ENCOURAGING NEWS FOR FRUSTRATED OUR LAWYERS EMPLOYERS

We are often approached by employers wondering how long they have to put up
with an employee who has been absent for months and even years from the
workplace as a result of a disability. These companies are sensitive to the
unfortunate circumstances of their employee, but want to know when they are
allowed to end the employment relationship without risking legal exposure –
especially based on allegations of discrimination.

A recent decision of the Human Rights Tribunal of Ontario has provided a
glimmer of clarity in this otherwise murky area of law known as “frustration of
contract.”

As background, legal frustration refers to the right to terminate a contract where
an event unforeseen by either party has occurred. In the employment setting,
the unforeseen event is often the disability of an employee resulting in an
extended leave of absence, from which the employee has confirmed he or she is
unlikely to return in the foreseeable future.

In Gahagan v. James Campbell Inc., the Human Rights Tribunal was asked to
find that the respondent company discriminated against Ms. Gahagan by
terminating her employment following a two-and-a-half year absence in the
wake of a workplace injury. The application suggested that James Campbell
Inc. failed to accommodate the employee's disability to the point of undue
hardship.

Of importance to the Tribunal's ruling that there was no discrimination, Ms.
Gahagan herself had stated as part of her application for disability benefits that
she was unable to perform her job as a result of a “severe and prolonged
disability” which appeared to be permanent in nature. Even with
accommodation, the Tribunal found she was unable to return to the workplace
as a result of the disability, and that therefore it was reasonable to declare her
employment frustrated.

This decision represents a breath of fresh air for employers inclined to throw up
their hands in these challenging circumstances.
Nevertheless, the case must be treated with caution, since both the Tribunal and
a court will engage in a contextual analysis of the unique circumstances
applicable to the case at hand. In addition, companies must be forewarned that
they are still required to pay out the employee's termination pay and severance
pay entitlements under the Ontario Employment Standards Act, 2000 – even
where the employee's employment has been frustrated.

This assessment is far from cut-and-dried. For instance, a Costco employee
disabled for five years was found to be wrongfully dismissed because the
evidence established he was seeking out new psychiatric treatment at the time
of termination. As a result, the frustration defence didn't fly in that case.
As such, employers should discuss with legal counsel the following considerations,
among others, before drawing any conclusions:

• The length of the employee's continuous absence from work;
• The potential impact of long-term disability benefits offered by the company;
• The extent to which objective medical evidence reveals a permanent incapacity;
• The employee's position and, more specifically, the extent to which the employee is “replaceable” (i.e. distinguish between an assembly line worker and a CEO); and
• Whether there is any possibility the company itself contributed to the employee's inability to return to work, thereby potentially negating the frustration defence.

Whitten & Lublin 141 Adelaide St. West, Suite 600 Toronto, Ontario M5H 3L5 Tel (416) 640-2667 Fax (416) 644-5198 www.canadaemploymentlawyer.com