The Quebec Court of Appeal rules that disability insurance benefits should not be deducted from the indemnity in lieu of notice of termination of employment

In a decision rendered on September 1, 2022[1] the Court of Appeal ruled that disability insurance benefits received by an employee should not be deducted from the indemnity in lieu of notice of termination, even if the employer funded the insurance plan .

In this case, Ms. Girard, a manager who had been employed by the Caisse Populaire Desjardins de Saint-Raymond-Sainte-Catherine (hereinafter the “Box”) for nearly a year, was sent home by his new chief executive. At the time of this event, April 17, 2014, Ms. Girard had 35 years of seniority with Desjardins Group.

A few months later and while sinking into a deep depression, Ms. Girard learns that she has been fired.

Ms. Girard received disability benefits for a period of 28 months, then started a new job in a different sector with a much lower salary.

Before the Superior Court of Quebec, Ms. Girard alleged that she had been dismissed without good and sufficient cause, abusively and unlawfully and intentionally damaging her reputation, dignity and honor. She is claiming compensation in lieu of 36 months’ notice of dismissal, as well as significant moral and punitive damages. Ms. Girard is also claiming that the Caisse pay her additional punitive damages for having dismissed her while she was suffering from a disability, namely depression, for which she was on leave at the time of her dismissal.

Thus, before the Superior Court, Ms. Girard claimed a total amount of $2,516,530.10.

The Superior Court first concluded that Ms. Girard’s dismissal was not justified.

As for the determination of the indemnity in lieu of notice of termination of employment, the Superior Court granted an indemnity of 24 months, taking into account Ms. Girard’s age, her high hierarchical level, her 35 years of continued service to the Mouvement Desjardins and the reduction in employment prospects for the future. This 24-month indemnity represents a total of $234,502 taking into account the bonuses and salary increases that Ms. Girard would have received during this period. Since the current disability insurance plan provided that the cost of the premiums was shared between the employer (80%) and the employee (20%), the Court deducted from the 24-month indemnity the amount equivalent to the benefits received by Ms. Girard between February 16, 2015 (date of termination of employment) and August 21, 2016 (end date of benefits), corresponding to the portion of the financing provided by the Caisse. Moreover, the Caisse has not demonstrated that Ms. Girard failed in her obligation to mitigate her damages. Accordingly, the Court established the amount of severance pay at $129,709.

As for the moral damages claimed by Ms. Girard, the Superior Court determined that the April 17, 2017 action of Ms. Girard’s manager to immediately send her home, in a manner as laconic as it was humiliating, was untimely, cavalier and brutal. . His subsequent silence for several weeks showed a total lack of respect and empathy on his part towards Ms. Girard and, in doing so, the Caisse showed negligence and abusive conduct. Considering the facts and circumstances of this case, the Court awarded a total of $75,000 to compensate Ms. Girard for the damage caused to her reputation, honor and dignity as well as for the troubles, stress and inconvenience caused by his wrongful and abusive dismissal. However, the Court dismissed Ms. Girard’s claim for punitive damages, as the evidence revealed no unlawful intent on the part of the Caisse to harm Ms. Girard’s reputation or terminate her employment due to her depression.

The Superior Court was also of the opinion that Ms. Girard had substantiated her claim in the amount of $6,565.01 in recognition of her 35 years of service with Desjardins Group, to which must be added the sum of $1 $000 for consultation and orientation. fees and the sum of $11,130.02 for accrued and unpaid vacation at the date of his dismissal.

Consequently, the Superior Court ordered the Caisse to pay Ms. Girard a total of $213,404, including $129,709 for 24 months’ compensation in lieu of notice of dismissal, $75,000 for non-pecuniary damages and $18,695 for certain expenses and loss of employment benefits.

2. The decision of the Court of Appeal

Dissatisfied with the Superior Court’s decision, the two parties, by way of appeal and cross-appeal, requested the intervention of the Court of Appeal.

The Court of Appeal first considered the length of the notice and upheld the Superior Court’s decision to take into account Ms. Girard’s seniority within Desjardins Group in the assessment of the length of the notice. . The Court of Appeal confirmed the 24-month indemnity in lieu of notice of dismissal, specifying that, taking into account all the circumstances, in particular the age of Ms. Girard (52), her 35-year career with Desjardins Group and the high hierarchical level of the position she occupied, 24 months’ notice was not excessive, even if it may seem generous given the precedents submitted by the Caisse.

Importantly, the Court of Appeal declined to confirm that 24 months would be an absolute cap in Quebec on notice periods, which we believe opens the door for the courts to consider longer notice periods. in the future.

