A recent Ontario Superior Court decision confirmed that an employment contract may become frustrated due to a prolonged long term disability leave. Frustration of a contract occurs when a situation arises for which the parties made no provision in the contract and performance of the contract becomes “a thing radically different from that which was undertaken by the contract.” (Naylor Group Inc. v. Ellis-Don Construction Ltd. 2001 SCC 58) In the context of employment, a contract may become frustrated by an employee’s illness or incapacity if the illness or incapacity is 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 employee to wait any longer for the employee to recover (Skopitz v. Intercorp Excelle Foods Inc.  O.J. No. 1543 (Ont. Sup. Ct. J.)).
In Roskaft v RONA Inc., 2018 ONSC 2934, the Court held than the employment contract between RONA and its employee of 13 years was frustrated by the employee’s 3 year absence. The employee went on long term disability in September 2012. On September 15, 2015, Mr. Roskaft was advised that he was terminated from employment as a result of frustration of the contract, and that he would continue to receive Sun Life employment LTD benefits provided he remained totally disabled as defined in his insurance plan and that RONA would pay him his minimum entitlements pursuant to the Employment Standards Act, 2000, S.O. 2000, c. 41 (“ESA”). At the motion for summary judgment, the plaintiff alleged that when he was terminated, he was starting to feel better, but RONA made no inquiries about his condition.
The Court found that the contract had been frustrated and that based on the evidence in front of it, there was “no reasonable likelihood that he would be able to return to work in a reasonable time.” Unlike other cases dealing with this issue, the court allowed the employer to rely on post-termination evidence regarding the plaintiff’s disability and ability to return to work. Specifically, the Court considered the post-termination representations the plaintiff made to the insurer, Sun Life, in January 2016 that his medical condition had not improved.
The decision follows the precedent set in Fraser v UBS Global Asset Management, where the Court concluded that the mere fact of long term disability coverage does not mean that the employer has agreed to employ someone indefinitely in spite of the employee’s inability to work. The Court took into account the reality that Ms. Fraser had not worked for three and a half years, there was no updated medical prognosis or reasonable prospect for being able to return to work, she had taken no further steps to provide information to her employer to substantiate her illness, and, according to the insurer, she had not participated in or at least reported on her ongoing medical treatment.
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