Sunday 1 April 2012

Frustration of Contract need not be Frustrating

Many employees who become chronically ill, are injured in a workplace accident, or get hurt in some other type of accident and are unable to return to work for medical reasons often believe that they have no option but to quit their job. By the same token, it is not uncommon for employers to take the position with their employees that the employee must either return to work or quit.

However, as this post will demonstrate the forced options of “return to work or quit” are, in fact, a false dichotomy. Employees have other options and employers have further responsibilities.

The Law

Prior to the enactment of certain key provisions within the Ontario Employment Standards Act, 2000, employees unable to return to work for medical reasons were dismissed from their employment in accordance with the doctrine of “innocent absenteeism”: the contract was brought to an end as a result of unforeseen reasons that are the fault of neither party. The legal term for what happens when a contract is unable to be performed for unforeseen, non-culpable reasons is “frustration." The result was that neither party owed anything further to the other.

Following changes to the Employment Standards Act and its associated regulations, however, things changed.

Part XV of the Employment Standards Act prescribes the minimum amounts of termination pay and severance pay that an employer must provide to an employee at the time of termination. (For a summary of the distinction between “termination pay” and “severance pay” see the post Not All Employees are Entitled to Severance Pay.)

Section 54 of the Employment Standards Act mandates that, all employers must provide an employee dismissed from employment with notice of termination or a payment in lieu of notice, unless an exemption applies.

Section 55 of the Employment Standards Act sets out that the list of exemptions that apply to section 54 are prescribed by regulation, specifically Ontario Regulation 288/01.

Within Ontario Regulation 288/01, paragraph 4 of subsection 2(1) enumerates:

An employee whose contract of employment has become impossible to perform or has been frustrated by a fortuitous or unforeseeable event or circumstance as an employee prescribed for the purposes of section 55 of the Employment Standards Act.

On its face, it may appear that employees unable to return to work on account of illness or injury can be terminated for “frustration” with the employer exempted from the requirement to provide either notice or pay in lieu of notice by reason of section 55 of the Employment Standards Act.

However, subsection 2(3) of Ontario Regulation 288/01 goes on to add that:

Paragraph 4 of subsection 2(1) does not apply if the impossibility or frustration is the result of an illness or injury suffered by the employee.

Similar provisions apply in respect of the obligation for an employer to pay severance pay, where otherwise applicable.

How This Assists Workers

One of the definitions of “termination of employment” within the Employment Standards Act is: when “the employer… is unable to continue employing” the employee. Arguably, employers unable to accommodate sick employees are “unable to continue” employing them, thereby triggering an obligation to provide notice, pay in lieu of notice, and severance. The net result, at least as I read it, is that sick employees are employees entitled to their termination pay.

Put more simply, if an employer is going to terminate an employee’s contract for frustration, that employer must still provide statutory notice and, where applicable, statutory severance. Period.

Read More

For more on the issues of chronic absenteeism, frustration of contract and human rights, consider the following posts:

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As always, everyone’s situation is different. The above is not intended to be legal advice for any particular situation. It is always prudent to seek professional legal advice before making any decisions with respect to your own case.

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