Howard Levitt: Companies can be on the hook for huge LTD payments if they fire employees without care

— a recent decision out of Saskatchewan — serves as a sobering reminder to employers in all jurisdictions of their potential liability for an employee’s LTD benefits. Pasap was employed for five years as a facilities manager. The casino gave Pasap an ultimatum: resign or be fired. The court found that the ultimatum amounted a termination giving rise to damages of eight months’ salary and benefits.

Four months after his termination, Pasap suffered a heart attack requiring immediate surgery. The court found that Pasap would have qualified for long-term disability benefits had he been provided with working notice. Since the employer discontinued LTD benefits prematurely, it effectively stood in the shoes of the LTD insurer. Justice McMurtry ordered the casino to pay Pasap over $1 million in LTD benefits.

When employers cut off LTD benefits prematurely, they are not afforded the same remedies as insurance companies. When an employee succeeds against an LTD insurer after a denial of benefits, courts normally award pay up to the date of trial and put the employee back on the LTD policy indefinitely until they recover or reach age 65. The insurer can then assess whether the employee continues to be disabled, especially since some employees get better with appropriate treatment and time.

But when employees succeed against their employers for LTD benefits, putting the employee back on the policy is not an option because employers are not insurance companies. Rather, employers are left holding the heavy bag of benefits payments to age 65, as though the employee would be disabled for the entirety of the policy.Article content

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