Employee Termination and Group Benefits
What happens when employees are terminated?
When an employee is terminated there is often confusion concerning the termination of their group benefits plan as well. In Canada, under most group benefit contracts, coverage ends on the last day worked. There is however a statutory notice period that requires an employer to provide a minimum amount of notice of termination to an employee. This period is set by employment standards legislation on a federal, provincial and territorial basis. Alternatively, instead of the minimum notice an employer may also choose to exercise immediate termination and pay the terminated employee in lieu of working notice. In this situation the employee benefits coverage will still end on the last day worked unless the employer is required by statute to continue coverage during the statutory notice period.
In some cases an employer’s obligations regarding employee termination and continuing benefits coverage may extend beyond the statutory notice period. This extension period is referred to as the common law notice period (also sometimes referred to as the reasonable notice period), and may rely on a number of factors including type of employment, length of service and availability of similar employment.
Lastly, an employer may sometimes wish to extend benefits coverage as part of a severance agreement to an employee; this can only be done with the insurer’s approval prior to offering the extension to the employee and will typically exclude any type of disability coverage.
The following table exhibits the minimum amount of notice of termination of employment that an employer must provide an employee dependent on the amount of time they worked for an employer in Alberta.