Monday, 21 November 2016

Div Court Finds No Frustration of Contract after 29-Month Disability Leave; Upholds Awards of Human Rights Damages and “Punitive” Costs

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Some decisions are just textbooks on employment law. They are ‘must read’ decisions for anyone looking to practice in this area. Boucher v Black & McDonald Ltd., 2016 ONSC 7220 is a key example of how to approach the following subjects: long-term absence; frustration of contract; human rights damages; and off-set of benefits for the receipt of long-term disability benefits.

The facts of the case are easy to understand and the statement of law is first-principles stuff. For anyone wondering what to do with an employee who has been absent from employment for a considerable period of time, here is a lesson in what not to do.


This case was an appeal to the Divisional Court of Ontario from a decision of the Ontario Small Claims Court. The Appellant Black & McDonald Ltd. (“BML”) appealed a decision of that court, dated January 4, 2016 and a related costs decision, dated February 16, 2016.

The plaintiff was hired by BML in December, 2008. Her performance reviews were consistently positive.

In June 2010, Ms. Boucher went on maternity leave. While on leave, she was assaulted and verbally and emotionally abused. She started to suffer depression and anxiety and underwent weekly psychotherapy.

Ms. Boucher was approved for Short-Term Disability, starting in June 2011. After expiry of Short-Term benefits she was approved for Long-Term benefits through Standard Life Assurance Company (“Standard Life”), in October, 2011.

Proposed return dates to BML were postponed due to her medical condition. By September, 2013 Boucher advised BML she would return before year end. The insurer agreed she was no longer disabled. A graduated return was proposed. By October 8, 2013, BML was advised she would return the week of November 11, 2013, after hernia surgery. The Deputy Judge found she was able to return by November 11, 2013.

On October 31, 2013, Boucher was terminated due to her “absence of several months”. During the scheduling of return to work dates, and without advising the insurer or Boucher, on March 25, 2013, BML hired a new employee to permanently fill her job.

At trial, Ms. Boucher argued she was wrongfully dismissed: that the employment was not frustrated; that a return to work plan was proposed; that she was able to return; and, that BML should not benefit from the decision by Standard Life to pay disability benefits. Since termination was based on the fact she had a disability, she argued BML had breached the Ontario Human Rights Code.

For its part, at trial, BML argued “the human rights argument was not relevant”: that there was “frustration” of contract; that there was no reasonable prospect she would return; that her job “needed to be done”; and, that any obligations under the Code ceased upon frustration. The Deputy Judge rejected BML’s argument that the employment was frustrated.

The Deputy Judge reviewed BML’s policies and found that they contemplated accommodating employees after a medical leave; not firing them. The Deputy Judge noted that whether a contract has been frustrated depends on whether the illness was likely to continue for such a period that either the employee would not be able to return or that it would be unreasonable for the employer to wait any longer.

The Deputy Judge noted no evidence indicated Boucher would not return. Rather, medical reports and evidence indicated she would return; and, only required a graduated return for a short period. The evidence showed that starting in January, 2013. She was going to return, “but never did the evidence show that she would not be able to return and not be able to perform her duties”.

With respect to whether it would be unreasonable for the employer to wait. He considered and rejected the argument that there was a clear and present need to fill Boucher’s position, and noted:

“In accordance with the disability contract and the Human Resources policies, she had to advise no later than October 19. 2013 whether she would return. In that she had already been on leave for approximately 33 months. Is it reasonable for the defendant to decide it could no longer wait for another 6 months?”

BML argued that it could not accommodate a temporary employee, or contract position. BML also argued the position was unique “and there was no one in the marketplace that they could simply hire. They had to be trained because it is a unique market that they filled.”

The Deputy Judge found that while BML did not know the exact date Boucher would return but knew she would. The Deputy Judge found “BML terminated her employment before the end of her leave period because she was not able to return at the moment that BML wanted her to return.” As a result, he found her termination was based on the fact she had a disability.

The Deputy Judge rejected the argument that it was unreasonable to wait any longer. He found the employment had not been frustrated, and Boucher was wrongfully dismissed. He therefore decided Boucher was entitled to reasonable notice. Having regard to the usual factors, he found she should have received eight weeks’ notice and BML should not have the benefit of deducting insurance proceeds.

The Deputy Judge noted that after BML knew Boucher would not be brought back, it continued to purport to work with her and the insurer on a return to work. The Deputy Judge reviewed the law relating to an employer’s duty to act fairly, and found BML failed in this duty too.

On appeal, the BML argued that the Small Claims Court Deputy Judge incorrectly applied the Human Rights Code in finding that discrimination occurred simply because the Respondent was terminated and had been disabled, without considering or applying the test for the duty to accommodate and undue hardship.


In rejecting all of BML’s arguments, Justice Kelly Gorman reasoned as follows:

[24] Courts can award human rights damages in the context of a wrongful dismissal action. Factors when determining the quantum include the importance of the right infringed, the impact of the conduct on the Plaintiff and the circumstances: Wilson v Solis Mexican Foods Inc., 2013 ONSC 5799 (CanLII) at para 92.

