Ending an employee’s employment, and with it their long-term disability (LTD) coverage, before a medically supported return to work has begun can amount to prima facie disability discrimination, even where the position was eliminated for genuine business reasons. In O’Grady v. Bell Canada, 2026 FCA 162, the Federal Court of Appeal reached that conclusion under the Canadian Human Rights Act (“CHRA”), a ruling with direct relevance for employers planning restructurings and for employees on disability leave.

Factual Overview

  • Disability leave and rehabilitation: Ms. O’Grady, a Bell Canada manager, went on disability leave in June 2006 due to a mental health disability. After a year of short-term benefits, she received LTD benefits administered by Bell’s disability management group, with rehabilitation services from a consultant engaged by Bell. Bell did not regard her as permanently unable to work, and return-to-work planning was ongoing.
  • Return-to-work planning: Through 2008, her physician, the rehabilitation consultant and an independent psychiatric examiner discussed a graduated return. In October 2008, the examiner concluded that she could attempt a progressive return after roughly six to seven weeks of further treatment. In January 2009, she reported that she was struggling again, and in March 2009 her psychotherapist advised that she could return under a progressive plan over the following two to three months.
  • Restructuring: Her position was eliminated in an August 2008 corporate restructuring affecting approximately 2,500 employees. She was not told immediately, and her LTD coverage continued for several months. A draft termination letter was circulated internally in November 2008, before the final medical updates were received.
  • Termination: On April 20, 2009, at a meeting she understood would address her return-to-work plan, she was terminated. Salary continuance was paid, but her disability coverage ended immediately, before the graduated return had begun. She experienced a relapse and states that she has been unable to work since.
  • Complaint and delay: She filed a human rights complaint in October 2010, alleging that she was terminated while still unfit for work. The Canadian Human Rights Commission twice declined to proceed, first because of a signed release and then after an unsuccessful mediation, and the Federal Court set aside both decisions. The Canadian Human Rights Tribunal dismissed the complaint in 2018, and the Federal Court dismissed judicial review in 2020. More than fifteen years after the events, the matter reached the Federal Court of Appeal.
  • Positions and lower decisions: Bell maintained that she had been cleared to begin a progressive return before the termination, that no rule requires an employer to postpone a termination until an employee returns, and that the loss of benefits was an incidental consequence of a legitimate restructuring. The Tribunal and the Federal Court agreed that the restructuring, not her disability, explained the termination. The Tribunal did not consider her argument that cutting off her disability coverage was itself discriminatory, and the Federal Court held that the Tribunal had no need to address it.

What the Court Decided

The Federal Court of Appeal held that the Tribunal and the Federal Court asked too narrow a question. The issue was not only whether Bell eliminated the position because of disability, but whether Bell treated an employee who remained disabled as though she were already well, by ending her employment and disability coverage before the medically supported return to work had started.

Several points stand out:

  • Unreasonable decision: The Tribunal’s decision was unreasonable because it failed to grapple with a central argument, namely that cancelling her LTD coverage was itself discriminatory. The Federal Court erred in finding otherwise.
  • Prima facie discrimination: The Court found a prima facie case of adverse impact discrimination on the ground of disability, having regard to paragraph 7(b) of the CHRA, which prohibits adverse differentiation in the course of employment. This was so regardless of why the position was abolished.
  • Clearance is not recovery: Approval to begin a graduated return to work is not the same as an actual return to active employment. Bell had blurred the line between anticipated recovery and actual recovery.
  • Earlier cases distinguished: Kerr v. Bell Canada, 2007 FC 1230, confirms that termination during disability leave, without more, does not establish discrimination, but it did not address a termination that automatically ends disability coverage for an employee who is still disabled. Tutty v. Canada (Attorney General), 2011 FC 57, turned on the absence of evidence that the claimant was disabled at the date of termination.
  • Business reasons come later: Restructuring rationale, the bona fide occupational requirement defence and accommodation to the point of undue hardship are assessed only after a prima facie case is made out.
  • Disposition: Citing the fifteen-year history, the Court declined another remittal on the prima facie question and substituted its own finding. Only Bell’s defence and the remedy return to a differently constituted Tribunal panel, although the Court observed that it may be difficult to see how a bona fide occupational requirement defence could succeed on these facts.

