Employers must be careful when claiming frustration
Question: If the physician of an employee on long-term disability leave provides a note saying the employee is unlikely to ever be able to come back to work, can the employer terminate due to frustration immediately or is there a period of time it should wait?
Answer: It has long been recognized that an employee’s permanent disability can terminate an employment contract where the disability can “put an end, in [the] business sense, to [the parties’] business engagement” and thus to “frustrate the object of that engagement,” as stated by the Supreme Court of Canada in Marks v. Dartmouth Ferry Commission.
The guidelines determining whether the disability is permanent were set out in Marshall v. Harland & Wolff Ltd. That case describes the inquiry as requiring a determination whether the employee’s incapacity, looked at before the purported dismissal, was of such a nature or appeared likely to continue for such a period that future performance of his obligations would either be impossible or would be radically different from previous performance and accepted by the employer under the agreed terms of his employment.
Relevant factors to be considered in determining the permanence of the disability include the terms of the contract, how long the employment was likely to last without illness, the nature of the employment, the nature of the illness or injury and how long it has lasted, the prospects of recovery and the period of past employment. Each case must be decided on its own facts and other factors can be relevant.
The range of relevant factors for assessing the permanence of a disability make it risky to rely solely on a doctor’s note to proceed to immediate termination. Clearly, where there is medical evidence of potential recovery in the near future, an employer will be unable to justify termination on the basis that the illness has brought the employment relationship to an end. However, the reverse is not necessarily true.
The opinion of the employee’s own physician that the employee will not likely work again is a significant indicator of permanent disability. However, caution dictates that the employer insure the physician is fully aware of the employee’s duties, the possibility of accommodation (if it exists) and the significance of her opinion. This is particularly important where the permanent incapacity is described in terms of a “likelihood” rather than a certainty.
In addition, it is important to communicate directly with the employee concerning the physician’s opinion and the employer’s intentions to formally end the contract. If the employee disagrees with the physician’s assessment for valid reasons, it is best for the employer to find that out before it takes action that could render it liable for wrongful dismissal. This is particularly important where the alleged frustrating event is the employee’s disability. In such a case, the employer may well be found liable for additional damages if the employee is seen to have been terminated in an unduly insensitive manner.
A recent Ontario Supreme Court decision, Altman v. Steve’s Music Store Inc., is illustrative of the dangers of moving too quickly and without appropriate investigation of the employee’s prospects for returning to work.
Altman involved an employee who had been diagnosed with cancer. She worked reduced hours for several months while undergoing surgery and treatment. Throughout that period, the employer was aware of the employee’s illness, the treatment she was receiving and the reduced hours she was working.
The employer continued her regular salary, raised no complaints about her performance and did not suggest at any time that her absences were jeopardizing her employment until eight months had passed. At that time, the employer sent the plaintiff a solicitor’s letter indicating that her absences were unauthorized, in breach of her employment duties and would be cause for dismissal if she did not fulfill her employment obligations by reporting for full-time work. She reported for work the next day, but the following day commenced a three-month medical leave that was extended for a further three months.
When the employee indicated her intention to return to work, the employer advised her, through a lawyer, that she was terminated, without making any effort to discern her current ability or following up with the medical opinions provided. The employee was 59 years old with more than 30 years of service.
The employer was found to have failed in its effort to prove that the contract had been frustrated by the employee’s illness under the Marshall guidelines. The medical evidence indicated that, at the time the employee was terminated, her doctors supported her assessment that she was able to work. The fact that her condition deteriorated fairly quickly afterwards was not relevant in assessing the wrongfulness of the employer’s conduct at the time. The employee was awarded 22 months’ salary in lieu of notice, $35,000 in damages for bad faith in the manner of dismissal and $25,000 in punitive damages.
In Naccarato v. Costco Wholesale Canada Ltd., the employer terminated the employment of a clerk after he had been employed for 17 years followed by five years’ absence due to depression. The employer based its decision on the clerk’s receipt of long-term disability benefits requiring total disability and a physician’s note that indicated that his depression was ongoing and the timing of a possible return to work could not be predicted.
The court found that the employer had not satisfied its onus to prove that the contract of employment had been frustrated by the clerk’s inability to work in the reasonably foreseeable future. The medical evidence did not establish a permanent disability but instead showed the disability and treatment were ongoing. The evidence relating to the job itself indicated there was no pressing need for the employer to terminate the clerk’s employment as he was not a key employee who needed to be replaced. Therefore, the contract could not be said to have been frustrated prior to the employer’s act of terminating the employment. The clerk was awarded 10 months’ salary in lieu of notice.
In Gielen v. Ste Anne (Town), a Manitoba employer succeeded in establishing frustration of the employment contract. It proved that the employee, a police officer, was granted a three-month disability leave to recover from a shoulder injury that prevented him from performing his job. When it appeared that the employee was not recovered at the end of the leave and in the face of his doctor’s opinion that he would never recover, the employer granted him an additional three-and-one-half months leave so see if there was any improvement. Only at that point, and after a current assessment of the employee’s condition, did the employer act to end the relationship because further accommodation was impossible. The employer was able to justify its conclusion because it established that the employee would never be able to safely perform active police work again, because the small size of the force required that the employee be replaced and because there were insufficient light duties available to keep the employee occupied.
Generally speaking, an employer who hopes to prove an employment contract has been frustrated by employee disability should be sure that it has investigated thoroughly and has satisfied itself, by a careful review of all the circumstances, that there is no reasonable prospect of the employee’s return to work. Jumping too easily to the conclusion that termination is the only answer may turn the tide in the employee’s favour in the event a wrongful dismissal claim is made.
For more information see:
•Marks v. Dartmouth Ferry Commission, 1904 CarswellNS 69 (S.C.C.).
•Marshall v. Harland & Wolff Ltd., [1972] 2 All E.R. 715 (N.I.R.C.).
•Altman v. Steve’s Music Store Inc., 2011 CarswellOnt 1703 (Ont. S.C.J.).
•Naccarato v. Costco Wholesale Canada Ltd., 2010 CarswellOnt 4108 (Ont. S.C.J.).
•Gielen v. Ste Anne (Town), 2009 CarswellMan 532 (Man. Q.B.).
