The recent decision of the BC Supreme Court in Feldstein v. 364 Northern Development Corporation provides a cautionary tale for well-meaning employers seeking to provide compensation and benefits package details to candidates during the interview process.
Cary Feldstein had been diagnosed with Cystic Fibrosis at the age of nine, obtained a Bachelor of Arts in Computer Science and worked in his chosen field of software engineering and was the major breadwinner for his family. In 2012, his existing employment was terminated and he sought out employment with other firms, including 364 Northern Development Corporation (“364”). The court found that the British Columbia job market at the time for software engineers was “hot” and, given his medical condition, Mr. Feldstein prioritized employee benefits when seeking out alternate employment, including in particular, LTD benefits.
364 liked Mr. Feldstein and, during the course of numerous interviews, conversations and meetings with 364’s management, Mr. Feldstein and 364 discussed the compensation 364 was offering, including employee benefits. The court found that, at a certain point during this process, 364 told Mr. Feldstein that three consecutive months of employment would satisfy any need for Mr. Feldstein to establish “proof of good health” for the purposes of LTD benefits. This statement ended up being untrue. After considering the information he had gathered from 364, Mr. Feldstein accepted employment and began working for 364 on April 30, 2012.
By May 2013, Mr. Feldstein’s health deteriorated significantly and he took a number of medical leaves. By October 2013, he wrote to 364’s owner to enquire about LTD benefits, as it was becoming clear that he was not eligible for the full LTD package as a result of his prior condition. 364 made, in the court’s words, “strenuous efforts” to have the LTD insurer provide full LTD benefits, without success. In the end, Mr. Feldstein only received the “Non-Evidence Maximum” of $1,000/month in LTD benefits. During his LTD period, Mr. Feldstein underwent a double lung transplant.
At trial, the question before the judge was whether 364 had negligently misrepresented the details of LTD benefit eligibility to Mr. Feldstein during the interview process, and if so, the extent of Mr. Feldstein’s damages. The court sided with Mr. Feldstein, finding in part that , given the importance of LTD benefits to his life and circumstances, he would have a more reliable memory of what transpired during the interview process. In sum, the court found that 364 owed Mr. Feldstein a duty of care to ensure it made accurate statements to him during the interview process, the statement regarding the three month “proof of good health” for LTD benefits purposes was inaccurate, untrue and misleading, breaching the standard of care required of 364, and Mr. Feldstein reasonably relied on the statement and suffered damages as a result.
The court awarded Mr. Feldstein 40 months of LTD benefits at the level Mr. Feldstein thought he would get when he accepted employment, less money he received in CPP income, for a total of $83,336.80. The court also awarded Mr. Feldstein $10,000 in aggravated damages for the “extraordinarily distressing” circumstances he suffered after he had gone to great lengths to protect himself against loss from a long term disability.
Lessons for employers?
- As a rule and best practice, refer to the plan provisions when explaining employee benefits. Benefits plans can be complicated and certain terms may need to be amended over time. Rather than risk providing inaccurate information (inadvertently, as it appears to have been in this case), provide a candidate with general information, subject to the plan terms, and provide the candidate with the actual plan document for his or her review.
- If a desirable candidate pushes for information in time-sensitive circumstances (as occurred here), ensure that you take the time to review the plan details and are comfortable with the terms. Check with appropriate staff and make necessary phone calls and enquiries before making any statements. Consider putting the candidate directly in touch with your benefits provider.
- Most importantly, ensure your employment contract includes an “entire agreement” clause, which stipulates that the written agreement supersedes and replaces any and all previous discussions, conversations and representations regarding the terms and conditions of employment. Had there been such a clause in this case, 364 may have been able to avoid the nearly $100,000 in liability it was ordered to pay
We understand this decision is currently under appeal. We’ll be sure to keep you posted on the outcome.