Q&A is a recurring series on the Vey Willetts LLP blog. The aim is to provide quick answers to questions we commonly encounter in our day-to-day practice of employment law. In this edition, we focus on “frustration of employment.”
Q. What is “frustration of employment”
A. Frustration is a legal doctrine that describes a situation where the employment relationship has been rendered untenable by a change in circumstances beyond the parties’ control or contemplation. Put differently, continued performance of the employment agreement is now impossible or at least radically different from what the parties agreed due to a change in circumstances.
Q. In what circumstances is an employment relationship “frustrated”?
A. Most commonly, we see frustration come into play where an individual experiences a serious illness that prevents the employee from being able to return to work in the foreseeable future. That said, frustration may also be found in other situations. For example, where a natural disaster destroys a place of work and the employer can no longer continue operating or where an employee is unable to maintain professional qualifications that are integral to the performance of their role.
There is no bright line test in this regard; each situation will need to be assessed carefully on its facts, taking into consideration the surrounding context and likelihood of employment resuming. Recently, however, the Ontario Superior Court of Justice stated that a contract of employment is frustrated in the context of illness when “there is no reasonable likelihood of the employee being able to return to work within a reasonable time.”
Q. How long must an employee be off work due to illness for the employment agreement to be frustrated?
A. In cases of illness or disability, there is no specific time period after which an employer or employee may assert that the employment relationship has been frustrated. Generally speaking, it is likely that frustration will be found where the employee has endured a lengthy absence and there remains an uncertain or negative prognosis for return.
Employers often choose to adopt a somewhat arbitrary two-year rule in this regard, which may be communicated in an employment agreement or workplace policy. Be mindful that any such pre-set or automatic timeline to assess frustration is not legally dispositive. Rather, the length of an employee’s absence will be one of several factors that a court will assess in determining whether the employment relationship has been frustrated. Among other things, a court will consider:
- The terms of the parties’ employment agreement, including provisions for sick pay;
- The nature of the individual’s employment;
- The nature of the illness or injury and medical prognosis for recovery; and
- The period of past employment (i.e. the individual’s tenure).
Employers should proceed with caution in asserting a frustration of the employment relationship. A misstep in this regard can prove costly, exposing the employer to unintended liability pursuant to human rights legislation (by failing to reasonably accommodate a disability to the point of undue hardship) as well as contractual or common-law severance (if the cessation of employment is in fact determined to have been a dismissal as result of the employer’s actions).
Q. What payment obligations apply (if any) when an employee’s employment has been frustrated?
A. Where a parties’ employment agreement has been frustrated, the employer is typically relieved of any obligation to provide either contractual severance or common law notice (or pay in lieu thereof). However, employers must still comply with minimum statutory requirements.
Regulation 288 (“Termination and Severance of Employment”) of the Employment Standards Act, 2000 requires that where frustration occurs as a “result of an illness or injury suffered by the employee”, the individual will be entitled to receive both statutory termination and severance pay.
While this statutory obligation will usually be less than contractual or common law entitlements, depending on an employee’s tenure with their employer (and the size of the employer’s annual payroll), an individual may nonetheless have an entitlement of up to 34 weeks’ pay.