Alberta court rules against double-dipping in disability payments, lost wages

An Alberta court has ruled that employees receiving disability payments during the reasonable notice period can’t “double-dip” by receiving payments for lost wages.

“The decision affirms the principle that employees are entitled only to what they would have received had they been working during the notice period,” says Sheena Owens, an employment lawyer at Stikeman Elliott LLP in Calgary. “Since employees receiving disability benefits would not be working, and therefore would not collect salary, they cannot be awarded both salary payments and disability payments in a wrongful dismissal claim.”

Of particular interest in Belanger v. Western Ventilation Products Ltd., a decision by Jim Farrington, an Alberta Court of Queen’s Bench master in chambers, is the fact that Farrington reached his decision despite the parties’ agreement that Greg Belanger, an employee with 43 years of service, didn’t receive adequate notice of termination.

On termination, the employer provided one year’s working notice with benefits to continue for at least two years from termination. But Belanger never worked during the notice period: he became ill and began receiving disability benefits from the company’s plan, to which he was entitled until age 65.

Belanger sued for wrongful dismissal, claiming a 24-month severance payment for lost wages with no deductions for the disability payments. Although the company agreed a 24-month period was appropriate, it took the position that, given his disability, Belanger had suffered no damages.

Western Ventilation Products reasoned that, had Belanger actually been working and become disabled at any point during the 24 months, he would’ve been entitled to no more than the disability insurance payments he did receive. The fact that he didn’t receive 24 months of notice made no difference because the disability payments continued for at least that long.

Farrington agreed with the company. “If I find in Mr. Belanger’s favour here, the termination puts him in a better position than [a] hypothetical employee [who had worked for some portion of the notice period and then become disabled],” he wrote in his decision. “I would be awarding payments to compensate for lost wages or pay that would not have otherwise been received had there been no termination.”

Indeed, finding otherwise “would effectively make the employer the insurer of Mr. Belanger’s health in circumstances where the employer took a proactive step in facilitating a disability program for its employees (which ought to be encouraged).”

This reasoning begs the question of whether a disability benefits plan continues during a notice period, especially if the employer decides to pay the employee in lieu of notice. “Whether a disability plan will continue during a notice period or even beyond that depends on the employer’s choices and the terms of the plan,” says Owens.

Still, she suggests employers interested in minimizing their risk should try to maintain disability benefits during the notice period. “Otherwise, if the employee becomes disabled during the notice period, the employer may have to step into the shoes of the insurer. If the employee is a young person, that can become a huge liability.”

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