Termination of Employees on Sick Leave

Enhanced damages for wrongful dismissal often follow where an employee has been terminated while ill.

In Wallace v. United Grain Growers Ltd. [1997] 3 S.C.R. 701, the Supreme Court of Canada held that an employee may be compensated, by an extension of the reasonable notice period, when the employer’s conduct in the manner of dismissal falls below an acceptable standard. At para. 98, the court explained the standard that employers must meet, when dismissing an employee, in the following terms:

[A]t a minimum, I believe that in the course of dismissal employers ought to be candid, reasonable, honest and forthright with their employees and should refrain from engaging in conduct that is unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive.

Wallace is sometimes taken to stand for the proposition that an employee on sick leave cannot be terminated; such termination is seen as insensitive or bad faith

Today’s Court of Appeal decision in Mulvihill v. Ottawa (City), 2008 ONCA 201 makes it clear that termination during sick leave, standing alone, is not objectionable. There must be some added element for such termination to generate Wallace damages.

The Court writes:

[66] … . The mere fact that Ms. Mulvihill was on sick leave at the time of termination does not necessarily mean the dismissal was conducted in an unfair or bad faith manner. There must be other evidence of bad faith, unfair dealing or “playing hardball”, such as cancellation of accommodation for an employee’s illness as a reprisal for the employee having made a human rights claim: see Keays v. Honda Canada Inc. (2006), 82 O.R.(3d) 161 (C.A.).