Loss of Benefits — Ontario Employment Law

When an employee is terminated in Ontario, the financial impact extends far beyond the loss of a regular salary. The "loss of benefits" represents a significant portion of an employee's total compensation, encompassing health and dental coverage, life insurance, retirement savings or pension contributions, car allowances, and disability coverage. Under Ontario law, securing compensation for these lost benefits is a critical part of a wrongful dismissal claim and severance negotiations.

Ontario employment law treats the loss of benefits differently depending on the time frame being examined. During the minimum statutory notice period required by the Employment Standards Act, 2000 (ESA), an employer is strictly legally mandated to continue the employee's regular benefit plan contributions. They cannot simply buy out the benefits or cut them off immediately. If the employer fails to maintain these benefits during the ESA notice period, they are operating in direct violation of basic provincial employment standards.

Beyond this minimum statutory period, most non-unionized employees are entitled to a longer "reasonable notice period" under common law. While employers are not usually required to keep the dismissed employee on the active benefits plan for this entire extended duration, they are obligated to compensate the employee for the financial loss of those benefits. Courts in Ontario generally award damages for lost benefits in one of two ways. The most common method compensates the employee for the cost the employer would have paid in premiums for the duration of the notice period. Alternatively, if the employee actually incurs medical or dental expenses that would have otherwise been covered, or if they secure private replacement insurance, the court may order the employer to fully reimburse those specific out-of-pocket costs.

Employers frequently attempt to argue that an employee is not entitled to benefits during the common law notice period by pointing to limitation clauses in the employment contract or the proprietary benefit plan text. However, Ontario courts have consistently ruled that unless the contractual language unambiguously excludes common law entitlements and explicitly limits benefits upon termination, the employee remains entitled to their value. Because assessing the exact true value of fringe compensation and interpreting complex plan texts is highly dependent on individual circumstances, it is generally recommended to have an employment lawyer evaluate your total compensation package before signing a severance release.