Frustration of contract and unionized workers

Applying the principles of frustration of contract in a unionized environment

Colin Gibson
Question: We have a unionized employee who has been absent from work for nine months following a motor vehicle accident, and a return to work is not expected in the foreseeable future. Do the principles regarding frustration of employment contracts apply to unionized workers?

Answer: The fundamental principle underlying every employment relationship is that the employee provides services to the employer in exchange for wages and other remuneration. If an employee is absent for an excessive period of time, regardless of the reason, the employee fails to deliver on her part of this bargain. Courts and arbitrators recognize, in most circumstances, a point will be reached where the employer may dismiss the employee for excessive absenteeism.

At common law, it is well established that an employment contract may be terminated without notice or severance compensation if the contract has been frustrated by a lengthy and permanent disability. In Yeager v. R.J. Hastings Agencies Ltd., the British Columbia Supreme Court adopted the following test for frustration established in Marshall v. Harland and Wolff Ltd.

“Was the employee’s incapacity of such a nature, or did it appear likely to continue for such a period, that further performance of her obligations in the future would either be impossible or would be a thing radically different from that undertaken by him and agreed to be accepted by the employer under the agreed terms of his employment?” In determining whether or not an employment contract has been frustrated by an employee’s disability, a court will take into account a number of factors, including: the terms of the contract, including provisions for sickness or disability pay; whether the employment is permanent or temporary in nature; whether the employee occupies a key position or is one of a number of workers in the same category; the nature of the illness or injury and how long it has continued; the prospects for recovery; and the employee’s length of service.

The application of the frustration of contract principles in the unionized setting is a matter of debate. Some arbitrators have applied the common law frustration concepts, as in Maple Leaf Meats v. U.F.C.W., Locals 175 & 636 and Toronto East General and Orthopaedic Hospital, while others have reasoned such principles cannot apply to an employment relationship governed by a collective agreement because there is no individual contract of employment that can be frustrated, as in Oxford Automotive Inc. v. U.A.W., Local 251.

In St. Joseph's General Hospital v. O.N.A., the arbitration board reconciled the competing lines of authority by stating the common law doctrine of frustration of contract is reflected in the arbitral principles pertaining to discharge for non-culpable absenteeism.

In U.A.W. v. Massey-Ferguson Ltd., Professor Paul Weiler said the employer has a right to get the job performance it is paying for and to take action if it doesn’t. As a result, excessive absenteeism can warrant non-punitive termination of the employment relationship.

“After a certain stage is reached, the accommodation of the legitimate interests of both employer and employee requires a power of justifiable termination in the former,” Weller said.

To justify the dismissal of an employee for non-culpable absenteeism, an employer must prove:
•The employee's absenteeism has been excessive, when measured against a relevant comparison group of employees
•There is no reasonable prospect of proper and regular attendance by the employee in the foreseeable future.

The second branch of this test can be a difficult hurdle. In some cases, the test will be met because it is apparent on the medical evidence the employee has a chronic disability and will not be capable of returning to work in the foreseeable future. In others, however, it will be difficult for the employee's physician or the employer to predict whether the employee is likely to be capable of regular future attendance. In such circumstances, it will be necessary for the employer to warn the employee — before resorting to discharge — that her absenteeism is excessive and the employment relationship will be terminated if it does not improve. If attendance does not improve after clear warnings have been delivered, the employer may then have an arguable case for non-culpable dismissal. However, some arbitrators require a “culminating incident” before the employer may resort to discharge.

In deciding if discharge was warranted, arbitrators will typically focus on the the employee’s past attendance record, the nature of and causes for past absences, the persistence of the attendance problem, the effect of earlier attempts to rectify it, the frequency and duration of the absences and any medical prediction regarding the likelihood of the employee's ability to report on a regular basis in future. By undertaking this analysis, the arbitrator attempts to make a reasoned judgment regarding the employee's ability to properly discharge her employment obligations in the future. Most arbitrators are of the view an employer cannot discharge an employee for non-culpable absenteeism if the dismissal would deprive the employee of access to benefits provided by the collective agreement, such as sick leave or disability benefits.

Before discharging a disabled employee for non-culpable absenteeism, the employer must ensure it has met its duty to accommodate under human rights legislation. The Supreme Court of Canada, in Syndicat des employé-e-s de techniques professionnelles & de bureau d'Hydro-Québec, section 2000 (SCFP-FTQ) c. Corbeil, recently clarified the limits of this duty:

“The 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.”

For more information see:

Yeager v. R.J. Hastings Agencies Ltd., 1984 CarswellBC 768 (B.C. S.C).
Marshall v. Harland & Wolff Ltd., [1972] 2 All E.R. 715 (N.I.R.C.).
Maple Leafs Meats v. U.F.C.W., Locals 175 & 636, 2001 CarswellOnt 2679 (Ont. Arb. Bd.).
Toronto East General and Orthopaedic Hospital, [2005] O.L.A.A. No. 485 (Newman).
Oxford Automotive Inc. v. U.A.W., Local 251, 2004 CarswellOnt 5701 (Ont. Arb. Bd.).
St. Joseph's General Hospital v. O.N.A., 2004 CarswellOnt 6236 (Ont. Arb. Bd.).
U.A.W. v. Massey-Ferguson Ltd. (1969), 20 L.A.C. 370 (Ont. Arb. Bd.).
Syndicat des employé-e-s de techniques professionnelles & de bureau d'Hydro-Québec, section 2000 (SCFP-FTQ) c. Corbeil, 2008 CarswellQue 6436 (S.C.C.).

Colin G.M. Gibson is a partner with Harris & Company in Vancouver. He can be reached at [email protected] or (604) 891-2212.

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