Benefits During Temporary Layoffs

Can’t afford them; can’t afford to cancel them! So what can you do about your benefits plan amid the COVID-19 pandemic.

April 2, 2020

Can I suspend benefits when employees are temporarily laid off?

With business slowing or shutting down completely, there simply isn’t enough cash coming in to pay health benefits premiums. This common problem has led many insurance providers to offer suspensions for employees who are temporarily laid off in an effort to keep business owners above water.

This is not permissible under the Employment Standards Act (ESA). In Section 56, sub-paragraph 2: you have the right to temporarily lay off employees, so long as the employer continues to make payments for the benefit of an employee under a legitimate retirement, pension or group employee insurance plan.

Failure to maintain these benefits will be deemed Constructive Dismissal ((Section 56, subparagraph b). Constructive dismissal describes where the employer has not directly fired the employee, but rather has failed to comply with the contract of employment in a major respect.

What’s at Stake?

If employees on Employment Insurance now loses their drug benefits coverage, they may not hesitate to call the Ministry of Labour to file a complaint. Worse, they may call a pro-bono labour lawyer.

Because Constructive Dismissal falls under Common Law, that employee could be entitled to a severance package equal to one month for every year worked. So, a 55-year old employee, who makes $60,000 per year and has been with you for 20 years, could be entitled to a severance of over $100,000! If you have other disgruntled employees, looking for a pay out, this could get extremely expensive.

But what choice do I have if my business is now closed and I have no revenue ?

One option is to maintain current benefits and finance them with an interest-free loan under the Canadian Emergency Business Account program. Learn More about the program.

Another option—which many of our EIO Solutions clients are doing—is: keep the same plan, but move to EIO Benefits’ Claims+ model. This structure protects you from any lawsuits while reducing your current benefit plan costs by up to 35% without cutting coverage! Learn more about Claims+

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