Severance Packages and Long-term Disability in Ontario, Alberta, and B.C.

Losing your job can be overwhelming, especially if you’re also dealing with a disability. Many employees wonder how a severance package affects long-term disability (LTD) benefits. Understanding your rights is crucial to ensure you receive the full compensation and benefits you’re entitled to under employment and insurance laws.

This guide explains the interaction between severance packages and LTD benefits in Ontario, Alberta, and British Columbia, highlighting key differences and what you need to know.

What happens to LTD benefits if you’re terminated?

In most cases, losing your job does not automatically cancel your LTD benefits. However, there are important considerations:

• Active Employment Requirement: LTD coverage is typically tied to your employment. If you became disabled while actively employed, your LTD benefits should continue even after termination.
• Impact of Severance Payments: Severance payments may reduce your LTD benefits. Some insurers deduct severance amounts from monthly LTD payments, depending on your policy.
• Termination and Group Policies: If your employment is terminated before you become disabled, you may no longer qualify for LTD benefits under group insurance plans.

Watch: Common questions about disability benefits with James Fireman on the Disability Law Show.

Ontario: Severance packages and LTD benefits

In Ontario, the Employment Standards Act governs severance pay, while LTD entitlements are typically outlined in insurance policies. Here’s what Ontario employees need to know:

• Severance and LTD Interactions: Ontario insurers often deduct severance payments from LTD benefits. For example, if you receive six months of severance, your LTD payments may be paused during that time.
• Employer Obligations: Employers must ensure LTD coverage remains in place for terminated employees during any statutory notice period.
• Key Tip: Speak to an employment lawyer at Samfiru Tumarkin LLP before signing a severance package to protect your LTD rights.

Learn more about severance pay and long-term disability benefits in Ontario.

Alberta: Severance packages and LTD benefits

In Alberta, employment termination is governed by the Employment Standards Code. LTD coverage depends on the terms of your group insurance plan:

• Severance Deductions: Insurers in Alberta may also deduct severance amounts from LTD benefits. Ensure you review your policy for specific terms.
• Termination During Disability: If you’re terminated while on LTD, your benefits should continue as long as you meet the policy’s definition of “disability.”
• Legal Support: Alberta employees facing termination while disabled should seek legal advice to secure both severance and LTD benefits.

Learn more about severance pay and long-term disability benefits in Alberta.

British Columbia: Severance packages and LTD benefits

In B.C., the Employment Standards Act provides severance pay guidelines, but LTD benefits depend on your insurer’s policy terms. Key points include:

• Severance and LTD Offsets: B.C. insurers commonly offset LTD benefits by severance payments, similar to Ontario and Alberta.
• Employer Responsibilities: Employers must maintain LTD coverage during the statutory notice period unless otherwise stated in your contract.
• Navigating Claims: Understanding your rights under B.C. laws and insurance policies is vital to avoid losing benefits.

Learn more about severance pay and long-term disability benefits in B.C.

How to maximize both severance and LTD benefits

To protect your financial stability, take these steps:

1. Review Your LTD Policy: Check for clauses about severance deductions and coverage termination.
2. Negotiate Severance Carefully: An employment lawyer at Samfiru Tumarkin LLP can help structure your severance package to minimize its impact on LTD benefits.
3. Don’t Rush: Employers may pressure you with arbitrary deadlines to accept severance offers quickly. Ask for a deadline extension and consult our lawyers to fully understand your options before taking action.
4. Consult a Lawyer: Professional legal advice ensures you’re not signing away your rights.

Common employer tactics to watch out for

Employers and insurers may attempt to:

• Pressure you to sign a severance package that negatively affects your LTD benefits.
• Claim your LTD coverage ends with your termination.
• Misinterpret or misrepresent your rights under provincial laws or insurance policies.

If you encounter any of these tactics, speak to Samfiru Tumarkin LLP immediately.

FAQs: Severance packages and LTD benefits

1. Can severance pay affect my LTD benefits? Yes. In most cases, insurers will deduct severance payments from LTD benefits. The impact depends on your policy and the terms of your severance package.

2. What happens if I’m terminated while on LTD? Your LTD benefits should continue as long as you meet the policy’s criteria for disability. Termination does not automatically end LTD payments.

3. Can I negotiate severance and still keep my LTD benefits? Yes. With the right legal advice, you can structure your severance package to minimize its effect on LTD benefits.

4. What if my LTD claim is denied after termination? If your LTD claim is denied, you have the right to appeal the decision or pursue legal action. A disability lawyer can help you navigate the process, starting with a free LTD consultation.

Real-life example: Navigating severance and LTD

Emily, a 45-year-old marketing manager in Ontario, was let go after 10 years with her company while receiving LTD benefits for chronic pain. Her employer offered a severance package of six months’ pay but failed to inform her that her LTD payments would be paused due to the severance. After consulting Samfiru Tumarkin LLP, Emily successfully negotiated a severance agreement that not only more than doubled the severance package, but also excluded offsets from her LTD benefits. This ensured she continued to receive uninterrupted LTD payments while securing her full severance.

Why choose Samfiru Tumarkin LLP?

Navigating the intersection of severance and LTD benefits can be complicated. Here’s why non-unionized employees in Ontario, Alberta, and B.C. trust Samfiru Tumarkin LLP:

• Proven Expertise: Over 50,000 clients helped across Canada.
• No Upfront Costs for Disability Cases: Pay only if we win. This type of legal fee also applies to many, but not all, severance pay cases our firm handles.
• Top-Rated Lawyers: Canada’s most reviewed employment law firm.
• Comprehensive Support: Our team specializes in both employment and disability law.

If you’ve been terminated and have questions about severance or LTD benefits, we’re here to help.

Contact Us Today to speak to an employment lawyer near you.