Yes.

But keep reading.

There is a common myth that a company cannot terminate an employee who is on disability leave or sick leave. This type of leave may also be called medical leave. This is a misconception: employers are entitled to terminate employees even while they are on disability or sick leave. However, employers who commit to a dismissal of this nature will have to tread carefully. This is because, in so doing, the law will look at the reason for the employee’s termination of employment. If the dismissal is connected to the employee’s disability or sick leave, even on a partial basis, the employer may find itself in violation of the Ontario Human Rights Code, 1990 (“Code”).

Employees in Ontario have various protections under the Code, including disability leave or sick leave. An employer may have a valid reason to terminate an employee who happens to be on disability leave or sick leave. For instance, an employee’s position has been rendered redundant or the business is simply unable to pay the employee because the business is experiencing financial hardship. In fact, an employer may even terminate an employee for cause while on sick leave. However, any of the aforementioned reasons must not be related to the employee’s disability leave or sick leave whatsoever. Moreover, if called upon, the employer has to be able to furnish adequate proof validating the need for the employee’s dismissal.

An employer who is unable to substantiate a lawful reason for the employee’s dismissal will likely be found to be in breach of the Code. Moreover, employees who are terminated while on disability leave or sick leave may also have a valid claim for “moral damages” or “aggravate damages” arising out of the manner of their dismissal. Such damages are separate from Code damages and, as such, may be awarded by the court on top of Code damages. Moral damages can be in the tens of thousands.

Likewise, employers who dismiss an employee during sick leave should ensure that the employee’s dismissal does not interfere with any disability and medical group plans the employee may be the beneficiary of. Although the details surrounding the circumstances of the dismissal will be extremely important and fact-driven, employers have been found liable for the value of the benefits if the dismissal resulted in the denial of such benefits by the insurance company.
Finally, the fact that the employee is on disability leave (which may last for years) does not mean that an employer will not be obligated to comply with the employee’s right to notice of termination and, where applicable, severance pay. An employee who is on disability leave will still be entitled to a reasonable notice of dismissal which, in the absence of an enforceable termination clause, may be as high as twenty-four months and, under some circumstances, possibly more.
So, can Ontario employers terminate employees while on sick leave or disability leave? Yes. However, is it worth the risk? You decide. We believe that it is best to contact an employment if you an employer in this position. The employment lawyer should be able to help employers deal with this issues in a way to minimize potential risks.