Human Rights: Damages: Lost Income: Disability Insurance

Common Law

A brief summary of the apparent present status of the common law is that a plaintiff is allowed to sue for lost income in a wrongful dismissal claim and maintain long term disability benefits without offset where the plaintiff has contributed directly or indirectly to the full cost of the premiums for such insurance. ¹

The origin of the possibility of such double recovery stems from the Supreme Court of Canada decision ² which stated that there was an obligation at common law that an employer must pay common law notice compensation to an employee who suffers from a medical disability, absent frustration.

Application of Double Dipping to Human Rights

This principle has been applied in human rights decisions.^{3 4}

Should McNamara apply to Human Rights?

The question of the analysis of this issue to human rights cases is a point which is most worthy of debate. In the application of the “but-for” test, the employer may well submit that the sole sum to be paid, but-for the termination, would have been the disability insurance payments, which would appear to be a logical submission. This argument has not been raised in any tribunal decisions to date. If this argument is accepted, there can be no double recovery.

Take for example, an employee who was suffering emotionally from harassment, could not work and was about to apply for disability benefits when she was terminated. Had the termination not followed – what would have otherwise happened? She would have remained off work and collected disability benefits. Why should her recovery exceed this sum?

No Lost Income Due to EI & LTD

A similar, but not the same, context arose due to adverse treatment of the applicant who suffered from a debilitating liver disease. An order of reinstatement was made even when the applicant was unable to return to active employment. No order was made of lost income as it was determined that there was no income loss due to the applicant’s receipt of employment insurance benefits, presumably of the sickness genre and long term disability insurance payments. ⁵

The decision does not reflect that the submission of double recovery was made before it and hence it would be an exaggeration to suggest that this decision may enable the argument.

WSIB

A comparable, but also not identical, issue arose in a case ⁶ in which the applicant had proven that he had been treated adversely due to the failure to accommodate a medical disability.

On the issue of the lost wage claim, the employee asserted that while he had received WSIB benefits, such should not be offset from the lost income claim as they were “locked-in”.

The Tribunal decided, in the application of the “but-for test”, that had the employer provided proper accommodation and allowed the employee to return to work, his worker’s compensation benefit would have ended. Hence the denial of the WSIB offset would have bettered his circumstance and accordingly this sum reduced the lost income claim.

If Double Dipping is Disallowed

LTD in Place

The plea of “but-for” to deny double recovery, as noted above, may also lead to a stream of disability income which continues for the entirety of the period of the disability as in Prince v Eaton, a common law wrongful dismissal case, as discussed elsewhere.

That is, the but-for analysis would place the applicant in a position of insured employment. They should be restored to that position for which covered insurance would follow. The damage then will be loss of disability benefits for the duration of the period of the medical disability.

Take for example, the decision in the Walsh case. ⁷ It is not apparent from the decision if there was disability insurance coverage in place at the time the medical disability arose.

If not, it was arguable that the employer was responsible for the loss of the disability coverage for the entirety of the period of the medical disability. ⁸Where one such foreseeable event may be an application for disability benefits, then the claim should follow against the employer for the full extent of such loss.

The common law wrongful dismissal case looks to that which is reasonably foreseeable in the notice period, whereas the tribunal uses the “but-for” analysis to determine the loss. In the case of the claim for disability benefits, the two approaches are in harmony. The applications of the differing logics produce the same result. The difference between the two lies in the eligible time for the claim to arise. The common law will use a notice period. The human rights case does not. The latter will use the time to the date of the hearing and arguably beyond.

This very issue was reviewed in a 2008 decision of the B.C. Human Rights Tribunal. ⁹ The applicant had suffered a medical disability, unrelated to unfair conduct of the employer. She did receive LTD benefits.

The Tribunal concluded that there was no lost income claim as had the employer not acted unfairly, the applicant would have been unable to work and hence there could be no lost income claim. In this case, the medical issue was not caused by the unfair treatment.

That being said, the Tribunal did opine, in obiter, that a different result may have followed, had the employer caused the disability.

No LTD

Equally, the converse argument is that absent short and long term disability covers, the employee’s recovery for relief may be lie solely in the short term solace offered by the Employment Insurance Act for sick benefits.

Employer’s Conduct Causes the Disability

The exception to this submission is where it is the employer’s conduct which caused the disability in which instance a damage award should follow, regardless of the existence of disability insurance. It is in this fact situation where arguments of double recovery may arise.

Second Thoughts

As noted, the down side to the employer is that the loss may be identified as a claim for LTD and related benefits such a medical and health insurance covers and pension accruals for the entirety of the disability period, one which is not related to the date of hearing. The employer would be prudent to keep disability covers in place as the termination of disability insurance will shift the liability unto itself. This could be a significant liability. ¹⁰

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1. In the Ontario Court of Appeal decision in McNamara v Alexander Centre Industries, at trial and on appeal
2. Sylvester v BC. There is also law allowing short term disability sums to be doubly recovered, as in in Zorn-Smith v Bank of Montreal. There is some debate as to whether Sylvester has been substantively eroded by Ontario Court of Appeal in Egan v Alcatel.  The employer’s application for leave to appeal to the Supreme Court was dismissed. Egan appeared very much to contradict Sylvester. Egan was not argued in Altman v Steve’s Music which applied Sylvester and allowed double recovery. It was also allowed by the Ontario Court of Appeal in Deyonge v Liberty Mutual, which was pre-Egan.
3. March 2012 decision of the Alberta Human Rights Commission in Schulz v Lethbridge (McFetridge);Kerr v Boehringer Ingelheim (Parrack)
4. The principle of potential double recovery was allowed in concept, but denied on the facts as it was determined the fact that the employer paid the disability insurance premiums and hence did not meet the test.  This decision was the subject of an unsuccessful judicial review application and subsequent appeal on issues which were not related to the issues of lost income claim summarized above.
5. This was the decision made in The Yukon Human Rights Board of Adjudication in its December 2008 decision of Hayes v Yukon College (Evans, Tkachuk and Riseborough)
6. Backs v City of Ottawa (Muir), a decision made in February of 2012. 
7. The Alberta Court of Appeal in Walsh v Mobil
8.   in accordance with Prince v Eaton principles as was applied by the late Mr. Justice Echlin in Brito v Canac and confirmed in the Court of Appeal.
9.  Senyk v. WFG Agency Network (No. 2)
10. The issue may not be this simple as most disability insurance requires “active employment” for coverage.