Ending Disability Benefits May Itself Be Discriminatory

An employer that improperly ends disability protection may face a claim for the benefits lost. The same conduct may also constitute disability discrimination.

Paragraphs 65–66 of O’Grady v. Bell Canada, 2026 FCA 162, decided September 29, 2026, explain the connection between these two forms of protection.

The employment-law consequences of lost disability coverage do not exhaust the inquiry. Human rights legislation separately governs the employer’s treatment of the disabled employee.

The Disability and the Restructuring

Kathleen O’Grady ceased working in June 2006 because of a mental health disability. Bell funded her long-term disability benefits and arranged rehabilitation services.

While those arrangements continued, Bell eliminated her managerial position as part of a genuine restructuring affecting approximately 2,500 employees.

The Tribunal accepted that disability was not the reason for eliminating her position.

Medical evidence nevertheless supported a graduated return to work. Bell’s disability management process contemplated that she would return progressively, with support, before resuming full-time duties.

Before that return began, Bell terminated her employment on April 20, 2009. Disability coverage ended immediately, although salary continuance was provided until October 27, 2009.

O’Grady experienced a relapse and alleged continuing total disability.

The Established Employment Law Protection

At paragraph 65, the Court discussed the potential employment-law liability arising when an employer deprives an employee of disability benefits.

That protection may apply where the employee is disabled at termination or becomes disabled during the applicable notice period.

Depending on the benefit arrangements and the circumstances, the employer, insurer, or both may face a claim for the value of the benefits lost.

The financial exposure may extend beyond the notice period. Coverage that should have remained available during that period may have produced disability payments continuing afterward, subject to the plan’s terms and the employee’s continuing eligibility.

Paragraph 65 recognizes this potential liability. It does not establish an unconditional entitlement to benefits until age 65 or determine O’Grady’s eventual recovery.

The Additional Human Rights Protection

Paragraph 66 makes a separate point.

Potential employment-law damages do not prevent the same conduct from violating paragraph 7(b) of the Canadian Human Rights Act, which prohibits adverse differentiation in employment on a protected ground.

An employer must therefore consider more than the financial consequences of failing to preserve benefits.

It must also consider whether ending disability protection adversely treats an employee because of disability and, if so, whether that treatment can be justified.

The availability of a contractual remedy does not remove that statutory inquiry.

The Error Was Treating Her as Recovered

The Court drew an analogy with disability-related absenteeism.

An attendance requirement may be legitimate generally. Applying it to an employee whose disability prevents regular attendance may nevertheless establish prima facie discrimination, requiring the employer to justify the treatment through the accommodation analysis.

In O’Grady, Bell similarly treated an employee who still required disability-related protection as though she had recovered.

As the Court stated at paragraph 69:

Essentially, Bell collapsed the distinction between anticipated recovery and actual recovery.

Approval to attempt a graduated return was not equivalent to an actual return to ordinary employment.

Bell ended the rehabilitation arrangements and disability coverage before that transition occurred.

A Genuine Redundancy Did Not Answer the Claim

The Tribunal concentrated on whether O’Grady had been selected for termination because of disability. Having accepted the legitimate restructuring explanation, it dismissed the complaint.

The Court of Appeal held that this overlooked the separate consequences of ending disability protection.

The reason for eliminating the position and the treatment of its disabled occupant required distinct consideration.

Whether postponing termination would have imposed undue hardship, or whether further accommodation was possible, belonged at the justification stage. Those questions did not defeat the initial finding that disability was a factor in the adverse treatment.

Salary Continuance Did Not Replace Continuing Disability Protection

At paragraph 77, the Court concluded that a few months of salary continuance did not offset the loss of ongoing disability coverage following O’Grady’s relapse.

A fixed period of termination compensation and protection against continuing disability serve different purposes.

Whether a payment compensates a particular loss requires examination of the benefit that was lost and the period for which it would otherwise have been available.

What the Court Decided

The Court substituted a finding of prima facie disability discrimination.

It did not finally determine Bell’s liability or award damages.

The complaint was returned to a differently constituted Tribunal to determine whether Bell could establish its bona fide occupational requirement defence and accommodation to undue hardship. If the defence fails, the Tribunal must determine the appropriate remedies.

Although the Court expressed doubt about the apparent strength of the defence, it left that determination to the Tribunal.

What the Decision Does Not Decide

O’Grady does not establish that every termination during disability leave is discriminatory. Paragraph 64 expressly recognizes that termination during disability, without more, does not establish prima facie discrimination.

Nor does it decide whether LTD payments received should reduce a human rights lost-income award.

That offset question concerns the calculation of compensation where benefits have been paid. O’Grady concerns the distinct issue of discriminatory treatment through the termination of disability protection.

The Court also did not determine how any overlapping employment-law and human rights monetary remedies should ultimately be coordinated.

Practical Significance

Paragraphs 65–66 identify two legal consequences that may arise from ending disability protection.

The employer may be responsible for the financial value of benefits improperly lost. Its conduct may also require justification under human rights legislation.

The central lesson is that an employer cannot complete its analysis simply by identifying a legitimate redundancy or providing termination compensation. It must separately assess the employee’s continuing disability, benefit entitlement and accommodation needs.