In McLeod v. 1274458 Ontario Inc. (“McLeod”), the Ontario Superior Court confirmed that working notice is not appropriate when an employee is on an unpaid leave of absence for medical reasons.

Generally, providing working notice allows employers to avoid having to provide pay in lieu of notice. Instead, employees are given advance notice of their termination and they are expected to work until their termination date.

In this case, the Plaintiff employee (the “Employee”) was involved in a non-work related car accident and he was placed on an unpaid medical leave of absence. While the Employee was on leave, on January 31, 2016, the Employer sent a notice to the Employee advising him that its retail business would shut down on July 31, 2016 and that his employment would be terminated on that same date. The Employer also advised the Employee that the period between the date of the notification and the date of the shutdown would be considered working notice. Although the Employee returned to work on July 27, 2016 (4 days before the Employer permanently shut its doors), the Employer did not pay the Employee’s salary during the balance of the notice period because he was on an unpaid leave of absence.

Shortly after the termination, the Employee filed a wrongful dismissal suit, claiming that he was entitled to pay in lieu of notice. The Employee moved for summary judgment and Justice Hood granted the motion, holding that providing working notice to an employee on a medical leave of absence is not an acceptable substitute for pay in lieu of notice. Justice Hood held that for working notice to be valid, the employee must actually be capable of working. Justice Hood relied upon a previous Supreme Court decision (Sylvester v. British Columbia) where it was explicitly found that the fact that an employee could not work was irrelevant to the assessment of damages. Damages are based on the premise that an employee would have worked during the notice period.

In so holding, Justice Hood rejected the Employer’s argument that the plaintiff should not have been awarded damages for the period between January 31, 2016 , when notice was given, and July 27, 2016, when he returned to work on a limited basis. The Employer relied on the Ontario Court of Appeal’s decision in Egan v. Alcatel Canada Inc. (“Egan”). The Court in Egan disrupted established jurisprudence by finding that working notice provided during an employee’s medical leave of absence was an acceptable substitute for pay in lieu of notice.

Justice Hood was not convinced by the Employer’s arguments and he distinguished Egan from the case before him. Specifically, Justice Hood held that the employee in Egan was only denied pay in lieu of notice because she received disability payments during the working notice period and pay in lieu of notice would have resulted in overpayment. The Employee received no such payments and Justice Hood held that Egan was therefore not applicable. Interestingly, Justice Hood also raised the question of whether Egan is a correct decision “in that it appears not to follow Sylvester” although he held that the question was not relevant to the case before him.

Overall, this case serves as a valuable reminder to employers that working notice should only be given to employees who are actually capable of working throughout the notice period. When terminating the employment of an employee on a medical leave of absence, appropriate pay in lieu of notice should be provided.

Written in collaboration with Samuel Keen, articling student.

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