Employers frequently experience mental “frustration” when managing absenteeism in the workplace. This frustration should not, however, be confused with the legal concept of “frustration of contract”. Frustration in the legal sense, arises when a contract comes to an end because one (or both) of the parties can no longer perform the contractual obligations due to unforeseen circumstances. In the employment law context, a frustration most often comes into play as a result of a long-standing disability that prevents an employee from returning to work in the foreseeable future.
The recent Ontario court decision in Roskaft v RONA Inc., 2018 ONSC 2934 sheds some light on an employer’s rights and obligations when managing prolonged absences and considering termination of contract.
In Roskaft, a RONA employee with 13 years’ service commenced a leave of absence for a medical condition and received short-term disability (“STD”) and long-term disability (“LTD”) benefits pursuant to the employer’s insurance plan with SunLife. Two years after starting his leave, the employee submitted a Return-to-Work Form that was stamped by his doctor, stating that he was unable to work and that his return date was indeterminate. About one year later, RONA terminated the employee as a result of frustration of contract, relying on a letter from SunLife that stated that the employee was not able to return to work as proof that he was “permanently disabled.” The Employer advised the employee at the time of termination that he would be entitled to continue on LTD for as long as he was eligible and he would also be paid his notice entitlements under the Employment Standards Act (“ESA”). The employee brought an action for wrongful dismissal.
The court found that while RONA was not entitled to conclude that the employee was permanently disabled on the basis of the letter from SunLife. However, the court did find that SunLife’s decision to extend the employee’s LTD benefits to be sufficient to justify the Employer’s conclusion that, at the time of the termination, there was no reasonable likelihood that the employee would return to work in the foreseeable future. The court therefore dismissed the employee’s claim.
Takeaways for Employers
This case raises some key learning points for employers:
- Statutory Entitlements Still Apply: Where employment has been terminated due to frustration, an employee is not owed common law notice or pay in lieu of notice. However, in Ontario, the Employment Standards Act, 2000 requires termination entitlements to be paid (statutory notice and severance pay, if owed) when a contract of employment has been frustrated due to illness or injury of the employee. For long service employees the combined impact of notice and severance can be as much as a 34 weeks’ pay.
- Human Rights Risks in the Absence of Appropriate Procedures: Prior to terminating a contract due to frustration arising from a disability-related absence, employers should request medical information that addresses the question of the employee’s ability to return to work in the foreseeable future. Employers should use caution when relying solely on an insurer letter or decision to continue disability benefits. Terminating employment based on assumptions rather than facts may lead to human rights related liability.
- Accommodation Obligations Must be Considered: Employers must always comply with the obligation to provide reasonable accommodation when required for employees who have a disability. Employers must consider whether reasonable accommodation would allow an employee to return to work before taking the position that the employment contract has been frustrated.
- Clear Policies and Procedural Consistency are Key: Employers should ensure that employees are treated consistently when they are on STD or LTD benefits. A policy that expressly states when a short- or long-term absence will trigger an evaluation of the employment relationship will help ensure consistency when assessing the specific facts of an individual employment relationship.
- Unionized Employers and Innocent Absenteeism: Finally, while the Roskaft case involved a non-union employee, these concepts are also relevant to unionized employers who are considering termination of contract for “innocent absenteeism”. At the same time, the applicable collective agreement will also be key factors in determining the employer’s rights and obligations.
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The lawyers at PooranLaw have extensive experience assisting employers managing disability, absenteeism and frustration of contract. For more information or if you wish to discuss any implications for your organization, please contact PooranLaw.