Frustration of contract, in the context of employment law in Ontario, refers to a situation where a contract of employment becomes impossible to fulfill due to unforeseen circumstances beyond the control of either the employer or the employee. This concept is based on the principle that if the performance of a contract becomes fundamentally impossible or radically different from what was originally agreed upon due to events such as illness, disability, or unforeseen economic factors, the contract may be considered frustrated.

In the context of employment agreements, frustration of contract could occur if an employee becomes permanently incapacitated and unable to work, making it impossible for them to fulfill their duties as outlined in the employment agreement. In such cases, the employment relationship might be terminated due to frustration of contract, and the employer would not be obligated to provide notice or pay in lieu of notice.

It’s important to note that frustration of contract is a complex legal concept and is subject to interpretation by the courts. Employers and employees should seek legal advice when dealing with situations that might involve frustration of contract to understand their rights and obligations under Ontario employment law.

In situations of frustrated contracts, because neither party is “at fault”, an employer is not obligated to provide the employee reasonable notice or payment in lieu of notice, only what is required under statute. Given that employees stand to lose significant amounts in terms of their notice or pay in lieu thereof, courts require the employer to prove the contract was in fact frustrated and will scrutinize the facts of the case.

While an employee may have frustrated their employment contract due to their disability, employers must not forget their duty to accommodate, given that human rights are another consideration which attracts potential liability.

Common Misconception Regarding Frustration of Contract

There is a misconception that employment contracts are frustrated after an employee receives their long-term disability benefits for two (2) years, a duration which commonly appears in long-term disability insurance policies. For some policies, after two (2) years, an insurer’s test for benefit qualification becomes more stringent. This timeframe, however, is not determinative of frustration of the employment contract, and acting based on that assumption can prove to be an expensive mistake.

Whether an employee is able to return to work in the foreseeable future will depend on several factors, including the permanency of the illness, the nature and duration of the illness, the prospect of recovery, medical documentation, and, to an extent, the length and importance of the employee’s position.

While employers want to know whether six (6) months or two (2) years is sufficient to claim frustration of contract, of course the answer is—it very much depends on the facts of the case.

It is also important as an employer to take the proper steps to ensure frustration has occurred, and to not conclude the contract has been frustrated by mere passage of time.

An Employment Lawyer Can Help

In the case of frustration of an employment contract, an employment lawyer can provide valuable assistance in navigating the complex legal aspects and ensuring that the rights and interests of both the employer and the employee are protected. Here’s how an employment lawyer can help:

Experience in Employment Law

Employment law is complex and varies by jurisdiction. An employment lawyer with experience in Ontario employment law and human rights cases can provide guidance specifically tailored to the specific matter.

Legal Assessment

An employment lawyer can assess the situation to determine whether the contract has indeed been frustrated and whether it is a valid reason for termination. They can review the circumstances and evidence to provide an informed legal opinion on whether frustration is a viable option.

Advice on Legal Obligations

Frustration of contract is a legal doctrine that requires careful analysis of the specific circumstances. An employment lawyer can explain the legal obligations of both the employer and the employee in a frustration scenario. This includes discussing issues such as notice periods, termination pay, and potential severance.

Negotiation

If it is determined that frustration of contract is a valid route, an employment lawyer can negotiate on behalf of their client to ensure a fair and reasonable resolution. This could involve discussing termination terms, severance packages, and other related matters.

Documentation

An employment lawyer can help draft necessary legal documents, such as a letter of termination due to frustration of contract, to ensure that the termination process is properly documented and in accordance with legal requirements.

Dispute Resolution

If there is a disagreement between the parties about the validity of frustration or the terms of termination, an employment lawyer can represent their client in any legal proceedings that may arise, including potential legal actions or disputes.

Mediation and Settlement

In some cases, frustration situations can be resolved through mediation or settlement negotiations rather than resorting to litigation. An employment lawyer can represent their client’s interests during these processes and work towards a mutually acceptable resolution.

Legal Representation

If the situation escalates and leads to litigation, an employment lawyer can provide legal representation in court, presenting arguments and evidence to support their client’s case.

Overall, an employment lawyer’s role is to provide legal advice, advocate for their client’s interests, and ensure that the frustration of contract process is carried out in compliance with Ontario’s laws.

Contact Achkar Law

If you are an employer who wants to take the proper steps before, during, and after your employee’s frustration of contract, or an employee who has questions about whether your contract is frustrated or whether you are entitled to more, our team of experienced workplace lawyers at Achkar Law can help.

Contact us by phone toll-free at 1 (866) 858-5723 or email us at [email protected].

Further Reading

Employment Contracts In Ontario: What You Need To Know

Is Negotiation Better Than Litigation?

Breach of Contract: What You Need to Know