Federally-Regulated Employer Liable for Damages for Termination of a Totally Disabled Employee

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In January 2011, an inter-provincial transportation company terminated an employee who had been on medical leave following a workplace accident since December 1989. The grievor was in receipt of benefits under the Workplace Safety and Insurance Act (WSIA). The union, relying on the protections of the Canada Labour Code (Code), grieved the dismissal.

In November 2010, the employer requested that the grievor complete a work capabilities form to determine whether his conditions had changed or whether suitable work was now available. Contrary to representations that his benefits would continue until he turned 65 years of age, the request indicated that if there was no prospect of change in his condition and no suitable work, his employment would be severed. The grievor did not complete the form but informed his employer by telephone that he was in no condition to return to work.

He was subsequently terminated without severance pay or pay in lieu of notice.

At grievance arbitration, the employer submitted that the dismissal was proper on the following basis:

  • the grievor’s absence from work and his continued inability to work had frustrated the contract of employment;
  • the duty to accommodate the grievor could not be fulfilled given that there was no prospect of a return to work in any capacity;
  • under the collective agreement, in order to receive health benefits, an employee is required to have reported to work in the month for which contributions to same were made; and
  • the employer had met its one year obligation to maintain the grievor’s benefits under the WSIA.

The Union argued that the dismissal was a violation of the Code and of the collective agreement on the following basis:

  • section 239.1 of the Code prohibits an employer from dismissing an employee because of absence from work due to work-related illness or injury, and requires that the employer continue to make contributions to the health benefits plan as if the employee were not absent;
  • section 168(1) of the Code provides that the statutory obligations override any law, custom or contract that is less favourable to the employee; and
  • the provision in the collective agreement which provides that absence due to bona fide illness or injury could not constitute cause for discharge.

The arbitrator concluded that the dismissal was not proper and reinstated the grievor. His decision highlights the following points:

  • While section 239.1 of the Code is not an open-ended guarantee of employment status and health benefits, where the circumstances of the employee has not changed (i.e. alternate positions with the employer are not available, alternate employment is not obtained, and medical clearance to return to work is also not obtained) there is to be no change in the employee’s entitlement to employment and the associated health benefits.
  • There is no distinction between absence due to a work related-injury and absence due to the inability to perform work because the former is a direct result of the latter.
  • The Code specifically overrides the common law doctrine of frustration rendering it inapplicable to the employee in these circumstances.
  • With regard to the collective agreement, where the collective agreement contradicts the Code, such as the requirement to work in the months that a contribution is made as in the instant case, it is invalid.
  • Where the provisions of the WSIA are less favourable to the employee, such as those pertinent to this case, the provisions of the Code must apply in their stead.

The grievor was reinstated with full benefits and pension entitlements. He was reimbursed for all expenses which he incurred that would have been covered by the benefits plan had his enrollment been uninterrupted.

This decision has set a precedent for federally-regulated employers faced with employees who are unable to return to work due to illness or injury resulting from a workplace accident. It indicates that short of a change in circumstances whereby the employee is healthy enough to return to work or the employee has found suitable work elsewhere, terminating such an employee promises to be nearly impossible.