Well-crafted employment agreements can protect group plan sponsors
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The best way for employers to ensure their benefits plans don't run afoul of labour laws or human rights legislation is to ensure they have a properly prepared employment agreement or letter as soon as they hire new employees, says a Toronto lawyer.
George Vassos, a partner with Littler LLP, told the May meeting of the Canadian Group Insurance Brokers (CGIB) in Vaughan, Ont., that employers often get themselves into trouble when it comes to dealing with benefits issues and their staff.
Many cases have found their way to the Supreme Court of Canada over the past 25 years with the result that high-court judges now designate employees as a "vulnerable group in society worthy of the protection of the court," said Vassos. So from Day 1, generally speaking, an employee has a legal leg up on an employer even before a case has time to develop.
Best defence
He stressed to group insurance brokers at the meeting that their employer clients should realize that their best – and sometimes only – defence lies in a specially crafted piece of paper.
"If you remember nothing else…and you want to assist employers, the best advice you can give an employer is to have an employment contract. It's fundamental. It doesn't have to be fancy, but you eliminate a lot of grief if an employment letter or a hiring contract is signed at the beginning of the employment relationship."
The contracts can be oral or written, but they can best reduce or even eliminate risk if they are properly drafted contracts, he said.
Duty to advise
As a result of some Supreme Court rulings, employers have a duty to advise their workers about details of their benefits packages, including subjects such as which life insurance option to select, as soon as they are eligible to get these benefits.
Employers also have to be cognizant of benefits issues that can take place with workers throughout their employment. One case Vassos cited dealt with an employer who inexplicably told the firm's insurance company that an employee was no longer working with the firm after she left work. The employer asked that coverage, including life insurance benefits, be terminated. A judge later declared that it was up to the employer to find out why the employee was not back at work and because he did not do this was found negligent. (It turned out that the employee did not return to work after discovering that a pre-existing cancer had spread. She later died.) The court found the employer liable for $42,000.
Often times, said Vassos, a "frustration" in law can occur, when through no fault of either party, a contractual obligation can't be performed – in these cases, because of illness or disability. The onus is on the employer to prove frustration.
Human rights laws
Employers must also deal with provincial human rights laws. All human rights legislation across the country forbids discrimination based on various grounds, including disability. "And this list of grounds keeps growing all the time, province by province," he said. Vassos said the only possible basis on which dismissal for disability might be sanctioned is frustration.
"The message for employers is that employees shouldn't be terminated on account of frustration unless there is due consideration for human rights legislation and in particular, a duty to accommodate a disabled employee and what is or isn't possible in that regard."
Vassos said language must be clear as to when benefits for an employee can be cut off and stressed that this information should be in at least three places for the worker to find – an employment contract, the benefits package and the company policy.
Any time an employer needs to deal with the termination of a disabled person and benefits, red flags should immediately go up. "Indeed, no benefits should be discontinued or altered for someone off on disability in the absence of a thorough review. You really do need to pay careful attention because you can get yourself into trouble under common law, under contract, under human rights, under statute, if you are not paying full attention to all of the particular circumstances of that particular case."
Vassos said employers contemplating terminating an employee should first contact the insurance broker to discuss coverage. He said employers should consider negotiating extended coverage for a terminated employee, adding some insurers may be agreeable to prolonging coverage beyond the statutory notice period.
Some employers may consider giving employees working notice, allowing the employee to continue at the company, getting full pay and benefits. The downfall of this is that an upset worker may be unproductive or potentially harmful during this time, he said.
Regardless of these issues, Vassos said the employer should receive a full and final release signed by the employee. When in doubt of what steps to take, employers should contact an employment lawyer, he said.
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