»An Employee is on LTD: Can their employment end?

Labour & Employment Newsletter

An Employee is on LTD: Can their employment end?   

Summer 2019

Employees who are absent from work and receiving long term disability (“LTD”) benefits can pose a sensitive problem for employers. Absences of short duration are less concerning for employers, but questions often arise when an employee is absent and, to use informal language, is “on LTD”. What happens when it becomes likely that an employee will not return in the foreseeable future, or perhaps, ever?  This newsletter identifies some of the factors for employers to consider.

Many employees believe that their employment cannot be terminated while they are on sick leave or on LTD.  That belief is not quite right. As we reviewed in an earlier newsletter, there is a concept called “innocent absenteeism” which says that an employer can consider an employment contract to be frustrated and at an end at a certain point. The concept of innocent absenteeism can apply even when an employee is on LTD, but there are extra considerations which we review in this newsletter. Specifically, we comment on why an employer might need to address the employment status of an employee who is absent, review the law on innocent absenteeism and then identify a particular concern with employees who are on LTD.

Why would an employer need to address the status of an employee who cannot attend work regularly?

There are legitimate business reasons why an employer might have to address the employment status of an employee who cannot attend work regularly.  The employer might simply need to have someone who can regularly attend work and perform the job. Sometimes the employer has ongoing financial obligations for benefit plans but cannot afford to continue paying for benefits for an absent employee. There could be other reasons too.

When can an employer consider an employment contract frustrated?

Courts and other adjudicators have been clear that an employment contract can be frustrated and therefore at an end where two factors exist.  First, the employer must establish that the employee has a record of excessive absenteeism. Second, there must be a prognosis that the employee is unable to regularly attend and perform their work in the reasonably foreseeable future. Some legal decisions have held that there is a third factor, too, requiring the employer to have given notice to the employee that it was considering the employment contract to be nearing frustration.

Of course, an employer could still have to analyze whether it can accommodate the employee.

Are there any special considerations when dealing with an employee who is on LTD? 

Yes, employees on LTD might have some extra protection. Some collective agreements and personnel policies have language expressly protecting an employee’s employment for a specified period of time (many of these provisions refer to two years) while the employee is on LTD. These articles are often called “automatic termination” or “deemed termination” clauses because employers would typically advise employees that their employment was at an end when the specified time period ended. This type of language is still very common. If it is in a collective agreement or personnel policy in your workplace, the employment contract cannot be considered to be frustrated until that point in time – and possibly not even then.

The Supreme Court of Canada (the “SCC”) provided significant guidance on this issue in a case involving the McGill University Health Centre (Syndicat des employés de l’Hôpital général de Montréal c. Sexton, 2007 SCC 4). The collective agreement there said that after 36 months “an employee shall lose his or her seniority rights and his or her employment” in the event of “absence by reason of illness or of an accident other than an industrial accident…after the 36th month of illness”. The employer terminated the employee after the 36th month of her illness. The Union grieved the termination.

The matter eventually ended up at the SCC. The SCC held that an employer cannot apply a deemed termination clause automatically, although it can rely on it in part. In addition to the deemed termination clause, the SCC considered the events leading up to the termination, the steps that the employer had taken to accommodate the employee, the grievor’s state of health, and the lack of evidence that the grievor would have been able to return to work in the reasonably foreseeable future.

All of that analysis boils down to a few key points.

  • An employer cannot simply apply a “deemed termination” or “automatic termination” clause.
  • In addition to considering the “deemed termination” or “automatic termination” clause, the employer has to assess whether it can accommodate the employee in any way. For instance, if the medical evidence had been that the employee could have returned to work but could only have worked six hours a day for a few weeks, then the employer might have had a duty to accommodate the employee by allowing him/her to do so.
  • The employee and a union (if there is one) must cooperate with the employer in looking for any accommodation. The employee would have to provide medical evidence that there was a reasonable prospect that he/she would be able to return to work in the foreseeable future. The employee must also work with the employer to find a reasonable accommodation.
  • As always, document any steps taken to ensure that the employer has sufficient information to determine whether the employee can return, what accommodation might be available, etc.

We hope that this newsletter has alerted you (or reminded you) that employment can end due to innocent absenteeism, even if the employee is on LTD. However, the employer could still have a duty to accommodate.  If you have any questions, please let us know.


This newsletter is produced by Wickwire Holm to keep our clients and friends informed of developments in the law and emerging issues. It is intended for general information purposes only. In preparing and circulating this newsletter, Wickwire Holm is not providing legal or other professional advice. Readers are encouraged to consult their professional advisers before taking any action on the basis of information contained in this newsletter. If you have any questions about any issues raised within this newsletter or a related issue, please contact us at wh@wickwireholm.com or 902.429.4111.

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