Terminating an employee without cause in Canada comes at a price. Employment statutes set out the required termination notice or pay in lieu of notice (and in Ontario and federal workplaces, severance pay on top of termination pay). The statutory termination period ranges from 1 to 8 weeks, depending on length of service and the province, plus severance pay if it applies.
But what are your obligations during the notice period beyond paying wages?
The statutory requirements
Employment statutes require employers to pay wages or salary for the notice period and to continue benefit contributions. In Ontario, the Employment Standards Act requires the employer to continue the employee's wages and terms of employment, and to:
"continue to make whatever benefit contributions would be required to be made in order to maintain the employee's benefits under the plan until the end of the notice period."
That includes whatever benefits the employee was entitled to, such as group health and dental premiums, life insurance, LTD, STD and travel insurance. A termination package for an employee terminated without cause must continue benefits throughout the statutory notice period.
When the insurer won't cover it
The problem is how far insurers will continue coverage once an employee is no longer "actively" employed. Most recognize the statutory obligation for general benefits like health and dental, but some refuse to insure bigger items like LTD or life insurance after the last day of active employment.
In the end, the employer, not the insurer, is obligated to provide benefits during the notice period. The insurer is only obligated to meet the terms of its contract with the employer.
The common law
The gap between what is required and what is insured grows even wider for the common law notice period. Employment statutes set minimum standards, and courts almost always award significantly more for wrongful dismissal (termination without cause and without notice).
For example, a 62-year-old supervisor with 15 years' service would be awarded many more weeks than the 8 weeks of termination pay and 15 weeks of severance pay required under the Ontario statute. Assuming no other issues such as age discrimination (unlikely), the notice period would probably be at least a year, and possibly more given the employee's age.
If the notice period is a year, the case law is clear that the employer must make the employee whole for the entire year. The employee is entitled to whatever she would have earned had the termination not happened, including regularly scheduled wage increases, any non-discretionary bonus tied to company performance, and the continuation of all benefits.