Frustration of (Employment) Contract
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 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 agreement. In such cases, the employment relationship might be terminated, and the employer may not be required to provide common law notice or pay in lieu. However, statutory entitlements under Ontario’s Employment Standards Act (ESA) may still apply.
Before concluding that frustration has occurred, employers must also consider their duty to accommodate under the Ontario Human Rights Code, particularly where disability is involved.
Understanding the Legal Threshold for Frustration
In situations involving frustration of contract, because neither party is “at fault,” an employer is generally not obligated to provide common law notice. However, courts require employers to prove the contract was truly frustrated and will scrutinize the specific facts of each case.
Factors courts consider include:
The permanency of the illness
The nature and duration of the illness
The prospect of recovery
Medical documentation
The length and importance of the employee’s role
Before making any decisions, speak with an employment contract lawyer to ensure your next step is legally sound.
Common Misconception Regarding Frustration of Contract
There is a common but mistaken belief that employment contracts are frustrated once an employee has been on long-term disability (LTD) benefits for two years. While some insurance policies apply a more stringent test for benefits after two years, this timeline alone does not determine whether a contract is frustrated. Acting on this assumption can be an expensive mistake.
Whether an employee is likely to return to work must be assessed case by case. The mere passage of time is not sufficient. Employers must consider accommodation options and take appropriate steps before claiming frustration.
Don’t rely on myths or policy assumptions. Let an employment contract lawyer help you determine whether frustration of contract applies to your situation.
As Christopher Achkar, employment lawyer and founder of Achkar Law, explains:
“When a contract becomes impossible to fulfill, frustration may be a legal reality, but it’s rarely straightforward. Whether you’re an employer or employee, getting legal advice before acting can protect your rights and limit risk.”
How an Employment Lawyer Can Help
In the case of frustration of an employment contract, an employment lawyer can provide valuable assistance in navigating the legal complexities and protecting the rights of all parties involved. Here’s how they can help:
Experience in Employment Law: Lawyers with experience in Ontario employment law and human rights matters can provide tailored advice.
Legal Assessment: They assess whether the contract is likely to be considered frustrated under the law and provide an informed opinion.
Advice on Legal Obligations: Lawyers explain the statutory obligations under the ESA and discuss potential notice, severance, or accommodation duties.
Negotiation: They can negotiate termination terms or settlements that align with legal requirements.
Documentation: They prepare proper termination letters and documentation to reduce the risk of legal challenges.
Dispute Resolution: Should a disagreement arise, lawyers can represent the party in mediation, legal proceedings, or litigation.
Contact Achkar Law
If you are an employer looking to take the proper steps before, during, and after a potential breach of contract or an employee with questions about your rights, contact Achkar Law today.
Our experienced employment contract lawyers can help you evaluate your situation, comply with legal requirements, and protect your interests every step of the way.
Call toll-free: 1-800-771-7882 | Email: [email protected]
The article in this client update provides general information and should not be relied on as legal advice or opinion. This publication is copyrighted by Achkar Law Professional Corporation and may not be photocopied or reproduced in any form, in whole or in part, without the express permission of Achkar Law Professional Corporation. ©
Workplace Law Topics
Employees: Termination and Severance, Constructive Dismissal, Termination with Cause, Human Rights, Workplace Accommodations, Employee Contracts, Long-Term Disability Claims
Employers: Employment Law, Employee Terminations and Layoffs, Employment and Labour Compliance, Employment Agreements, Workplace Investigations