A recent lawsuit underscores the importance for employers of properly administering employees' health insurance plans.
Roxanne Nielsen is suing Tim Hortons (TSX:TSI) franchisee Calecur Enterprises Ltd. for allegedly not deducting appropriate premiums during many of the 12 years she worked for the fast food chain. As a result, when she became disabled, Nielsen received lower payments than she believed she was entitled to, her notice of civil claim alleges.
"Employers' duty goes beyond arranging to have insurance in place and paying premiums to an insurance company," said Kent Employment Law associate Jennifer Wiegele.
She added that employers must also either tell insurance companies when employees get raises or otherwise ensure that higher premiums are deducted and provided to insurers to reflect those wage hikes.
In Nielsen's case, she was working at Tim Hortons in mid-2003 at a salary of $25,056 and that salary rose steadily following her promotion to manager of a store in Mission. By February 2010, when Nielsen was disabled with severe hip pain, she claims that her annual salary was $48,493.
But, Nielsen alleges in her December 30 notice of civil claim, her insurer, Standard Life, had been receiving premiums from Calecur based on a $25,056 salary.
"[Calecur] had failed, neglected or refused to advise Standard Life of [Nielsen's] salary increases since 2003 and had failed to deduct and remit the premiums appropriate to her increasing salary," states the claim.
Nielsen is not suing Standard Life, which is paying her 60% of her 2003 salary. Instead she is suing her former employer for the difference between 60% of her 2003 salary and 60% of her 2010 salary.
That compensation, Nielsen claims, is what she would be entitled to had Calecur filed the necessary paperwork and deducted appropriate premiums. Her claim for compensation from Calecur stretches until October 2043, when she turns 65.
Calecur principal Calvin Adams declined to comment to Business in Vancouver.
None of the allegations has been proven in court, and no statement of defence had been filed by deadline.
Another common insurance dispute between employers and employees is when courts force employers to stand in for insurers when employees are injured during what would have been a normal notice period after they have been dismissed.
"I have about three of those lawsuits on my desk at any given time," Wiegele said.
The nub of these lawsuits is often that companies' insurance policies have ended as soon as an employee is terminated and is no longer physically working for a company.
Coutts Pulver LLP partner Dean Crawford said an executive who has been employed by a company for 12 years would likely be entitled to 18 months of working notice.
"It's rare that an employer is going to give 18 months' working notice because you've got an employee who may be dispirited," he said. "Typically what happens is that there's a dismissal and then an offer of severance with a release document."
If the former employee signs a release form, then severance is paid and the employer has no further obligations to the employee.
If the two sides fail to agree on the terms of settlement, Crawford said the employee then has an outstanding claim for severance, including all benefits to which the employee would have been entitled during a working notice period.
"There's definitely the possibility that if the employee is injured during the notice period, the employer could have to step into the shoes of the insurer," Crawford said.
"So, I advise my clients to consider getting special replacement long-term disability insurance to cover workers who are let go."
