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A primer on undue hardship and frustration of contract

frustration of contractThis blog post provides a primer on the state of undue harship and frustration of contract under Ontario’s Human Rights Code.

Quick facts

The Plaintiff Darren Nason developed problems with his arms and hands because of the physical demands of his work as an orthotic technician. Nason’s employer, Thunder Bay Orthopaedic Inc. (TOI), placed Nason on medical leave in August of 2010 and terminated his employment in January 2013.

Mr. Nason sued Thunder Bay Orthopaedic for both wrongful dismissal and damages under the Human Rights Code for his employer’s failure to accommodate his disability and for disability related discrimination. He was awarded 15 months pay in lieu of notice (net of WSIB collaterals), plus $10,000.00 in damages for the breach of the Human Rights Code. The trial judge found Mr. Nason’s disability was a factor in Thunder Bay Orthopedics decision to terminate his employment.

Court of Appeal

The decision escalated to the Court of Appeal. Mr. Nason appealed the decision submitting that the trial judge made an error by not awarding him damages for loss of income between August 2010 and January 2013. He argued that the trial judge erred in concluding that TOI had accommodated his disability to the point of undue hardship in August of 2010, and that the employer was justified on placing him on medical leave that date.

Thunder Bay Orthopaedic cross appealed with arguments that the trial judge erred by not finding that the employment contract was frustrated by the appellants disability. They argued that at the time Darren was fired, there was no reasonable likelihood of him being able to return to work within a reasonable time.

Undue Hardship

Firstly, what is undue hardship? There is a duty to accommodate an employee on disability short of undue hardship. This requires that the employer modify work rules, practices and requirements to meet the needs of the individual employees who would otherwise be subjected to unlawful discrimination.

Stacey Ball, in his text Canadian Employment Law, tells us that the purpose of accommodation is to ensure that an employee who is able to work can do so and that persons who are otherwise fit to work are not unfairly excluded while working conditions can be adjusted without undue hardship.

In Nelson, the Court of Appeal explained that a determination of whether an employer has accommodated a disabled employee to the point of undue hardship must take into account 1) the specific fact situation and 2) appeal to common sense. Although an employer must modify work rules and practices to try and accommodate an disabled employee, an employer is not required to create a new position for the employee, nor is the employer required to make fundamental changes to employee’s entire job scope or working conditions. Hardship becomes undue when an employee is no longer able to fulfill the basic obligations of his/her employment position, despite accommodations.

In this case, modifications were put into place very early on for Mr. Nason. He was allowed to work at a pace compatible with his condition, he was allowed rest breaks at his own discretion, breaks to stretch and he did not use a computer at lunch so that he could rest his wrist and hands instead. He was also allowed extensive paid time off, as he need to attend physiotherapy and other medical appointments.

The Court of Appeal found that these steps taken by Thunder Bay Orthopaedic satisfied the substantive component of their duty to accommodate Mr. Nason’s disability. Despite this, Mr. Nason’s situation got worse and his condition deteriorated to the point where his productivity declined at less that 50% of what it should have been. Other employees worked evening and weekends to maintain productivity in the business, but eventually they came to the realization that working 12–13 extra hours per week, was not sustainable and it made no sense to keep Mr. Nason on the payroll. Thunder Bay Orthopaedic directed Mr. Nason to WSIB which the court found logical and reasonable.

In short, the Court of Appeal was persuaded that Thunder Bay Orthopaedic fulfill their procedural and substantial obligations to accommodate Mr. Nason as best they could in a small business situation. The acted proactively, but despite accommodations offered, Mr. Nason worsened in his ability to fulfill his employment obligations beyond the point of viability.

Frustration of contract

The respondent argued that Mr. Nason had frustrated his employment contract.

The issue of whether or not termination of employment of a disabled employee is a wrongful dismissal or the frustration of the employment contract depends on the facts. A good starting point is asking whether or not if an employee is permanently unable to work because of a disabling condition. If so, the doctrine of frustration of contract applies because the permanent disability renders the performance of the employment contract impossible, such that the obligations of the parties are discharged without penalty or damages for wrongful dismissal. Normally, frustration of an employment contract is established at the time of termination if there is no reasonable likelihood that an employee is able to come back within a reasonable time. The onus is on the employer to proof the contract of employment has become frustrated and if it has, then termination of the employment contract is not based on “just cause” but on the doctrine of frustration i.e. is there reasonable likelihood of the employee returning to work and fulfilling his/her obligations under his/her contract.

In this case, Thunder Bay Orthopaedic argued that there was no reasonable likelihood of Mr. Nason being able to return to work within a reasonable period of time; however, the Court did not agree with this. Rather, the Court held that whether Mr. Nason could have returned to work with accommodations had not been sufficiently explored at the time of his termination that one could conclude that there was no reasonable likelihood of it happening in the future.

Success in this case was divided on the appeal – the appellant failed to prove undue hardship and the employer failed to prove its argument of frustration of the employee’s employment contract.

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Matt Lalande

Personal Injury Lawyer at Micheal L. Lamont Personal Injury Law
Matt Lalande is a lawyer at Micheal L. Lamont Personal Injury Law. Although Matt is specialized in representing those who have suffered harm by the wrongs of others. Matt has particular emphasis on wrongful death, personal injury and employment law. Matt has represented employers and employees within all facets of employment law and human rights law.Read more
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