As for the bonuses and salary increases, the Court of Appeal ruled that they were part of Ms. Girard’s working conditions and were not purely discretionary, even if they depended on the achievement of certain objectives. In addition, Ms. Girard’s salary has always been increased under the incentive plan. Thus, the Court of Appeal rejected the Caisse’s claim that Ms. Girard was not entitled to the bonuses and salary increases provided for in her contract.

The Caisse pleaded before the Court of Appeal that the Superior Court had erred in ordering it to pay $75,000 in non-pecuniary damages in connection with the meeting of April 17, 2014, because this event constituted a work accident within the meaning of the Act respecting industrial accidents and occupational diseases. The Caisse adds that there is no proof that it committed an abuse of rights or a manifest fault and, alternatively, that the amount of damages is exaggerated. The Court of Appeal agreed that Ms. Girard could not claim from the Caisse, in the form of damages, what she could have obtained from the CNESST for the physical and moral harm caused to her by her dismissal from work on 17 April 2014 and as a result of which his disability began. However, Ms. Girard retained her common law rights and remedies based on a “separate cause of action”, in this case the breach of her employment contract on February 16, 2015, and any separate fault committed by the Caisse that does not would not constitute an employment injury. Consequently, the Court of Appeal reduced the amount of compensation for moral damage to $20,000.

As for the deduction of disability insurance benefits received by Ms. Girard, the appeal concerns the application or not of section 1608 of the Civil Code of Quebec (there “Coded”) to the situation of Ms. Girard. This article provides that “[t]The obligor’s obligation to pay damages to the obligee is neither reduced nor altered by the fact that the obligee receives a benefit from a third party, as a result of the damage he has suffered, except insofar as the third party is subrogated to the rights of the creditor”.

According to the Court of Appeal, the Superior Court should not have deducted from the notice indemnity the disability insurance benefits received by Ms. Girard during this period on the grounds that the Caisse participated in the financing of the insurance plan. . In this regard, the Court of Appeal wrote:

[85] As for the contrary opinion, I am of the opinion that article 1608 CCQ applies when an employee receives disability benefits from an insurer, when the employer pays all or part of the cost of the insurance premiums. This employer contribution is part of the employee’s terms and conditions of employment[60] and should not be confused with disability benefits paid by the insurer. To conclude otherwise would amount to transforming disability insurance for the benefit of the employee into insurance that would insure the employer against the pecuniary consequences of his obligation to give reasonable notice of termination of employment (a kind of civil liability insurance). [86] […] It would be different if the employer paid not the insurance premiums but the salary or part of the salary in the event of disability. In this case, the employee would not receive a benefit from a third party and article 1608 CCQ would not apply.. […] [our emphasis].

(Our translation).

The Court of Appeal also explained that this principle does not apply to “self-insured” employers who pay disability insurance benefits themselves.

Thus, according to section 1608 of the Code, the employer’s obligation to pay an indemnity in lieu of notice of termination of employment is neither reduced nor modified by the fact that the employee receives a benefit from a third party insurer. The Court of Appeal stated that it is not correct to speak of double indemnity, since the invalidity benefits are not compensation for a prejudice suffered, but rather the subject of an obligation of the insurer under the insurance plan. Consequently, the Court of Appeal increased the indemnity in lieu of notice of termination of employment by the amount deducted by the Superior Court as disability benefits paid by the insurer.

Finally, the Court of Appeal rejected Ms. Girard’s claim for “the replacement value of her pension fund”, because this argument amounted to denying the right to unilaterally terminate the employment contract conferred by section 2091 of the Code. . The Court of Appeal also dismissed Ms. Girard’s claim for employer contributions to the pension scheme Desjardins Group for the notice period, because it was of the opinion that the evidence presented did not make it possible to quantify this advantage or this loss of earnings.

Thus, the Court of Appeal reduced the indemnity for moral damages to $20,000, subtracted $11,130 from the indemnity in lieu of notice of leave for vacation pay and increased the indemnity in lieu of notice of leave to $203,185.

Comments

This decision of the Court of Appeal confirms that disability insurance benefits paid by an insurer should not be deducted from the indemnity in lieu of notice of termination, even if the employer financed the plan. ‘insurance.

However, the Court of Appeal clarified that this would not be the case if the employer did not pay the insurance premiums, but rather the salary or part of the salary in the event of disability (i.e. . under a self-insured plan). In such a case, the deduction of disability benefits paid by the employer from the indemnity in lieu of notice of termination would be appropriate.

It should be noted that this decision was rendered within the framework of the Civil Code of Quebec.