Employers Terminate Disabled Employees Using the “Frustration of Contract” Argument

Employers Terminate Disabled Employees Using the “Frustration of Contract” Argument

Employment provides financial sustenance and the ability to contribute to society. For many, their employment forms part of their identity, provides a means for self-expression and fuels self-worth. There are a vast number of individuals who have spent a great deal of their working life employed with the same company. Unfortunately, their loyalty is not always rewarded and sometimes in addition to dealing with the effects of their disability, they are dealing with employment issues at the same time.

It is not uncommon for employers to threaten to terminate employees who are unable to return to work as a result of a disabling physical or psychological condition that prevents them from being able to perform their job duties. These employers send letters to disabled employees threatening to terminate their employment if they do not return to work by a certain date, setting up a “frustration of contract” argument.

At common law an employer may terminate an employee who is unable to work due to illness in certain circumstances, on the basis that the employment contract has been “frustrated”. In order to succeed in such a case, the employer would need to prove that the employee’s incapacity renders further performance of the employment contract impossible.

There are, however, certain cases in our courts that have held that the employment relationship cannot be frustrated if an employee is receiving long-term disability benefits. The theory behind these decisions appears to be that in providing access to benefits the employer contemplated the possibility of an employee being unable to work at some point.

Our courts have also considered the manner in which a termination or employment takes place. Employers are required to treat employees with good faith and even handedness at the time of their termination. Given that employees with disabilities are often more vulnerable to experiencing psychological distress, this issue becomes particularly pertinent.

In Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701, a 59-year-old employee was dismissed without explanation after fourteen years as a top salesperson. The manner of his dismissal led to him suffering from depression. Courts have relied on this decision to review the employer’s conduct during termination. Where employers have for instance been dishonest and misleading with an employee, made unfounded allegations against an employee, withheld money from an employee and embarrassed an employee, the courts have considered this conduct in awarding damages.

The Human Rights Code provides a measure of protection to employees from discrimination on the basis of disability. An employer is required to offer a disabled employee accommodation in the form of modified employment (to the point of hardship for the employer) that would facilitate the employee’s ability to perform their job. An employee who is dismissed as a result of being unable to work due to a disability may be able to make a Human Rights complaint against the company.

Sometimes an employer terminates employment before an employee is able to make a claim for disability benefits, leaving the employee open to coverage issues should the employee attempt to make a claim for disability benefits after their employment has been terminated. Our courts have in certain situations found employers liable for providing disability benefits to employees terminated before or while they experienced a disability (see for instance: Re Stelco Inc. (2005 Ont. S.C.J.): Zorn-Smith v. Bank of Montreal (2003 Ont. S.C.J.): Prinzo v. Baycrest Centre for Geriatric Care (2002 Ont. C.A.): Keays v. Honda Inc. (2005 Ont. S.C.J.).

In certain circumstances, employers provide disabled employees with a termination letter together with a severance offer suggesting that they are complying with their legal requirements. Many employees are unaware that statutory termination and severance pay are minimumlegal requirements. Employees often believe that the employment standards payout is the maximum that they can receive. However, depending on the circumstances of a case the true value may be greater than the proposed offer based on common law damages. Often employees are forced to attend meetings and sign documents in which they give up their rights to pursue employment issues.

It is important to know and understand your legal rights at all times. Consulting with a lawyer familiar with the interplay between disability and dismissal is essential to ensure that your legal rights are protected.

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