Is A Terminally Ill Employee's Estate Entitled to Severance After His/Her Death?
If you guessed that the answer to the above question is "it depends" you are correct. As with many employment law and estate law issues, the answer depends on the particular facts of the situation. However, a 2015 Ontario Superior Court case, Estate of Cristian Drimba v Dick Engineering Inc., demonstrates that the estate of a terminally ill employee could be entitled to severance under the Employment Standards Act.
Pursuant to O.Reg.288/01, sections 2(1), clause 4; 2(3); 9(1), clause 2; and 9(2)(b), an employee is entitled to both termination pay and severance pay if an employment contract is frustrated by illness or injury. That means if an employee loses his or her employment because of injury or illness, s/he is entitled to severance.
Cristian Drimba was employed by Dick Engineering. In May 2013 he requested a six month leave of absence to deal with a medical issue. Approximately one month later, he was diagnosed with terminal cancer. The following month, Dick Engineering was sold by way of an asset sale. Typically, in an asset sale, employment of all existing employees terminates when the assets are sold (employees are an asset but not one that can legally be sold). The seller must provide severance to the terminated employees unless the terms of the asset sale specifically provide for the buyer to take responsibility for the ongoing employment or severance of the employees.
Shortly after the asset sale, Mr. Drimba was advised that his employment would continue, and that he should apply for benefits. He was also told that he could return to work whenever suitable. Unfortunately, within two months, he died.
Counsel for Mr. Drimba argued that his illness was frustration of his employment contract such that gave rise to severance. Counsel for the employer argued that the employment contract was severed by Mr. Drimba's death.
The court ruled that, despite the offer of continuing employment, the severity of Mr. Drimba's illness made it apparent that he would be unable to return to work. As such, the employment contract was frustrated and Mr. Drimba's estate was entitled to collect his severance.
The Lesson: estate trustees should evaluate whether terminal illness frustrated the deceased's employment contract thereby entitling the estate to the severance owed. Failure to do so could result in the trustee being responsible for failing to collect all of the estate's assets.
Estate of Cristian Drimba v Dick Engineering Inc., 2015 ONSC 2843 http://www.canlii.net/en/on/onsc/doc/2015/2015onsc2843/2015onsc2843.pdf
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