While it is not out of the realm of possibility to be terminated while on Long-Term Disability (LTD) in Canada, it can only occur under specific and carefully regulated conditions. Canadian employment and human rights laws offer strong protections for individuals on LTD, which require that dismissals while on LTD are not discriminatory and that employers meet their obligation to provide reasonable accommodations. This blog will explore the various circumstances under which termination may happen while receiving LTD benefits, with the goal of providing clear and informative guidance on the complexities regarding this subject matter.

Understanding Long-Term Disability (LTD)

Long-Term Disability (LTD) benefits are intended to replace income for employees who are unable to work due to a disability for an extended period. Usually offered through an employer-sponsored insurance plan, these benefits are distinct from your actual employment status. As a result, you may still qualify for LTD benefits even if your employment is terminated—depending on the specific terms outlined in your insurance policy.

Employment Status While on LTD

While you’re receiving LTD benefits, you are typically still regarded as an employee unless: (1) you choose to resign, (2) your contract expires without renewal, or (3) your employer formally terminates your position. Although being on LTD doesn’t guarantee job protection, it does provide you with specific legal safeguards against unfair or discriminatory dismissal.

Legal Protections Against Termination

Canadian human rights legislation prohibits employers from terminating employees solely because of their disability. This is because disability is a protected ground under human rights laws, and terminating an employee for this reason is considered discriminatory. Employers are required to accommodate employees with disabilities to the point of undue hardship. This means they must make reasonable efforts to adjust the work environment or duties to enable the employee to continue working, unless doing so would cause significant difficulty or expense for the employer. This system is an attempt at protecting any individuals in the workforce with disabilities, while also ensuring that employers don’t take on undue hardship while trying to accommodate the individual.

When Termination May Be Permissible

There are situations where an employer may legally terminate an employee on LTD, which as as followed:

  • Frustration of Contract: If it’s determined that an employee is unlikely to resume work in the near future, the employment relationship may be seen as “frustrated.” This legal doctrine applies when an unforeseen circumstance—like a long-term disability—makes it impossible for the employment contract to be carried out as intended. In such cases, the employer may be permitted to end the employment without it amounting to discrimination under the law. However, it’s not a guaranteed outcome, and the application of frustration of contract is highly fact-dependent and case-specific.
  • Undue Hardship: If accommodating an employee’s disability would place an undue burden on the employer, they may be legally allowed to end the employment relationship. In assessing whether undue hardship exists, factors such as financial strain, health and safety risks, and the organization’s size and available resources are taken into account.
  • Non-Discriminatory Reasons: An employee receiving LTD benefits may still be terminated for legitimate, non-disability-related reasons—such as a company-wide restructuring, budget cuts, position elimination, or performance issues that existed before the disability leave. In such cases, the termination must be based entirely on objective business grounds, and the employer must be able to provide clear evidence that the decision was not motivated, even in part, by the employee’s disability or medical leave. Failing to do so could result in the termination being viewed as discriminatory or wrongful.

Employer’s Duty to Accommodate

Before moving toward termination, employers are required to meet their obligation to accommodate the employee’s disability. This means actively working with the employee to explore reasonable adjustments, such as modified job duties, flexible scheduling, or the use of assistive technology. The aim is to support the employee in performing their role effectively, as long as these accommodations do not create undue hardship for the employer.

Impact on LTD Benefits

Losing your job does not automatically end your eligibility for LTD benefits. If you were actively employed and covered under the LTD plan when your disability began, you may still qualify to receive benefits after your employment ends. That said, it’s important to carefully review the specific terms of your LTD policy, as some plans may include provisions that impact benefit entitlement following termination.

Why Ongoing Medical Updates and Open Communication Matter

Staying in regular contact with both your LTD insurer and employer is essential to protect your benefits and job status. Providing consistent medical updates is more than just a habitual routine, it is proving that your condition continuously prevents you from working and that you’re also making reasonable efforts toward recovery. Employers often depend on these reports to determine whether you might return to work or if adjustments to your role are still practical in the particular circumstances. If you fail to submit updated medical information or ignore requests from your employer or insurer, it could lead to confusion, challenges to your disability claim, or even termination under frustration of contract. On the flip side, being proactive with communication shows you’re acting in good faith, which can work in your favour if your case becomes more legally complex than you initially thought.

Seek Legal Support

Although employers are legally allowed to terminate an employee on Long-Term Disability in specific situations, such decisions are closely examined under the law. Employers must be able to show that the termination is not discriminatory and that they have made genuine efforts to accommodate the employee’s disability. If you’re facing this kind of situation, consulting a legal professional is essential to safeguard your rights and ensure you receive any benefits or compensation you may be owed. Reach out to the team of qualified lawyers at NOVA Injury Law for support and legal guidance through the complicated legal matter. For more information or to book a free consultation, reach out to them at info@novainjurylaw.com.