Strategic Implications for Employers

Key Takeaway: A legitimate restructuring does not, on its own, answer a discrimination claim where the termination cuts off disability coverage for an employee who is still disabled.

  1. Match the timing to actual medical status. Medical approval to begin a graduated return to work is not recovery. Terminations affecting employees on LTD warrant careful attention to their actual medical position rather than projected return dates.
  2. Business justification arrives late. Genuine business reasons and undue hardship are defences on which the employer bears the burden. Exposure at the prima facie stage may be broader than many employers assume, so the benefit consequences of a termination warrant review before it is implemented.
  3. Human rights and employment law exposure run in parallel. Lost disability benefits already attract damages at common law, and the Court noted that this does not preclude a human rights violation. Federally regulated employers in particular should seek advice before terminating employees on disability leave, and can find further guidance on employer-side employment law and on managing workplace discrimination risk. Related reading: when an employer can rely on frustration of contract, which highlights the limits of that doctrine where an employee is absent due to disability.

Strategic Implications for Employees & Executives

Key Takeaway: Termination during disability leave is not automatically discriminatory, but ending disability coverage before actual recovery may be.

  1. Focus on the loss of coverage, not only the reason for termination. The claim succeeded because it targeted the cutoff of disability benefits and rehabilitation, not just why the job ended. Employees on disability leave who receive a termination notice should have its effect on benefits assessed promptly. Employees in this position may have rights under both human rights law and employment law, as outlined on the employees page.
  2. Treat any release with care. In this case, a signed release led the Canadian Human Rights Commission to decline the complaint at the outset, a decision later set aside on judicial review, and years of litigation followed. Severance terms, including how disability and benefit coverage are treated, warrant careful employment contract review before signing. Executives whose packages include LTD, benefits or equity should also consider executive compensation protections.
  3. Preserve the medical and return-to-work record. Medical reports, rehabilitation plans and the employer’s own disability management communications were central to the outcome. Complete records support both a human rights complaint and a wrongful dismissal claim.

Frequently Asked Questions

Can an employer terminate an employee on long-term disability leave? Termination during disability leave, without more, does not establish discrimination. The concern in O’Grady was ending disability coverage while the employee remained disabled and before a medically supported return to work had begun. Further information on disability-related protections is available on our workplace discrimination page.

Does a genuine restructuring protect an employer from a human rights claim? Not at the outset. Business reasons are considered only after a prima facie case is established, at the stage of the bona fide occupational requirement defence and the duty to accommodate to the point of undue hardship.

Does the decision apply to Ontario employers? The decision interprets the Canadian Human Rights Act, which governs federally regulated employers such as banks, telecommunications companies and interprovincial carriers. Provincially regulated employers are subject to the Ontario Human Rights Code, but the reasoning may be persuasive in similar circumstances.

Has Ms. O’Grady won her case? Partly. The Court found prima facie discrimination, but whether Bell has a defence, and what remedy applies, remain to be decided by a differently constituted Tribunal panel.

Are lost disability benefits recoverable in a wrongful dismissal claim? The Court noted that terminating disability coverage for a disabled employee can give rise to damages equal to the value of the lost benefits in employment law, in addition to any human rights liability.

How Pelsmakher Law Can Help

Pelsmakher Law advises both employees and employers on terminations, disability leave, accommodation and workplace discrimination. To discuss a specific situation, contact Pelsmakher Law to arrange a consultation.

For further information, please feel free to explore more legal updates on the Pelsmakher Law blog, including when an employer can rely on frustration of contract.