One of the biggest financial risks employers face is terminating an employee who is on the verge of developing a disability.
Most companies fail to grasp this hidden landmine. If you are an employer thinking about doing so, think again. You may end up stepping into the shoes of the long-term disability (LTD) insurance company and footing the entire bill.
Most insurers only offer LTD coverage for claims that arise before an employee’s final day of work or during the statutory notice period, which usually ranges from one to eight weeks, depending on the province or territory.
From a risk standpoint, this is understandable. Employees facing a sudden loss of income may be more inclined to seek benefits from their insurers by making false claims. This gap leaves employers holding the bag for disabilities that arise after the statutory notice period but during the much longer common law notice period.
Why? Because, as we have said many times, barring clear contractual wording to the contrary, employees are entitled to receive the same compensation and benefits they would have received had they worked throughout the notice period. When LTD benefits are cancelled after mere weeks, there is significant financial exposure for employers over the ensuing notice period, which can be up to 30 months.
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