Pay the price if not paying severance to ill employees

Date: 2010
Author: Daniel A. Lublin
Publication: Metro
Experience is the name everyone gives to their mistakes. – Oscar Wilde
Ill or disabled employees often receive protections that few others in the workplace are afforded. But what happens when a sick employee can never return? Can employers discard employees they view as festering on their disability insurance or must they keep their jobs available for an indefinite period of time? According to a recent Alberta case, employers must tread carefully with injured employees or pay the price of their severance.
When Sandra Lippa received a package in the mail containing her record of employment signed by her replacement and her outstanding vacation pay, she assumed she had been fired. Lippa had left work five months’ earlier due to an illness and it was not clear when she would return.
Lippa’s employer, Can-Cell Industries, disagreed. Lippa hadn’t qualified for short or long-term disability insurance, and in the meantime it had no choice but to replace her in her position. Can-Cell wrote to Lippa requesting medical confirmation that her illness prevented her from working and gave her a deadline to respond. When Lippa questioned the sincerity of Can-Cell’s position, she was fired for cause.
The company argued that Lippa had abandoned her employment by refusing to return and that her employment was frustrated so it did not owe her any severance.
The legal principle of frustration of contract means that what you have initially bargained for no longer exists. In workplace law, the issue often arises when employees are absent for an indefinite period of time, without any reasonable likelihood of returning. If an employment contract is frustrated, then the employer has the right to walk away from the employee, without paying any severance.
Recently, an Alberta court considered Can-Cell’s arguments and rejected its assertions that Lippa had done anything wrong. According to the judge, Can-Cell had treated Lippa’s health problems as being “fortuitous.” By arguing that Lippa had abandoned her job, Can-Cell was simply seeking to avoid paying her severance.
Canadian employers are not permitted to discard employees whose prospects for recovering from an illness appear dim. While a legal defence may arise when a long-term absence clearly becomes permanent, employers cannot opt for that defence prematurely – or risk paying considerable damages to an employee it did not think it had fired.