodate employees with a disability up to the point of undue hardship. In this case, the employer maintained their status as employees with full benefits while they were on LTD. However, when it became clear the employees would never be able to perform work in any fashion for the employer, the employer reached the point of undue hardship and was no longer required to keep them as employees. An inability to perform work with no prospect of ever being able to is generally considered a frustration of the employment contract.