[25] The court in Solis went on, at para. 47 to state that a decision to dismiss, whether in whole or in part, based on the fact the employee has a disability is discriminatory and contrary to the Code.

[26] BML was aware of the duty to accommodate. On June 12, 2012, BML stated that it could accommodate Boucher, and that there were no barriers or issues that would impact Boucher’s return. However, after a return to work plan was given to BML, Boucher was terminated.

[27] BML knew Boucher would return, but did not know the exact date and was unwilling to wait any longer. Given BML knew she would return, and that she was able to perform her duties, accommodation should have been considered. The Deputy Judge found that no accommodation was considered.

[28] At termination, the Deputy Judge found that no accommodation was considered. No documentation of the action taken or possible solutions proposed was presented:

[29] BML did not keep any record of accommodation attempts or discussions to find alternative solutions.

[30] The Ontario Court of Appeal has confirmed that the failure to take appropriate steps to assess an individual’s needs in the accommodation process is a violation of s.5 of the Code: Hamilton-Wentworth District School Board v. Fair, 2016 ONCA 421 (CanLII).

[31] BML did not fulfil its duty to accommodate. BML did not involve Boucher in the process nor propose any alternative solutions. BML argued that its obligations “ceased upon frustration”, and Boucher’s position was filled by Walter Hanisch on March 25, 2013.

[32] I agree with the Deputy Judge that the contract was not frustrated.

[33] The doctrine of frustration applies when a contract becomes incapable of being fulfilled: Antonacci v Great Atlantic & Pacific Co. of Canada (1998). 1998 CanLII 14734 (ON SC), 35 CCEL (2d) 1 at para 37; Skopitz v Intercorp Excelle Foods Inc. (1999), 43 CCEL (2d) 553 at para 21.

[34] Permanent disability will frustrate a contract. However, employment is not frustrated by temporary sickness. The law permits temporary sickness and moreover, allows the disabled to recover: Dartmouth Ferry Commission v Marks (1904), 34 SCR 366 at para 9.

[35] In order to prove “frustration”, there must be evidence that there is no reasonable likelihood of the employee returning to work in the foreseeable future. The onus is on the employer: Naccarato v. Costco Wholesale Canada Ltd., 2010 ONSC 2651 (CanLII) at para. 19.

[36] In the present case, there was a plan to return to work. Indeed, BML had been advised by October 13, 2013 that Boucher intended to return to work November 11, 2013. However, following the submission of the return to work plan, Boucher was terminated.

[37] BML’s only rationale for hiring Hanisch was one of “business necessity”· As for Boucher’s return in a different position, BML concluded any obligations “ceased upon frustration”.

[38] The Ontario Human Rights policy and Guidelines states that business inconvenience is not a defence to the duty to accommodate (5.1.1). While costs may lead to undue hardship, they have to be quantifiable, shown to be related to the accommodation, so substantial that they would alter the essential nature of the enterprise, or so significant that they would substantially affect its viability (5.3.1).

[39] There was no evidence put forward to quantify costs, or to substantiate their significance for BML’s viability. The only evidence tendered by the Appellant was the opinion evidence of the employer.

[40] As the court stated in ADGA Group Consultants Inc. v. Lane, 2008 CanLII 39605 (ON SCDC), [2008] O.J. No. 3076, 91 O.R. (3d) 649 at para. 117:

Undue hardship cannot be established by relying on impressionistic or anecdotal evidence, or after-the-fact justifications. Anticipated hardships caused by proposed accommodations should not be sustained if based only on speculative or unsubstantiated concerns that certain adverse consequences “might” or “could” result if the claimant is accommodated.

[41] In my view, the Deputy Judge findings were correct. He correctly applied the law to his findings of fact. There was no palpable and over-riding error. Accordingly, this ground of appeal must fail.

[45] The Appellant further submits that in awarding eight weeks of wrongful dismissal damages, the Small Claims court deducted four weeks already paid to the Respondent by BML but failed to take account of the approximately seven weeks of disability benefits paid to the Respondent by Standard Life from October 31, 2013 to December 19, 2013 due to the Respondent’s hernia surgery, which coincided with the notice period assessed by the Small Claims court. The Small Claims Court did not account for these disability benefits paid to the Respondent during the notice period when awarding damages for pay in lieu of notice.

[46] By way of authority, the Appellant submits that in Sylvester v British Columbia the Supreme Court of Canada established that disability benefits may be deducted from wrongful dismissal damages where:

(a) The terms of the plans demonstrate that the disability benefits were intended to be a substitute for regular salary;

(b) The simultaneous payment of disability benefits and damages for wrongful dismissal is inconsistent with the tens of the employment contract; and

(c) The disability benefits are not akin to benefits from a private insurance plan for which the employee has provided consideration.

