Employers often wonder what their obligations are in regards to continuing to provide benefits for employees while they are on a leave of absence. There are multiple factors that must be taken into consideration in order to determine what the employer’s obligations are for benefit continuation while an employee is on leave of absence. We will discuss these factors in this article; however, it is important to note that legislation varies by province with regards to benefit continuation. It is important that you review your jurisdiction’s legislation and/or contact our OnDemand team for assistance in developing and implementing your company’s policy as it relates to benefit continuation.
The first consideration is the ‘type of leave’ that the employee is going to be on. Is it a legislated leave? Is it a sick leave due to a workplace injury or illness? If the leave is a legislated leave (meaning the employee is entitled to the leave by law), then the employer generally has an obligation to maintain the employee’s benefits during the period of the leave, subject to any cost sharing arrangement already in place for most jurisdictions. If the employee chooses not to maintain their share of the cost of the benefits, then the benefits can be discontinued, however, we would strongly recommend getting this in writing from the employee.
Common types of leaves that fall under a ‘legislated leave’ are: Maternity Leave, Parental Leave, Adoption Leave, Compassionate Care Leave and Emergency Leave. Some legislation also require the employer to maintain benefits for a certain amount of time, such as Ontario’s WSIB Act, which states that Employer’s must continue coverage for a minimum of 12 months when an employee is unable to work due to a workplace injury or illness.
For ‘non-legislated leaves’, the requirement to maintain benefits is at the employer’s discretion. However, the one caution is with sick leave. Although there may not be a legal requirement to maintain benefits, employers must be careful under Human Rights legislation not to discriminate against an employee due to a disability. Does that mean employees are entitled to their benefits for life if they become unable to do their job? The answer is no. Does that mean that you can cut them off their benefits from day one? This is not a good idea and not a recommend practice!
Benefits continuation during a non-legislated sick leave
It is important to have a policy that clearly outlines what your company’s rules are as it relates to benefit continuation for legislated and non-legislated leaves so that it is fair and consistently applied from one employee to the next. Here are some common practices for non-legislated laves:
1) Maintain benefits for a period of 30 days from date of illness/injury – after that the employee is on their own.
2) Match Workers Compensation rules for maintaining benefits. In other words, an employer treats all illnesses/injuries the same, regardless if the illness or injury is work related or not. As previously mentioned, in Ontario, this would equate to employer’s maintaining coverage for 12 months.
3) Maintain benefits for up to 24 months to match the Own Occupation definition commonly found in Long Term Disability (LTD) contracts.
4) Maintain benefits for the elimination period for LTD (this is often either 17 weeks or 26 weeks).
Whichever decision you make, you need to put it in writing and inform the employees of your policy. This is often done in the Employee Handbook and/or by a separate standalone policy. When employee’s go off on a leave, you should remind them, in writing, of your policy as it relates to their benefit continuation and if they are nearing the end of coverage, send them another letter prior to terminating their benefits so they have sufficient time to seek alternative arrangements. You will find templates for such letters under the Resource Centre.
What about employee’s currently on a leave?
The other issue you need to consider is how this ‘new’ policy will apply to employees already on a leave. One option is to advise the employee currently on leave of the new policy and give them reasonable notice of the change (We recommend at least 30 days) to allow sufficient time for the employee to find alternative coverage.
Another option is to advise the employee of the new policy and let them know that the timelines for discontinuing the benefits (e.g., 30 days, 1 year, 2 years or 17/26 weeks) will start effective immediately. In other words, if you choose one (1) year as your company policy for maintaining benefits, the employee who is off will have coverage for the one (1) year from the date you notify him or her of your new policy, regardless if they have been off for longer than the time frame chosen. Alternatively, you can also choose to ‘grandfather’ your employee(s) who are currently off at the time of the new policy being implemented and choose not to apply the policy for this leave and continue their coverage for the remainder of their leave.
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