Case sheds light on employee entitlements under disability plans
Since the cost of living crisis hit, employers have been dealing with an onslaught of pay rise requests. That’s just part and parcel of the job. It’s less common, however, to receive pay rise requests from employees on sick leave.
An IBM employee made headlines this month after he sued his employer for not raising his pay – despite being on sick leave for 15 years. The worker took the tech giant to court on the grounds of discrimination for refusing to hike his wage, having been on IBM’s disability plan and under “no obligation to work” since 2013.
As per the employee’s disability plan, 25% of his annual salary of $120,714 (£72,037) was deducted – leaving him picking up $90,536 (£54,028), The Mirror reports. However, he argued that this wasn’t enough, factoring in the rising inflation rates in the U.K and adding that he’s also battling stage four leukemia, the Telegraph reports.
The case was ultimately dismissed by the judge who ruled that the employee was being given “favourable treatment”.
Group benefits coverage
It’s a complex and nuanced legal case, one with lots of moving parts. But it also sheds light on what employers are duty bound to provide under accommodation laws and what employees aren’t entitled to – however difficult the circumstances.
Speaking with Mike MacLellan, partner at Ontario-based law firm CCPartners, he tells HRD that it was very fortunate this employee was being paid significantly though a company health plan.
“Employers will often obtain group benefits coverage for their employees as an integral part of the overall compensation and to be able to compete for talent in the marketplace,” he says. “However, many employers simply do not make enough money to provide such comprehensive benefits.
“Obviously we want all workers to be able to afford to be off work when their poor health makes work impossible, but realistically that just cannot be the sole responsibility of the employer.”
Long-term disability leave (LTD) in Canada is a growing concern for employers post-pandemic. HRD Canada recently penned a guide on how to manage employees who’re off sick for extended periods of time.
Pay increases on long-term leave
Salary requests in sick leave aren’t as uncommon as you might think, with MacLellan saying it’s not really that farfetched.
“It’s common for employment contracts to stipulate when salary will be reviewed, or even when salary will be increased,” he tells HRD. “Criteria for salary increases may or may not be stipulated in advance. The outcome of this case would have turned on the intention of the parties or the employer’s practice in giving salary increases.”
Assuming that the employer had a reasonable policy and practice of increasing salaries conditional on active employment - and therefore contributions to the company’s business - then it’s reasonable for an employee who has not been contributing to the business for 15 years not to have their salary increased, MacLellan advises.
“However, the opposite outcome would be reasonable if salary increases were based only on length of service.”
‘Frustration of contract’
It’s a complex case, one which highlights the importance of the accommodation and undue hardship in Canadian law.
“It’s interesting that the employee remains an employee even after 15 years of absence and no apparent prospect to return to work,” says MacLellan. “There’s a legal principle called ‘frustration of contract’ where an unforeseen intervening event makes it impossible to perform a contract.”
In employment law, this might happen where an employee becomes too sick to work. If there’s no expectation that the employee can return to work in the foreseeable future, the employment can be deemed ‘frustrated’ and the contract is severed.
A 2019 case in Ontario ruled that frustration of contract can be resolved by way of a summary judgement. In Katz et al. v. Clarke, the court ruled that an employee’s desire to return to work could not rebut any medical evidence that the initial contract had become frustrated. The case shed light on the issue of the duty to accommodate, showing that a lack of participation and medical information ca be used to determine frustration in disability cases.
“The employer isn’t liable to the employee to provide a severance package other than what is required by the applicable legislation,” says MacLellan. “So the fact that IBM has kept the employee on after 15 years, allowing him to keep his benefits, is itself notable.”
