Frustration of contract not easily proven

Sep 12, 2012

Date: 2007
Author: Daniel A. Lublin
Publication: Metro

Distinction between permanent disability and temporary illness

Can an injured employee languishing on medical leave simply be discarded by his employer?  According to a recent British Columbia case, absolutely not!
When Kashmir Sandhu took time off work to recover from a car accident, he expected to return to his job when his injuries healed. But the problem for Sandhu’s employer, Delta, B.C.-based North Star Mills Ltd., wasn’t allowing Sandhu an extended absence from work – it was whether it would permit him to return.
While Sandhu was still off on leave, North Star filled his position. Sixteen months later, with his health finally restored, Sandhu tried to return.  But his employer refused to give him back his old job.  Sandhu had been away for a lengthy period – but he didn’t believe that he should have lost his job.
North Star disagreed.  Arguing that Sandhu’s lengthy and indefinite return date had frustrated his employment, which means that it had effectively ceased to exist, it said it was under no obligation to re-hire him when he had recovered from his illness.  Sandhu had been absent for sixteen months and had not specifically indicated that he ever intended to return.  When it wasn’t clear when – or if – Sandhu was returning, it had no choice but to find a replacement – a replacement that Sandhu could not simply “bump” out of the job when he finally recovered.
But the judge deciding the case was hardly convinced by North Star’s arguments, noting that Sandhu was never asked if he was coming back to work and was not told that his job was in jeopardy if he was unable to return by a certain date.  Focussing on the distinction between a permanent disability and a temporary illness, the judge also rejected North Star’s defence that Sandhu’s illness frustrated his employment, concluding that the nature of Sandhu’s injuries were such that his recovery should have been expected.
Employers are not permitted to simply discard employees whose prospects for recovery appear dim.  While a legal defence may arise when an employer can reasonably conclude that a long-term absence has become permanent, Canadian employers cannot opt for that defence prematurely – or, as North Star Mills Ltd. recently learned, risk paying considerable damages to an employee it did not think it had fired.
In situations of long-term illness or injury, Canadian employers and their employees should consider the following lessons gleaned from this case:

  • Successfully demonstrating that employment has been frustrated by a disability is a risky endeavour that is seldom successful in court: a permanent illness must be indisputable and the medical evidence dispositive.  A British Columbia judge recently found, as an example, that a two-year absence with slight prospects of return, was satisfactory to meet the test.
  • The illness’s nature, duration and the prospects of recovery are the most important factors.  Employers who proceed to terminate employees without genuinely considering these factors not only risk wrongful dismissal damages, but violating human rights legislation as well.
  • Employment contracts should be thoroughly reviewed. Subject to human rights legislation, an express agreement can permit employers to terminate employees on their disability rolls, where such a right would not otherwise exist.
  • Provincial legislation varies, so seek legal advice.  In Ontario, for example, statutory severance pay is mandatory even where frustration is proven.

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