[47] However, as the court stated in Skopitz v. Intercorp Excelle Foods Inc. (1999), 43 CCEL (2d) 553 (Ont. Gen. Div.) at paras 33-34:

There are two competing principles at play when considering the issue of whether the disability payments received by Ms. Skopitz during the relevant notice period should be deducted from her award of damages. The first is that an aggrieved party should not recover compensation beyond his or her actual loss. The second is that a wrongdoer ought not to be able to take advantage of a benefit provided bb another person. The cases on this issue reconcile these competing principles by providing for deductibility of the benefit where it is the employer who provided and paid for the benefit (Sylvester v. British Columbia, [1997] 2 S.C.R. 315 (S.C.C.) and not providing for deductibility where the employee contributed to the scheme. [Sills v. Children’s Aid Society of Belleville (City), Hastings (County) & Trenton (City) (1997), 30 C.C.E.L. (2d) 217 (Ont. Gen. Div.)].

The evidence is that the long term disability plan with Unum was established as one where the employee would make the premium payments. Further, in this case Ms. Skopitz did contribute to the plan which was one funded not by the employer (as was the case in Sylvester) but by a third party. Given these facts I find that the disability payments received by Ms. Skopitz during the relevant notice period are not deductible from the award of damages.

[48] Boucher’s employment contract did not provide for disability benefits being deducted from an award of damages. Further, long-term disability payments were made by a third party insurer. BML did not contribute to them, although the employee did.

[49] Conduct of an employer that is callous or insensitive will attract a finding of bad faith, which may increase an award of damages: McIntyre v. Grigg, 2006 CanLII 37326 (ON CA), [2006] 83 OR (3d) 161 at para. 50. The Supreme Court of Canada has found that terminating an employee while on disability is an example of bad faith or unfairness: Wallace v. United Grain Growers Ltd., [1997] SCR 701.

[50] Based on the foregoing, in my view, the Deputy Judge was correct in concluding that the LTD benefits were not to be deducted from the notice period.

[51] BML submits that the costs award of the Small Claims Court was excessive, unreasonable, contrary to law, and should be overturned.

[52] The small Claims Court awarded penalty costs based on a finding that an offer to settle from the Respondent was valid despite the Small Claims Court’s finding that it was ambiguous.

[53] The Small Claims Court held that Rule 14.07 of the Small Claims Court Rules was operable in this case allowing the Court to double the usual costs in the event that a valid offer to settle is not accepted by the Defendant. The Appellant submits that this decision was in error and that no valid offer of settlement was made by the Respondent.

[54] On June 17, 2015 Counsel for the Respondent wrote to Counsel for the Appellant. The relevant portion of the correspondence reads as follows:

[…] In the interim the plaintiff offers to settle on the following terms:

  1. The Defendant shall pay to the Plaintiff the sum of $14.000.00.
  2. The Defendant shall pay to the Plaintiff pre-judgment interest on the amount owing under paragraph 1 above.
  3. The Defendant shall pay to the Plaintiff her costs of this action on a partial indemnity basis as agreed upon or assessed.

The Deputy Judge stated at para. 11 of his Decision on Costs:

While I agree that the cost component was not clearly set out, it seems reasonable that the Defendant could have questioned the offer to determine what costs they were seeking in order to facilitate settlement Since this is meant to encourage parties to settle, it seems reasonable that if a question arises regarding an offer, it should be questioned as opposed to rejected on the basis that the party isn’t sure what it means. If the answer reflects something unreasonable, as feared by the Defendant in this case there are grounds to reject the offer. If reasonable, then it afforded an opportunity for the parties to settle and thereby avoid trial. Since the purpose behind this is to encourage settlement, both parties have a role to play when settlement is offered.

[56] He concluded that the criteria enumerated in Rule 19.06 had been met and awarded the Respondent $11,500.00 in costs.

[57] The overriding principles when making a costs order are fairness and reasonableness: Boucher v. Public Accountants Council (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (C.A.).

[59] The Deputy Judge concluded, reasonably, that the Appellant had a role to play in settlement negotiation and could have made appropriate inquiries [as to the amount sought for costs]. The Appellant failed to do so at its peril.

[60] Based on the foregoing, I find that there was no error in principle in the Deputy Judge’s assessment of costs.


First, let me start by saying $11,500 in costs at the Small Claims Court? That may be a new high score.

Second, as I mentioned at the outset of this post, this case is really a textbook on a number of issues, especially those related to long-term disability and frustration. While this blog has a number of posts on the cases mentioned by Justice Gorman, Her Honour’s articulation of the takeaway from each of those cases is spot-on.

This is simply a good decision.

Takeaways for Employees with Labour Pains

The takeaway for employees with labour pains is that if an employer refuses to take you back after an extended medical leave or maternity leave speak with a lawyer. Frustration of contract is a complicated legal issue and can arise in cases of extended absence. That said, in most cases a frustration of contract will not have happened and the termination of your employment may well be wrongful.

Takeaways for Employers with Labour Pains

The takeaway for employers with labour pains is simply because an employee has been absent from employment for an extended period of time does not mean that you can just replace them and hope that everything will go away. This point is especially true in cases where the employer provides, or provides access to, long-term disability benefits as a portion of an employee benefits plan.

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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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