In a recent case, the Ontario Superior Court ordered a defendant employer to pay over $300,000.00 to cover a terminated hourly employee’s lost earnings and STD/LTD benefits, as well as punitive damages, costs and interest.  This should serve as a reminder that employers who provide ESA minimums upon termination and roll the dice in litigation sometimes pay a heavy price.

The employee in this case had been terminated as a result of restructuring after nearly 24 years of service, when he was 55 years old. Although he managed to get a new job less than a month after his dismissal, the pay at his new job was much lower and it did not offer disability insurance coverage.

As sometimes happens, the defendant employer in this case had continued the employee's benefits coverage only for the minimum ESA notice period of 8 weeks, and presumably hoped for the best. Unfortunately for all concerned, after the 8 weeks had expired, but before the end of the "common law" notice period (fixed by the court at 22 months) the employee was diagnosed with laryngeal cancer and had to undergo treatment and miss work without pay or disability insurance.  He had worked for 15 months at a new corporation, in mitigation of his damages, before becoming disabled and undergoing medical treatment.

The employee sued his former employer for pay in lieu of common law notice termination, as well as lost STD and LTD benefits, and punitive damages.

The employee was successful on all counts.  Most importantly, but also predictably, the Court rejected the defendant employer's argument that the employee had failed in his duty to “mitigate his damages” by failing to purchase a replacement STD/LTD policy on the open market.  As a result, the court forced the employer to step into the shoes of the insurer, and cover all of the STD and LTD benefits that the employee would have had if he had still been employed by the defendant employer.

The Court noted that the employer had consistently chosen to litigate disputes with all of its employees, listing several "notice" cases which had made their way to trial. Qualifying the employer's overall conduct as "cavalier, harsh, malicious, reckless, outrageous and highhanded", the Court further awarded $15,000 in damages relating to the company’s "hardball approach" towards the employee.

The total award exceeded $300,000 after costs and interest, a whopping sum for an individual who's total anual cash compensation was valued at $71,000 by the Court, and found a new job after a month of looking.

Knowing this, employers may want to think twice before cutting off STD/LTD insurance to terminated employees if they haven't been able to get a signed release.  Further, employers who take "notice” cases to trial can anticipate an unfriendly judicial reception, at least after the first attempt.