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Disability claim against employer drawing interest: Rashid


An Ontario Superior Court decision that allowed a man to proceed with a long-term disability (LTD) claim after he waived his claim for benefits in a release should have employers and their insurance providers taking note, Ottawa personal injury lawyer Najma Rashid.

“The employee was asked to sign a release by his former employer that was deemed by the judge to be unconscionable,” says Rashid, partner with Howard Yegendorf & Associates LLP. “That waiver would have released the employer and insurer from claims regarding the man’s LTD benefits, but the judge set aside the release and declared it unenforceable.”

The matter involved a man who worked for the employer from 2001 to 2007 under fixed-term contracts without employee benefits. From December 2007 until his employment was terminated in 2015, he received employee benefits. He worked as a distribution clerk and helped in the mailroom, and his job had physical demands such as lifting and moving.

In 2013, he was diagnosed with degenerative disc disease, spinal stenosis of his lumbar spine and osteoarthritis. According to his evidence, he was unable to work without suffering from severe pain, and he was also suffering from depression, the decision states.

He was incapable of performing the duties of his current occupation and received LTD benefits for approximately two years. However, after those two years, the insurance company told him he was no longer entitled to benefits, the decision states.

While appealing the insurance company’s denial, the man’s employment was terminated. He was offered a severance above the Employment Standards Act (ESA) notice, but with the stipulation in the release that he waive his claim for disability benefits. If the release was not signed, the employee was told he would only receive the minimum ESA severance.

“He didn’t realize that the release he was asked to sign was waiving his rights to LTD payments when he had been communicating exclusively with the insurance company, and the employer knew that,” says Rashid, who was not involved in the matter and comments generally.

“The employer admitted it should have asked him if he intended to appeal his LTD claim but chose not to ask,” she says.

The insurance company had given him an appeal deadline for his claim and his employer added the clause to their release, she says.

“It stated he would have to release any payments related to benefits coverage including short-term or LTD benefits,” Rashid says.

She says one of the facts that swung in the man’s favour was that the court found him to be vulnerable because of his financial situation.

“In the context of somebody in dire financial circumstances as well as someone who is dealing with a physical disability, there was unfairness in the entire sequence of events that happened,” says Rashid.

She says such circumstances “would cause an enormous amount of stress on an individual.”

Rashid explains that case law has laid out the criteria needed to meet the test of unconscionability, including:

  • a grossly unfair and improvident transaction
  • the victim’s lack of independent legal or other suitable advice
  • an overwhelming imbalance in bargaining power caused by the victim’s ignorance of business, illiteracy, ignorance of the language of the bargain, blindness, deafness, illness, senility or other similar disability
  • the other party knowingly taking advantage of this vulnerability

The ruling should also cause employers to pause when dealing with employees about benefits and the end of their employment, she says.

“The court found that the company should have been much more prudent,” Rashid adds.