In Soave v. Stahle Construction Inc., 2023 ONCA 265, the Ontario Court of Appeal (OCA) allowed an employer’s appeal of the trial judge’s finding that an employee who was on a temporary leave at the time of an injury was entitled to receive long-term disability (LTD) benefits, which were included in the employer’s group benefits plan (GBP).  The OCA remitted the matter back to the trial judge or another judge of the Superior Court to reconsider whether the employee qualified for LTD benefits.   

Background

In 2013, the employee began his employment as a construction site supervisor for a general contractor in the construction industry.  The employee’s employment contract required him to participate in the employer’s GBP, which was provided by Great West Life (GWL), administered by Mercon Benefits Services (Mercon), and included LTD benefits described in a booklet provided by Mercon (Mercon Booklet).   

In 2014, the employee refused the employee’s offer to supervise a construction site stating that he needed hernia surgery. The employer completed a Record of Employment (ROE) that indicated the employee was on a temporary leave due to medical illness.

Prior to the hernia surgery, the employee was in a serious car accident and suffered significant injuries. When he attempted to pay for medication at a pharmacy through the employer’s GBP, the employer advised the insurer that since the employee was no longer employed by the company he not entitled to benefits. When the employee subsequently applied for LTD benefits from GWL, he was rejected on the basis that he was no longer actively working on the date of his car accident.

The employee brought an action against the employer claiming that he continued to be employed by the company when he stopped working, and that the company improperly terminated his benefits.

Decision of Trial Judge

The trial judge decided the employee had taken a “temporary medical leave”; was still employed by the employer at the time of his car accident; and was entitled to LTD benefits. She ordered the employer to pay the employee $245,995 in general damages and $2,935 in special damages.  

Decision of OCA

The employer appealed only the trial judge’s finding that the employee was entitled to receive LTD benefits.  The OCA found that the trial judge failed to properly assess whether the employee met the eligibility requirements for receiving LTD benefits. 

The OCA conducted a review of the Mercon Booklet and noted it provided:

• The employee’s benefit coverage starts after the end of any waiting period imposed by the employer and the employee is required to be “actively at work” on the date his coverage started.
• When an employee’s employment is temporarily interrupted (e.g., they are on a leave of absence or disabled), the terms above are subject to the following qualifications:
  
  • During a leave of absence, benefits (other than disability benefits) continue for up to six months.
  • While unable to work due to disability, benefits may continue for up to 24 months from the date the employee becomes disabled, provided the employee is in receipt of either Workers’ Compensation or LTD benefits, or approved for waiver of premium under the Employee Life Insurance benefit.  (Emphasis added)
• An employee is only eligible for LTD benefits following a qualifying period of 120 days of disability. At the end of this qualifying period, the employee has 180 days to provide notice of all LTD claims to GWL.
• Disability is defined as follows: “In order to be considered disabled, you must be unable to perform the essential duties of your own occupation during the Qualifying Period and during the first two years immediately following the Qualifying Period. Thereafter, you will be considered to be disabled if you are unable to perform the essential duties of:
  
  • any occupation for which you are qualified or may reasonably become qualified, by training, education or experience;
  • any occupation for which you are receiving an income that is equal to or greater than the amount of monthly disability benefit payable under this provision, adjusted annually by the Consumer Price Index.”
• An employee is not eligible to receive LTD benefits during any period that they are on a leave of absence during which they become totally disabled, unless their employer is required to pay benefits during this period as required by legislation, regulation or case law.

The OCA concluded that the trial judge made the following palpable and overriding errors in her interpretation of the eligibility requirements for LTD benefits:

• She fundamentally misread the eligibility requirements for LTD benefits, i.e., she treated the employee’s work interruption as “a temporary medical leave,” and then accepted that he was entitled to LTD benefits due to the injuries he suffered in the car accident.
• She did not consider whether the employee’s work was interrupted because he was on a leave of absence or because of disability.
• She did not consider whether the employee met the eligibility requirements for LTD coverage.
• She focused on the Continuation of Coverage provisions, which do not address a disability that commences after an employee stops working or disability coverage.
• She considered whether the employee met the definition of disability following his motor vehicle accident; however, the definition of disability requires a person to be unable to perform their essential duties during the qualifying period.
• She failed to consider the provision that explicitly states that an employee on a leave of absence is not entitled to LTD benefits if they become totally disabled during this period, unless the employer is required to pay benefits by legislation, regulation or case law.

The OCA found that the employee was only eligible for LTD benefits:

• If he met the definition of disability on the date he stopped working and throughout the 120-day qualifying period, or
• If he was not disabled within the meaning of the Mercon Booklet on the date he stopped working, if he became totally disabled during his leave of absence and his employer was required to pay benefits during that period “as required by legislation, regulation or case law.”

The OCA concluded that the trial judge erred in finding that the employee was entitled to LTD benefits, without considering if he was disabled on the date he stopped working or whether there was a requirement in legislation, regulation or case law for making such a finding. Accordingly, the OCA remitted the matter back to the trial judge or another judge of the Superior Court to reconsider the issue in accordance with its reasons.

Bottom Line for Employers

The decision of the OCA in Stahle Construction demonstrates how important it is for an employer to assess properly whether an employee is entitled to benefits, including LTD benefits, when the employee’s work is interrupted due to a leave of absence or disability.  An employer’s improper termination of such benefits due to its incorrect belief that the employee is no longer employed by them, or due to another error in interpretation, can negatively impact the employee’s entitlement to benefits, including LTD benefits, and result in possible liability for the employer.  Conversely, an employer’s incorrect interpretation of eligibility requirements can result in an incorrect finding that an employee is entitled to such benefits.  Accordingly, employers are encouraged to review applicable policy documents rigorously, with a specific focus on eligibility requirements, and to seek the support of experienced employment counsel in conducting this exercise.