Ensure That You Are Insured

Many businesses offer their employees a benefit package, which sometimes includes long-term and short-term disability insurance. This type of income security program is greatly appreciated by employees who, for whatever reason, become unable to complete their required duties.

Insurance companies often try to limit the circumstances in which they will provide coverage.  One common limit on disability policies is that they do not apply to "inactive" employees.  This most often comes up when the employee has been terminated without cause.

When you terminate an employee without cause, you may be required to pay the employee a certain number of weeks of termination pay.  During that time, you cannot change the terms of their employment. This means that you must maintain all of their benefits until that number of weeks has passed.  Unfortunately, most insurance companies do not automatically extend their policies to cover this situation.  It is common to see termination packages where an employer states that "all of your benefits will continue during this period, except long and short-term disability".

The problem is that you have now violated the Employment Standards Act.  Your reaction is "well, my insurance company doesn't provide coverage, so there's nothing that I can do".  Be warned: There was a gentleman in British Columbia who became disabled during the notice period.  The employer did not have the coverage it was required to have under their employment legislation.  The employer was liable for what the employee would have received in disability payments.  Unfortunately for the employer, the employee was permanently disabled and the employer had to pay the disability payments from that time (the employee was in his early 40s) to when the employee turned 65.

It is the employer's obligation to ensure that the benefit coverage you provide is available during periods of "inactive" employment.  You should contact your insurer to make sure that your coverage complies with the Act.  If it does not, you should insist on them providing you a policy that does comply with the Act.  Some insurance companies will extend coverage to cover the notice period, but only if you notify them in advance of the termination and, possibly, pay extra premiums.

You are perfectly within your rights to insist that the insurer provide a policy that does not contravene provincial legislation. Failure to do so exposes you to significant potential liability.