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Wrongful Dismissal Results in Employer Paying Over $1M in LTD
Pasap v Saskatchewan Indian Gaming Authority, 2022 SKQB 200 is a new Saskatchewan Court of King’s Bench decision where the Court found that an employer was required to pay 26 years of Long-Term Disability (“LTD”) payments to a wrongfully dismissed employee. It is also notable that the Court permitted double recovery of the employee’s salary and LTD benefits for a portion of the notice period.
This case is important, as it demonstrates the potential liability employers expose themselves to when providing insufficient notice to employees.
The following are the pertinent facts summarized by the Saskatchewan Court of King’s Bench:
- The Plaintiff employee, Mr. Pasap, was employed with the Bear Claw Casino (the “Casino”) for five years and was working as a Facilities Manager at the time of termination. He was responsible for the Casino’s maintenance, supervised 15 employees, and reported to the Casino’s General Manager. As part of Mr. Pasap’s employment, he was entitled to receive Long Term Disability benefits from Great-West Life (the “Disability Plan”).
- Due to a back injury, Mr. Pasap went on disability leave in March of 2011 and did not return to full-time hours until April 2012. The Casino’s General Manager, Mr. Littlechief, claimed that Mr. Pasap’s work performance declined when he returned from his disability leave. On August 17, 2012, Mr. Littlechief arranged for a meeting in his office to discuss performance concerns.
- At trial, the Casino argued that Mr. Pasap resigned during the meeting once Mr. Littlechief brought up his concerns. Conversely, Mr. Pasap argued that the Casino terminated his employment after Mr. Littlechief gave him an ultimatum to either resign or be terminated.
- Four months after the employment relationship ended, Mr. Pasap collapsed in a parking lot after suffering a congestive heart failure, which required immediate surgery (the “Medical Event”).
- Pasap argued that the Medical Event rendered him “totally disabled” within the meaning of the Disability Plan and that he remained disabled until the date of trial. As such, he claimed but for his wrongful dismissal, he would have qualified for Great-West Life’s disability payments.
- The Casino argued first that Mr. Pasap resigned and was not terminated. In the alternative, they argued that if he was terminated, his condition would not have satisfied the Disability Plan’s definition of “totally disabled.”
Analysis / Conclusion
Based on written correspondence between the two parties that corroborated Mr. Pasap’s version of events, the Court found that Mr. Pasap was terminated and did not voluntarily resign. Justice McMurtry subsequently determined that Mr. Pasap’s reasonable notice period was eight months.
Justice McMurtry then turned to the issue of Mr. Pasap’s entitlement to LTD payments. To qualify, Mr. Pasap needed to demonstrate that he met the definition of “totally disabled” within the meaning of the Disability Plan, which required the following:
- That his disability persisted for 120 days or more (the “Waiting Period”); and
- After the Waiting Period, his disability prevented him from doing “the substantial duties of his own occupation.”
The Waiting Period ended three days before Mr. Pasap’s notice period expired. As such, if Mr. Pasap had not been wrongfully dismissed, he would have qualified for and received LTD.
Per the terms of the Disability Plan, Mr. Pasap would have been entitled to receive benefits for 24 months (until April 2015), after which he would need to satisfy a higher definition of “disability” to continue to receive benefits. He would need to show that:
- His disability prevented him from performing any gainful occupation that would enable him to earn 66.67% of his pre-disability earnings (the “Definition Change”).
Justice McMurtry found that Mr. Pasap would have satisfied the Definition Change, as his disability prevented him from holding any gainful employment from 2015 until the date of trial. Justice McMurtry ordered the Casino to pay Mr. Pasap LTD benefits reflecting his entitlement from April 13, 2013, through to is 65th birthday (26 years).
Justice McMurtry also found that the Disability Plan was a “cost-shared” plan. As such, between the expiration of the Waiting Period (April 13, 2013) and the end of Mr. Pasap’s notice period (April 16, 2013), he was entitled to recover both LTD benefits and his salary, with Sills v Children’s Aid Society of the City of Belleville (2001), 2001 CanLII 8524 cited as authority.
The Ontario Court of Appeal in Sills found that whether disability payments are deductible from wrongful dismissal damages depends on the terms of the employment contract and the intention of the parties. Despite the potential for double recovery, the parties to an employment contract can agree (or it can be inferred from the agreement) that the employee is entitled to receive their salary and LTD benefits. Absent express language to the contrary, cost-shared plans imply that the employee retains disability benefits in addition to wrongful dismissal damages, as cost-shared plans are akin to private insurance contracts.
This case was decided on principles of contractual interpretation. While not technically binding in Alberta, its reasoning is applicable across all jurisdictions. Alberta has mixed caselaw on the issues in this case, but this case could affect that and should serve as a strong consideration for employers when either alleging cause or providing employees with working notice or a severance package.
The Casino was liable for the LTD Benefits because they did not provide Mr. Pasap with any notice or continuation of health coverage. Had the Casino provided him with sufficient notice and continued his coverage through the notice period, he would have remained insured under the Disability Plan and qualified for LTD after the Waiting Period. After qualifying, any disagreement regarding Mr. Pasap’s coverage under the plan would have been between him and the insurer. However, because of the Casino’s breach, it became solely liable for the entirety of the damages.
Lastly, courts do not presume that a dismissed employee is entitled to both wrongful dismissal damages and disability benefits during the notice period. Typically, disability benefits are deductible from wrongful dismissal damages, as they would constitute double recovery. However, disability policies are integral parts of employment contracts. As the failure to provide working notice is a breach of the employment contract, the employee may be entitled to damages from the breach of the employment contract and the disability policy.
Cost-shared plans, where an employee contributes to the disability plan premiums, are akin to private insurance contracts. In this context, the reason the employee can benefit from both the wrongful dismissal damages and the LTD is because the employee effectively pays for the benefits in question.
The Casino’s obligation to pay Mr. Pasap’s salary and LTD benefits for those last three days may not seem substantial, but the Casino’s failure to do so is the reason Mr. Pasap lost out on LTD for the remainder of his working life. The principles in this case highlight a significant risk for employers, specifically concerning employees with longer notice periods.
Bow River Law provides these regular legal blog articles for the purposes of legal education and research for the public and the legal profession. These articles should be considered general information and not legal advice. If you have a legal problem, you should speak to a lawyer directly.
Michael Hernandez is an employment lawyer at Bow River Law. He is a knowledgeable and skilled lawyer, handling employment law, human rights (discrimination) and labour law matters. Bow River Law is based in Calgary but we are Alberta’s Workforce Lawyers.