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Layoffs, Leaves and Continuation of Group Benefits During COVID-19

The COVID-19 situation causes employee absences along with business disruptions and even forced closing of non-essential services. Group insurance benefits may be impacted.
Provincial employment standards provide rules around temporary layoff and especially about the specific number of weeks that a temporary layoff may run. If an employee is laid off for a period longer than the period of time specified in the applicable legislation, then the employee is considered terminated and entitled to termination pay. Employment standards typically do not require continuation of benefits (life, disability, health) during a layoff period, although if benefits are continued it can often lengthen the period until termination is deemed to occur.
For unionized employees, the collective agreement will typically govern whether and how benefits continue during a temporary layoff. Group insurance contracts must comply with bargaining requirements or else the employer may be held liable for the shortfall. For non-bargained situations, it may be left to the employer to decide if benefits are to be continued during a layoff based on what is allowable under any group insurance contract that is in place in respect of the laid off employees.
Given the recent pandemic situation, some insurers are adapting contractual requirements for maintaining benefits during a layoff period and offer extended coverage periods. As business may face financial challenges in the months ahead, insurers may also be inclined to extend premium payment deadlines. It is therefore recommended to verify not only applicable policy provisions but also the measures that your carrier may be offering as accommodations to help plan sponsors weather the current pandemic.
The decision to maintain group plans during a layoff period should be taken with great care, weighing the risks, the costs and the subsidy programs that may be available to both employees and employers. Termination of benefits can be fraught with consequences and may leave employees unprotected when they need it most, especially regarding the disability benefit. If it can be maintained, then normally the waiting period for a disability claim that occurs during a layoff will not begin until the return to work occurs.
Employees who work in businesses that remain open during the pandemic may need to take time away from work because of sickness, quarantine or to take care of a dependent. In these cases, they may have access to a protected leave during which benefits may need to continue. This could be required under existing employment standards provisions or based on recently introduced amendments enacted by legislatures in reaction to COVID-19.
The situation is fluid and is evolving daily and exceptions to insurer’s practices and employment standards rules may be enacted in reaction to these mass layoff situations. Reach out to your Aon advisor to discuss the issues outlined above and other risk issues that may be of concern related to the COVID-19 situation.