July 26, 2016

Absenteeism Due to Disability: Has Frustration of Contract Occurred?

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Accommodating the extended absence of an employee who is off work due to illness or disability can be a difficult task for employers.  If the absences relate to an underlying disability, the question becomes - can the employer legally terminate the employee without running afoul of human rights legislation or providing reasonable notice of termination (or pay in lieu thereof)?

When an employee is unable to fulfill the required employment duties as a result of a disability, the legal principle of contract frustration may apply.  Frustration arises when it is impossible for one of the parties to fulfill the terms of a contract.  However, it is often difficult to determine at what point frustration occurs. 

In order to justify the termination of an employee on the basis of frustration, the employer should consider the nature and expected length of the illness; the prospect of recovery; and, to a lesser extent, the length of service.  Overall, the greater the degree of incapacity, the longer the period of illness and the greater likelihood of persistence, the more likely it is that the contract has been frustrated.

Duty to Accommodate

Before frustration can occur, there is a legal obligation to accommodate a disabled employee to the point of undue hardship.  The employer must consider possible accommodations which take into consideration the employee’s specific limitations, and may include, 

  • Investigating alternatives to work standards (e.g. modifying duties, shifts or policies);
  • Providing additional assistance, training or assistive devices; or
  • Investigating whether business goals can be met while exempting employees from general standards.

Undue Hardship

It is the employer’s burden to prove accommodation of the employee to the point of undue hardship.  In some provinces, human rights legislation requires consideration of specific factors in determining whether undue hardship has occurred, however, Prince Edward Island’s Human Rights Act for example, simply provides that discrimination will not apply where disability is a “reasonable disqualification” from employment.1 Determining whether a disability disqualifies the employee from employment requires careful consideration.  Failure to accommodate a disability to the point of undue hardship can result in an award for damages for wrongful dismissal or under human rights legislation. 

Most commonly, employers prove undue hardship in the form of a cost to the business whether it be financial, administrative, or employee morale.  If the workforce is flexible or the employees are low skilled and interchangeable, it is more difficult to prove undue hardship.  On the other hand, the following factors would support a finding of undue hardship:

  • Employees are specialized and need to be replaced quickly to perform core functions of the business
  • Extensive equipment purchases or modifications are required at a significant cost
  • Accommodations would lead to health and safety risks of other parties

Recent Decisions

There is extensive case law on the subject of frustration, however, courts must always consider the specific employment situation and the realities of the employer’s business.  The following decisions demonstrate how an inquiry may unfold in determining whether a contract has been frustrated.

  • Naccarato v. Costco Wholesale Canada Ltd2 - a 12 - year employee was off work for approximately five years due to depression and was dismissed on the basis of frustration of contract.  The employee claimed he was wrongfully dismissed.  The court found in favor of the employee on the basis that the employer failed to advance any proof or medical evidence that the employee would not likely be able to return to work in the reasonably foreseeable future.  Further, the employer did not show that it would experience undue hardship from waiting longer for a return work or clear prognosis.  
  • Duong v. Linamar Corp3 - the employee was receiving long-term disability benefits, however the benefits ceased after 24 months because the employee refused to participate in a rehabilitation program.  The employee was not improving and no return date was in sight.  The court found that the contract had been frustrated.
  • Alagaratnam v. Metropolitan Hotel Vancouver4 - the employee was terminated from his employment and filed a human rights complaint on the grounds of disability.  The human rights tribunal found that the termination was not discriminatory because the contract was frustrated.  The employee had only been off work for eight months but his doctor’s prognosis was that the employee would be unable to return to work for at least three years.  Although few efforts to accommodate were made by the employer, the tribunal found that there were no other jobs available to the employee. As such, the employer was not expected to continue the relationship when there was no expectation of a return to work in the foreseeable future.

Overall, employers must not focus solely on the length of time the employee has been off work but also the likelihood of the employee’s return (whether in a regular or accommodated position) and whether the employer will experience undue hardship in accommodating the employee’s return.  In all cases, supporting medical evidence and opinions will be key in justifying a termination on the basis of frustration.

This publication was written by Meaghan Hughes, Associate, and Gerald Caseley, Articled Clerk.

1Human Rights Act, RSPEI 1988, c H-12, at s. 6(4)
Naccarato v. Costco Wholesale Canada Ltd., 2010 CarswellOnt 4108
Duong v. Linamar Corp, 2010 ONSC 3159
Alagaratnam v. Metropolitan Hotel Vancouver, 2013 CarswellBC 3211


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Absenteeism Due to Disability: Has Frustration of Contract Occurred?

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Cox & Palmer publications are intended to provide information of a general nature only and not legal advice. The information presented is current to the date of publication and may be subject to change following the publication date.