Frustration of Contract Issues

Terminated while on Disability? Speak to our Hamilton employment lawyers. We help clients throughout Ontario.

Can employee who is on disability or who has been away from work for an extended period of time due to illness, injury or chronic disease be terminated? The answer is that it depends.  This is typically called the “frustration a contract”.  At common law, the doctrine of frustration applies to contractual obligations where making performance of the contract is radically different than what the parties agree to and cannot be considered the fault of either party.

When and how can an absent employee be terminated?

Frustration of the employment contract is not the same as just cause for termination. The events that lead to frustration a contract or not a breach of the contract that can be attributable to an employee being blameworthy. Rather, the contract simply cannot be completed. The frustration of contract does most often come up when an employee is sick or hurt, and is absent from work for an extensive amount of time.

Illness, Injury, Disability & Frustration of the Employment Contract

If you are sick, hurt or suffer a chronic disease and are unable to return to your position, it’s important that you speak to one of our Hamilton employment lawyers to assist with your issue.Whether frustration has occurred typically depends on the anticipated duration of your illness illness or incapacity, the duration of employment and the nature of work to be performed.

How do courts assess whether your contract has been frustrated?

There is an analytical framework adopted by Canadian courts which asks whether an employee’s capacity is such that further performance of the employment obligations would be impossible or radically different from what the parties originally agreed to. Courts would typically examine several factors including:

  • the terms of the contract, including provisions for sick pay or disability benefits
  • how long the employment was likely to last had the illness or injury not occurred
  • the nature of the employment
  • the nature of the illness
  • the nature of the injury
  • how long the employee has been absent
  • the prospect of recovery
  • the period of past employment

Does your employer need evidence of employment incapacity?

Your employer bear the onus of proving proving frustration and must take positive steps to collect the necessary medical evidence in order to rely on the frustration defence.

How long can your employer wait before considering the contract frustrated?

The overall period of absence is very important, but it is only one factor that is to be considered in determining whether the employment contract has been frustrated by an employee’s injury or chronic illness.  It’s important to note that employers should never rely on the defence of  frustration if there is medical evidence showing future improvement of an employee’s condition, despite a lengthy absence. Evidence of improved condition may preclude frustration, even after an absence of many years. Some things employers should look before relying on the defence of frusrtration is whether or not your medical condition has plateaued and if you could  expected to return to work –  or – whether or not there is medical evidence showing there is no reasonable likelihood of return to work in the reasonably foreseeable future. The employer should not set an arbitrary period for evaluating your prospects for return to work.

What effect does the frustration of the employment contract have on your disability benefits?

This is often a confusing situation for employers.  The mere existence of LTD benefits does not prevent the application of the frustration doctrine. In fact, if you have passed the change in definition (COD) at the two-year mark, it’s reasonable to conclude (depending on the facts medical evidence that is particular to each case) that you suffer a total disability and are prevented from working in any occupation for which you are reasonably suited by education, training and experience. Given the variety of LTD benefit arrangements, the terms of your employment contract and LTD policy should be reviewed closely to determine their effect on any application of the doctrine of frustration.

How does the obligation to accommodate under the Human Rights Code play into frustration?

The common law doctrine of frustration typically looks only at an employee’s ability to fulfill job duties the employee was hired to perform. Human rights law requires the employer to accommodate an employee’s disability to the point of undue hardship. This accommodation may require transferring the employer into a new position. This is a separate consideration from determining whether or not frustration a contract is occurred a common-law.

However, similar medical evidence is often relied on to demonstrate both of the following:

  • The employer cannot make further efforts to accommodate disability without undue hardship.
  • The employee’s return to work is not likely in the reasonably foreseeable future.

In some cases, accommodation to the point of undue hardship has been found on the basis that the factors required for frustration of the employment contract have been satisfied.  It’s best to speak to a Hamilton employment lawyer about your particular situation.

Is severance or a separation payment required if my contract has been frustrated?

Minimum standards legislation in all jurisdictions requires employers to provide employees with notice of termination or pay in lieu. In Ontario, employees whose employment ends due to illness or injury are still entitled to statutory termination entitlements.

Also, in the federal jurisdiction, the doctrine of frustration may have little or no application due to unique employee protections under the Canada Labour Code, R.S.C. 1985, c. L-2: which state that employers are prohibited from terminating employees with work-related illness or injury, despite that the common law criteria for frustration may be satisfied.

Have you been terminated while on disability or while absent from your workplace for an extended period of time?

If you are an employee who has been terminated while absent of on disability and your employer is alleging frustration of your employment contract, Call our Hamilton employment lawyers at 905-333-8888 to speak with us at your convenience. We would be happy to meet and answer any questions you may have.



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