Can an employee be terminated while on medical leave in Ontario?

At Samfiru Tumarkin LLP, we assist both employers and employees with all aspects of employment law. A common question we receive from employers in Ottawa concerns employee medical leaves of absence and the duty to accommodate disabled employees.

While it is widely believed that employees affected by a disability or on medical leave cannot be terminated from their employment, this perception is not entirely true. Generally, there are three circumstances in which an employer can dismiss an employee who is disabled or on a medical leave.

Termination unrelated to medical leave

The law is clear that an employer can terminate a disabled employee “without cause” provided that:

a) that the reason for termination is entirely unrelated to the employee’s medical leave or disability; and

b) that employee is paid the proper amount of severance to avoid a wrongful dismissal.

Let’s use the following example to illustrate this point:

Terry is 53 years old and has worked as a production manager for ABC Co. for 10 years. A year ago, Terry went on a medical leave of absence and is set to return in one months’ time. Unfortunately, Terry’s employer has had several quarters of poor financial results and has recently made the decision to eliminate Terry’s position, along with several others in his department.

Though Terry is on a medical leave, his employer can end his employment on the basis that his position has been eliminated. This kind of restructuring is a perfectly legitimate and acceptable ground to terminate any employee, regardless of health status. In this circumstance, Terry’s termination entitlements will be significant. Given his age, position and years of service, Terry would be owed approximately 12 to 14 months of compensation as an appropriate severance package.

Termination for cause

Another circumstance in which an employee on medical leave can be terminated is if that employee has committed serious, willful misconduct. Despite the employee being disabled or on a medical leave, he or she can be terminated for “just cause,” without any kind of severance pay whatsoever. Human rights laws in Canada require employers to treat disabled employees the same as all other employees. A disability leave will not protect an employee who has been dishonest with their employer or who has knowingly engaged in the types of conduct which give rise to a termination for just cause.

Using our example above, if Terry’s employer discovered that Terry had been stealing production items from the workplace, the employer would be able to immediately terminate Terry’s employment for just cause, without severance, even though he remained on medical leave. It should be noted that terminations for cause are very difficult to establish and must be reserved for the worst kind of workplace misconduct. Courts have been very reluctant to find just cause for dismissal except in situations where the employee’s misconduct was so serious so that it was inconsistent with the continuation of the employment relationship and where the employer had properly documented and proven the misconduct.

Frustration of contract

Finally, an employee on medical leave for an extended period with no reasonable prospect to return to work may be terminated due to a “frustration of contract.” A frustration of contract only occurs if it is entirely unlikely that the employee will be able to return to work in the foreseeable future. A disability that is found to be temporary will not cause the employment contract to become frustrated. However, where the disability is found to be permanent, and the employee is no longer able to work in any capacity, frustration of contract may arise and the employer may be able to discharge the employee.

Whether or not frustration of contract exists depends on the medical evidence provided by the employee’s treating physicians. It does not necessarily matter how long the person has been away from work. In a frustration of contract situation, an employee will still be owed termination and severance pay in accordance with the Ontario Employment Standards Act, 2000.

Risks of termination

Terminating an employee who is on an approved medical leave is fraught with risk and is usually ill-advised, but it is not impossible. If you are an employer contemplating terminating an employee who is on a medical leave of absence, you should seek legal advice immediately to determine whether such a position can be sustained.

If you have any questions regarding disciplinary measures for employees, termination for cause, severance pay or other employment law matters please visit our website or contact us at 1-855-821-5900 or help@employmentlawminute.ca.

Alex Lucifero leads Samfiru Tumarkin LLP’s Ottawa office as its Managing Partner, providing sound advice to both employers and employees on all aspects of labour and employment law, including wrongful dismissal, severance packages, terminations and workplace harassment.

Stay up-to-date on workplace rights in Ontario by watching Alex on the Employment Law Minute.