Frustration Can Happen Against Your Wishes

I rarely intend to get frustrated, but every now and then, frustration will happen despite my best efforts.

According to the Ontario Superior Court of Justice, the same can be true for frustration of employment contracts.

“Frustration,” in the legal sense, means that a contract can no longer be performed through no fault of either party. For example, an employee’s disability may frustrate an employment contract: the employee can’t work, and it’s neither side’s fault.

For an employment contract to be frustrated due to disability, the employee must be off work for an extended time and the medical evidence must show that even with accommodation, they won’t be able to return to work in the foreseeable future. If this happens, the employment relationship ends, and the employee is entitled to their minimum termination and severance entitlements under the Employment Standards Act (ESA) but nothing more.

In practice, it’s usually the employer who declares the employment contract to be frustrated. This allows the employer, if it can successfully prove frustration, to terminate an inactive employee while only paying the ESA minimum amounts. However, a recent court decision says that frustration can occur even without the employer intending it.

In Hoekstra v. Rehability Occupational Therapy Inc., an employee had been on a medical leave of absence for nearly four years when the employer changed benefit carriers and the employee lost his benefits eligibility. The employee claimed constructive dismissal. The employer denied dismissing the employee and offered him his job back. When he refused, the employer took the position that he had quit and was not entitled to any termination or severance pay.

Eventually, the employee conceded that there was no constructive dismissal. Nonetheless, he claimed ESA termination and severance pay, arguing that the employment contract was frustrated. The employer objected that it had never terminated the employee for frustration; it was the employee who chose to quit and then assert (and later withdraw) a constructive dismissal claim.

The court rejected the employer’s argument. The medical evidence proved the employee had no reasonable chance of returning to work in the foreseeable future. Therefore, the employment contract was frustrated. Whether the employer (or the employee for that matter) wanted it to be frustrated is irrelevant. Frustration happens or doesn’t happen based on the underlying facts, not the parties’ wishes.

The court found that since his employment contract had been frustrated, the employee was entitled to termination and severance pay under the ESA.

I’m sure the employer found this quite frustrating.

In light of this decision, employers may wish to review, and discuss with an employment lawyer, the circumstances of employees who have been off work for an extended time. Employers should ensure that they are complying with their legal obligations around frustration.