Employer liable for long-term disability coverage during the common law notice period
In Brito v. Canac Kitchens, the Ontario Superior Court awarded substantial damages against the employer for wrongful dismissal, including damages for lost disability benefits, payment in lieu of a 22-month notice period and $15,000 in punitive damages due to the employer’s “hardball” approach to the termination of a long-service employee. The case should serve as a warning to employers who provide only the statutory minimum amount of notice to employees upon termination without cause and plan to negotiate and/or litigate additional entitlements at a later date.
The employee, Luis Romero Olguin, had worked for Canac Kitchens for 22 years. He was 55 years old at the time he was terminated without cause as a result of a restructuring. Upon termination he was given the statutory minimum amount of 8 weeks’ pay in lieu of notice, plus benefits for the same period. While Mr. Olguin found a new job less than a month later, it was lower-paying and did not offer disability benefits.
Approximately four months after Mr. Olguin was terminated, he began treatment for cancer, rendering him totally disabled and unable to work. He brought an action for wrongful dismissal, including a claim for damages in lieu of disability benefits.
Mr. Olguin was awarded a 22-month notice period and Canac was ordered to pay damages in lieu of short-term and long-term disability benefits, including the present value of the remainder of his long-term disability entitlements to his 65th birthday. In coming to this decision, Justice Echlin observed (at para. 13):
Canac consciously chose not to make alternative arrangements to provide its loyal, long-service employee with replacement disability coverage. Rather, it chose to go the "bare minimum" route. It provided only the statutory minimums in pay and benefits and then gambled that he would get another job and stay well. When it lost that gamble, it chose to litigate this matter for over five years. When confronted with its potential significant exposure, it raised the argument that Mr. Luis Romero Olguin failed to mitigate his potential damages by purchasing a replacement disability policy.
Canac failed to establish the plaintiff’s failure to mitigate damages, and Justice Echlin found that insufficient evidence had been led to show that comparable replacement coverage would have been available.
In addition to the award for disability benefits, which was in excess of $200,000, Justice Echlin awarded the plaintiff $15,000 in punitive damages, having regard for “Canac’s cavalier, harsh, malicious, reckless, outrageous and high-handed treatment” of the plaintiff and their “hardball approach”.
This case should serve as a reminder to employers that courts will ensure that employees who are dismissed without cause are “made whole” and will not be limited to statutory minimums when doing so. In addition, Brito v. Canac Kitchens makes clear that courts will extend liability to forms of compensation outside the ambit of traditional remuneration, including disability benefits. Prudent employers should take proactive steps to mitigate these sources of liability by, for example, advising employees of replacement disability coverage, extending disability benefits to terminated employees where possible, offering realistic rather than “base minimum” separate packages or entering into employment agreements with employees which clearly outline employees’ post-termination entitlements.
This decision is also relevant for employers who choose to frequently litigate employment matters before the courts. It appears from the reasons that Canac’s continued strategy of exposing terminated employees to extended litigation impacted the Judge’s decision in this case.