The Defendant employer relied on the following, in support of its decision that the employment contract had been frustrated, giving it the right to terminate the Plaintiff's employment:
- The Plaintiff's long and continuing absence from work, which equated to a period of five years;
- The Plaintiff had been in receipt of long-term benefits which require a finding of "total disability"; and
- The statements of one of the Plaintiff's doctor that he did not know when the Plaintiff's medical condition would improve and did not know when he would be able to return to work
The Court underlined that the "burden" is squarely on the employer to prove frustration of contract, turning immediately to the medical evidence:
In other words, an employer has a "due diligence obligation." It must satisfy itself on a reasonable basis as at the time of termination that the medical documentation supports a finding that "there is no reasonable likelihood of the employee returning to work in the reasonably foreseeable future."
The law with respect to the burden of proof on an employer to establish a frustration of contract has been very well set out by Justice Perell in the case of Dragone v. Riva Plumbing Limited, 2007 CanLII 40543 (ON S.C.), 2007 CanLII 40543 (ON. S.C.). In that case, the employee had been absence from work due to illness for a period of approximately fourteen months. The evidence was that the employee did not know when she would get better, but that based on the evidence there was at least hope that she would eventually be able to return to work. The Court found that a permanent incapacity to return to work had not been proven. Justice Perell found that the onus was on the employer to prove that the contract had become frustrated and that it was not the employee’s onus to provide medical evidence with respect to her ultimate prognosis.
In this case, although the duration of the illness is significant, a period of five years, the medical evidence does not support a finding that there is no reasonable likelihood of the employee returning to work in reasonably foreseeable future. Rather, the evidence is that the employee is still being treated by his doctor as a new psychiatrist is being sought.
Costco could have followed up with the doctor to ask further questions with respect to the likelihood of a return to work in the foreseeable future, but it did not do so. Costco has not, in my opinion, provided this Court with the necessary medical evidence to support a finding that it is unlikely that Mr. Naccarato will be unable to work in the reasonably foreseeable future.
. . . To determine if a contract has been frustrated, regard must be had to the relationship of the term of the incapacity or absence from work to the duration of the contract, and to the nature of the services to be performed.
Mr. Naccarato further argues that there is a trend of our courts to refuse to apply the doctrine of frustration of contract in situations where the employee is entitled to receive short-term and long-term disability benefits due to illness. The submission is made that as such benefits are provided by the employer, it cannot be said that the event of the employee’s illness is something that was not reasonably contemplated by the parties. The frustration of contract must be delayed until the expiration of the period during which the benefits are provided for by the employer. Costco’s response to this argument is that what is not within the contemplation of the parties is the duration of the employee’s illness and not the fact that the employee may get ill.
Justice Perell, in the Dragone case, considers the effect of the presence of the long-term sick leave and disability benefits:
The presence of long-term sick leave and disability benefits indicates a greater tolerance for the duration of an employee’s absence before frustration occurs. Indeed, it has been suggested that contracting for these benefits may postpone the time of frustration because it may be inferred that the contracting parties anticipated that the employee might take leave for illness. See: Antonacci v. Great Atlantic & Pacific Co. of Canada,  O.J. No. 876 (Gen. Div.), aff’d. In part  O.J. No. 280 (C.A.); E.E. Mole and M.J. Stendon, Wrongful Dismissal Handbook (3rd ed.) (Markham: LexisNexis Canada Ltd., 2004), chapter B-4.”
If you believe you have been wrongfully dismissed, please contact a lawyer who can advise as to your rights and entitlements both under the Ontario Employment Standards Act and at common law.