Disability-related dismissals can be frustrating, (September 22, 2010), Canadian Employment Law Today, Issue No. 565 at 1

Disability-related dismissals can be frustrating, (September 22, 2010), Canadian Employment Law Today, Issue No. 565 at 1

By Nikolay Y. Chsherbinin

Employees are expected to perform work in exchange for pay. When an employee fails to attend work due to a permanent illness or disability, an employer may be justified in terminating the employment without liability. Termination of employment in such a case is not based on “just cause,” but rather “frustration” of the employment contract, which can happen due to illness, incapacity, imprisonment, deportation or bail conditions.

In disability-related cases, a question that vexes employers is: When can they safely trigger frustration? There is no easy answer as it is usually fact-specific. A quick termination of an employee who is absent from work due to a temporary, but prolonged, illness may have significant legal implications.

The risk of liability is especially acute when the employment contract contains long-term disability provisions. The implication would seem to be the parties contemplated the employee may, at some point during the employment relationship, be disabled and prevented from working for a long time. For example, it might be frustrating for employers to learn the frustration defence may not be available in circumstances where an employee can’t work for a long time because of depression, something doctors are often reluctant to declare permanent.

5-year absence of long-term employee not enough for frustration

The Ontario Superior Court of Justice grappled with this issue in Naccarato v. Costco Wholesale Canada. Costco terminated Frank Naccarato’s 17-year employment, after he had been off the job for five years because of depression, for frustration of his employment contract. Costco argued it was unlikely Naccarato would be able to return to work in the reasonably foreseeable future, basing it on: the lengthy absence; the fact Naccarato had to prove he was totally disabled from performing work for any occupation; and the lack of medical prognosis for his anticipated return to employment. The court disagreed, based on the legal test to determine frustration based on illness or incapacity in the employment contract context.

“Whether or not the illness or incapacity was of such a nature or likely to continue for such a period of time that either the employee would never be able to perform the duties contemplated by the original employment contract or that it would be unreasonable for the employer to wait any longer for the employee to recover,” said the court.

The court found the medical evidence did not support Costco’s position that there was no reasonable likelihood of Naccarato returning to work in the foreseeable future. Rather, the evidence was that Naccarato was still being treated by his doctor and a new psychiatrist was being sought.

Naccarato makes it clear the finding of permanent disability must be based on objective evidence, not the subjective belief of either party. The court further concluded keeping Naccarato’s vendor clerk position open during his absence did not disrupt Costco’s business. As a result, the court found the employment contract had not been frustrated and awarded Naccarato 10 months’ reasonable notice.


Naccarato demonstrates that uncertainty surrounding the parties’ contractual obligations when an employee suffers from prolonged illness is a problem for both employers and employees. The onus is on the employer to prove the contract has become frustrated. In order to determine if a temporary illness or disability is sufficient to bring the employment contract to an end, employers must take into account:

The terms of the employment contract. The presence of long-term sick leave and disability benefits indicates a greater tolerance for a lengthy absence before frustration occurs. It has been suggested that contracting for these benefits may postpone frustration because it may be inferred the parties anticipated the employee might take leave for illness (see Antonacci v. Great Atlantic & Pacific Co. of Canada).

The importance of the employee’s position. The employment relationship is more likely to survive an extended absence if an employee’s job is one of many in the same category rather than a key post which must be filled on a permanent basis if the absence is prolonged. In Burgess v. Central Trust Co., the New Brunswick Court of Queen’s Bench found an assistant lending officer was a key person in the employer’s organization due to the upcoming busy season and was more willing to find the contract had been frustrated.

The nature of the employee’s illness. This requires an employer to consider how long the illness has lasted and an employee’s prospects for recovery. A short or routine illness frustrates the employment contract. The greater the degree of illness and the longer the absence, the more likely courts will find the employment contract has been frustrated.

The nature of the employment. If the employment contract is for a fixed term, the prolonged illness or disability will likely frustrate the employment contract than a contract of indefinite hire.

The period of employment. A long standing employment relationship is not easily frustrated. In Yeager v. R.J. Hastings Agencies Ltd., the British Columbia Supreme Court found a 30-year employee’s illness, which caused him to be absent from work for two years, was not lengthy enough to frustrate the employment contract.

The duty to accommodate. Not only must an employer prove frustration of contract to justify termination, but also that the duty to accommodate has been considered and met, if applicable, such as by providing modified duties or time off.

When dealing with medical conditions like depression and stress, employers must be absolutely certain that, in all circumstances, the employment contract has been frustrated, before advising ending someone’s employment. The British Columbia Supreme Court in Demuynck v. Agentis Information Services Inc. suggested frustration becomes a justifiable response where an absence from work reaches 18 to 24 months. Nevertheless, employers should always keep in mind each case turns on its unique facts.

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