Editor's Desk|Canadian HR Law|Employment Law|The C-Suite|HR Guest Blog

Getting frustration of contract right

What happens if a worker fails to provide medical documentation to support their ability to work?
employment law
An Ontario decision found that the employee’s contract had been frustrated and even though the employee expressed his desire to return to work, the duty to accommodate had not been triggered due to his failure to provide supporting medical documentation. Shutterstock

By Nadia Zaman and Stuart Rudner

Frustrated with your employee? Well, that may not be the same as “frustration of contract” at law. However, where there is frustration of contract, you are not terminating the employee’s employment, and the employee is not resigning. Rather, the contract simply comes to an end.

How long does an employee have to be on medical or disability leave before you can terminate their employment? That is a question we are asked all the time, and the answer is that there is no simple answer. What is clear is that employers must handle these situations very carefully.

Ontario decision

A recent decision is helpful for employers. In Katz et al v Clarke, the Ontario Divisional Court found that the employee’s contract had been frustrated and even though the employee expressed his desire to return to work, the duty to accommodate had not been triggered due to his failure to provide supporting medical documentation.

The employee had been off work for five years due to disability, initially due to depression and then a knee injury. He received both STD and LTD benefits. The insurance benefits provider concluded that based on the medical information, the employee was “unable to perform the essential duties of his position and there was no reasonable expectation that he would be capable of performing them in the foreseeable future.”

As a result, on July 1, 2013 the employer notified the plaintiff that his employment would come to an end effective Dec. 31, 2013 and his statutory entitlements under the Employment Standards Act, 2000 (ESA) would be provided.

The employee informed the employer, through his counsel, that he was working hard to return to work. The employer’s counsel requested medical information supporting the employee’s ability to return to work on two separate occasions. However, the employee failed to provide supporting medical information, and the employer treated the employment relationship as having been frustrated.

Taking it to court

The employee brought an action for wrongful dismissal damages and human rights damages. The employer brought a motion for summary judgment, which was unsuccessful, since the motion judge was of the view that the plaintiff’s desire to return to work was sufficient to trigger the duty to accommodate. The employer appealed.

On appeal, the Divisional Court set aside the motion judge’s decision, dismissed the employee’s action and granted summary judgment in favour of the employer.

First, the court found that this was an appropriate case for summary judgment, since there was no dispute regarding material facts and summary judgment would serve the goals of “timeliness, affordability and proportionality without any adverse effect on the interests of justice.”

Second, the court found the motion judge erred in finding there was a genuine issue for trial:

“An employer’s duty to accommodate is only triggered when an employee informs an employer not only of his wish to return to work but also provides evidence of his or her ability to return to work including any disability-related needs that would allow him to do so… the employee must communicate the ability, not just the desire, to return to work.”

Third, the court commented on frustration of contract specifically:

“[An] employer’s duty to accommodate ends where the employee is no longer able to fulfill the basic obligations associated with the employment relationship for the foreseeable future… it is ‘inherently impossible’ to accommodate an employee who is unable to work.”

Here, the medical evidence clearly indicated that the employee was totally disabled and unable to work “in any occupation at the time or for the foreseeable future.” Accordingly, the employer was entitled to treat the contract as having been frustrated. 

Takeaways

There are no hard and fast rules for determining when a contract of employment has been frustrated, and there are many cases in which employees have been off work for years and the courts have said that the contract had not yet been frustrated. Rather, each case will be decided based upon its own particular facts and, in particular, the medical information available.

The courts will assess whether there is any reasonable likelihood that the individual will be able to return to work in the foreseeable future. If there is, then it is unlikely that the court will conclude that the contract of employment had been frustrated.

This decision is helpful for employers, as it provides guidance on what employers should do before asserting frustration of contract, especially in scenarios where the employee has been off work due to disability.

Employers would be wise to continue to request updated medical information regarding prognosis for recovery from employees who are off on long-term medical leave before claiming frustration of contract. If the evidence shows the employee has a permanent disability that makes it impossible for them to perform the employment contract for the foreseeable future, then the employer is entitled to end the employment relationship “without penalty” by providing the employee with their statutory entitlements under the ESA.

In this case, the employer got it right, although the victory undoubtedly came at a cost, both in terms of time and money. Getting it wrong, unfortunately, can be far more costly.

Nadia Zaman is an associate at Rudner Law in Toronto.

© Copyright Canadian HR Reporter, HAB Press. All rights reserved.

Stuart Rudner

Stuart Rudner, Employment Lawyer and MediatorStuart Rudner is the founder of Rudner Law (RudnerLaw.ca), a firm specializing in Employment Law and Mediation. He can be reached at stuart@rudnerlaw.ca, (416) 864-8500 or (905) 209-6999, and you can follow on Twitter @RudnerLaw.
CLICK TO COMMENT ON THIS BLOG POST
(Required)
(Required, will not be published)
(Required)
All comments are moderated and usually appear within 24 hours of posting. Email address will not be published.