"DEEMED TERMINATION" CLAUSES: BACK FROM THE DEAD?

EP Update - February 2, 2007

For the past decade or so, collective agreement "deemed termination" clauses triggered by absences due to disability generally have been thought to be discriminatory and therefore, unenforceable by employers. However, the recent decision of the Supreme Court of Canada in McGill University Health Centre (Montreal General Hospital) v. Syndicate des Employes de l'Hopital general de Montreal ("McGill") may have breathed new life into these clauses. This decision suggests that at least in some cases, a deemed termination clause may once again support an employer’s decision to terminate an employee who has had an extended absence due to illness or disability.

BACKGROUND

In March 2000, the employee in McGill commenced a sick leave. Over the next 2.5 years, she made a number of unsuccessful attempts to return to work. In September 2002, just as she appeared to be ready to resume her full-time duties, her involvement in an automobile accident required that she take more time off. Ultimately, in March 2003, the hospital notified her that it was terminating her due to her ongoing absence.

A grievance was filed contesting the termination and requesting that the hospital negotiate a reasonable accommodation for the employee. The arbitrator dismissed the grievance, noting that the hospital had already accommodated the grievor by extending the rehabilitation period provided for in the collective agreement and that the grievor still remained unfit for work at the end of the three-year period under the "deemed termination" clause. On judicial review, the Superior Court agreed with the arbitrator's decision and dismissed the union's application. However, the Court of Appeal reversed that ruling, holding that the arbitrator must assess the accommodation issue on an individualized basis. The Employer in turn appealed to the Supreme Court of Canada.

SUPREME COURT DECISION

While the entire Court concluded that the Court of Appeal decision was incorrect, there were two substantially different but concurring opinions released by the Court, with the minority reasons providing much stronger support for the deemed termination clause.

Majority Opinion

The majority recognized that collective agreements often contain deemed termination clauses which are aimed at ill or disabled employees. The majority stated that such clauses are prima facie discriminatory and that the three-part test from its 1999 decision in Meiorin must be applied by the employer in order to show that it could not accommodate the employee without undue hardship.

The majority stated that employers may implement bona fide measures to encourage regular attendance at work as well as to encourage employees who are absent due to illness or disability to return within a reasonable period of time. Therefore, while the majority presumed that a deemed termination clause is prima facie discriminatory, the employer may call evidence to prove the clause to be justified and that to accommodate further would cause 'undue hardship'. The majority stated that the establishment in a collective agreement of a maximum period of time for absences constitutes a form of negotiated accommodation and that the existence of such a provision is one factor to consider when assessing whether the employer has fulfilled its duty to accommodate. However, each case still must be evaluated on the basis of its particular circumstances such as the characteristics of the workplace and the specific needs of the employee.

The majority stated that while a deemed termination clause will be one factor to consider, it will not be determinative of whether the employer has fulfilled its duty to accommodate. Such a clause, however, may give a clear indication of the intention of the workplace parties with respect to what constitutes reasonable accommodation and therefore, should be viewed as a potentially significant factor when considered by an arbitrator. That is, the clause may serve as evidence of the maximum period for accommodation in regard to an extended absence, beyond which the employer will face undue hardship if the absence continues. The majority stated that this may be particularly useful for larger organizations, where proving undue hardship due to an employee's absence may be a complex and difficult task.

Minority Opinion

Significantly, and unlike the majority, the minority stated in its concurring opinion that deemed termination clauses are not, in and of themselves, prima facie discriminatory. Rather, the minority was of the view that the initial onus rests with the employee to establish such prima facie discrimination. Whether such a clause is indeed prima facie discriminatory will depend upon the facts of the particular case, including the negotiated terms of the collective agreement. If prima facie discrimination is established, the onus then shifts to the employer to establish that it has fulfilled its duty to accommodate.

The minority held that deemed termination clauses which are triggered following a reasonable period of absence represent a reasonable compromise between the employer's interest in maximizing the productivity of its workforce and the employee's interest in maximizing job security. The minority held that there is nothing inherently discriminatory about such a compromise, especially if the period of resulting protection is significantly longer than that provided under any applicable employment legislation. The minority stated that it is a matter of common sense for the union and employer to agree to such a trade-off in order to replace an individualized case-by-case approach characterized by undefined periods of absence with a universal but generous period of job protection for disabled employees.

WHAT ARE THE IMPLICATIONS FOR EMPLOYERS?

While the majority and the minority came to their conclusions in quite different ways, they were agreed on a fundamental point – i.e. a deemed termination clause that is triggered by a period of absence due to illness or disability is not necessarily discriminatory. This will be of some significance to employers who in recent years may have felt burdened by increasingly onerous accommodation obligations. The decision appears to signal a departure from the commonly held notion that such clauses essentially are unenforceable in the context of the duty to accommodate.

The majority, of course, started from the premise that such clauses are prima facie discriminatory and that the onus rests with the employer to prove otherwise, based on the facts of the case. The minority, on the other hand, did not agree that such clauses are prima facie discriminatory. Therefore, under the approach of the minority, the onus rests with the employee/union to establish that the clause is discriminatory.

It is possible that some arbitrators may be receptive to the approach taken by the minority. Certainly, the chances of this happening are much greater than had the minority opinion been a dissent rather than a concurring decision. If the approach of the minority gains currency, it would represent a significant shift in the thinking surrounding such clauses.

Regardless, it is clear from this decision that a deemed termination clause in a collective agreement should provide for a fairly generous period of accommodation that meets the needs of as many employees as possible. As a result of this case, arbitrators may be more inclined to view such periods as the maximum time period for accommodating absences due to illness or disability, beyond which the employer would suffer undue hardship.