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Employees on Disability Leave Must Receive Pay in Lieu of Notice when Employment is Terminated

In McLeod v 1274458 Ontario Inc., the Ontario Superior court confirmed the principle that working notice does not count when an employee is on disability leave.

The plaintiff in this summary judgment was on a medical leave of absence when he was informed that the defendant company was shutting down operations and that his employment would be terminated effective six months from the date of the notice.  The plaintiff returned to work for two shifts right before the business closed.

Justice Hood confirmed that when the plaintiff received notice of termination, he was incapable of working. As such, he was entitled to damages representing the salary he would have earned had he worked during the notice period.

This logic is in keeping with the general principle that common law notice is intended to tide people over through a time of transition, allowing them to earn the income they would have been earning if they were working while they look for alternate comparable employment.

If an employee is able to work, then the employer has the option as to whether to pay the salary out as working notice or pay in lieu of notice. In the case where an employee is medically unable to work though, it would be unfair to deprive them of that right to notice. As a result, the employee must be given pay in lieu.

Another issue in the decision was the fact that the defendants plead that the employee failed to mitigate his damages by seeking alternate comparable employment quickly enough. Justice Hood disagreed and stated that the plaintiff could not have been expected to undertake a serious job search until he was able to return to work, stating that the plaintiff’s mitigation efforts need only be reasonable.

This is a useful reminder to employers to talk to an employment lawyer before terminating the employment of an employee on disability leave, so that the employer can canvass all the issues and assess the risks before deciding on strategy.

For more information on managing employees on disability, please contact Krista Kais-Prial at kkais-prial@sultanlawyers.com .


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