Blog Post by Sebastian Chern
Lawrence Smith and Daniel Sorensen
January 31, 2019
A FRUSTRATING SITUATION: WHEN INJURY, ILLNESS AND/OR DISABILITY CAN TERMINATE AN EMPLOYMENT RELATIONSHIP
One of the most trying and difficult scenarios in an employment relationship, for both employer and employee, is where the employee suffers from a long-term disability, specifically if that disability affects their ability to perform their contractual duties and responsibilities. If an illness, disorder or disability continues to keep an employee from returning to work, an employer may be tempted to terminate the employment relationship. But, in doing so, the employer may be required to provide notice or pay in lieu of notice under the BC Employment Standards Act and, in the absence of a contract to the contrary, common law reasonable notice. Further, the employer’s decision to terminate may be in contravention of the BC Human Rights Code.
However, under certain circumstances, an employer may be able to claim that the employment contract has been “frustrated” and would be at liberty to terminate the employee without further notice and without contravening the BC Human Rights Code.
In the employment context, a contract of employment is frustrated by an employee’s illness or incapacity when it 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 contract or that it would be unreasonable for the employee to wait any longer for the employee to recover. In determining whether an illness or injury has met the standard necessary to frustrate the employment contract, Canadian courts continue to refer to the factors set forth by the U.K. National Industrial Relations Court in Marshall v. Harland & Wolff Ltd.,  2 All E.R. 715:
(a) The terms of the contract, including the provisions as to sickness pay;
(b) How long the employment was likely to last in the absence of sickness;
(c) The nature of the employment;
(d) The nature of the illness or injury and how long it has already continued and the prospects of recovery; and
(e) The period of past employment.
These factors are interrelated and cumulative but are not exhaustive of those that must be considered. Any other factors which bear on this issue must also be considered.
The onus is on the employer to prove that the employment contract has become frustrated.1 If there is a frustration of the employment contract, the courts have held that termination of the contract occurs automatically by operation of law and both the employer and employee are relieved from further performance of the contract.2
When considering the principle of frustration, the courts in BC have not imposed a duty on the employer to accommodate or otherwise offer an employee alternative positions or duties. As in Marshall and confirmed by the British Columbia Court of Appeal in Wightman Estate v. 2774046 Canada Inc., 2006 BCCA 424 (CanLII), the question is whether the employee’s incapacity is of such a nature that further performance of their obligations in the future would either be impossible or would be a thing radically different from what was agreed to under the original employment agreement? Accommodating an employee by offering an alternative position or duties would be considered a new contract and failure to do so does not stop the old contract from being frustrated.
The Human Rights Code
Contrarily, the BC Human Rights Code (the “Code”) requires an employer to accommodate an employee’s disability. Pursuant to the Code, an employer may not terminate an employee because of their disability, unless they can justify the basis of the termination as a bona fide occupational requirement (“BFOR”). To establish a BFOR, an employer must, acting in honest and good faith, adopt a standard that is rationally connected to the performance of the job and show that that standard is reasonably necessary. An employer must also show that it is impossible to accommodate the employee’s disability to the point of undue hardship.
The BC Human Rights Tribunal has held that frustration is a basis upon which an employer may be able to justify terminating an employee with a disability as a BFOR.
Chohan v. Costco Wholesale Canada
Considering the issue in a recent case, Chohan v. Costco Wholesale Canada, 2017 BCHRT 233, the Tribunal found that, to establish frustration of contract as a BFOR, an employer must show that the employee remains unable to work for the reasonably foreseeable future despite the employer’s efforts to accommodate them.
In that case, the complainant, Chohan, had been employed by Costco for over 20 years, where he held the position of Member Services Team Lead. In January and November of 2012, Chohan was injured in two separate motor vehicle accidents. As a result, Chohan was on medical leave from January 2012 until July 9, 2015 when the employment relationship was terminated. Prior to terminating Chohan, Costco had considered the following:
1. While on medical leave, Costco regularly received medical information regarding Chohan’s condition, which consistently indicated that he was unable to return to work in any capacity;
2. After a period of time, Costco’s long-term disability benefit provider ended Chohan’s LTD claim on the basis that they had determined that Chohan did not meet their policy’s definition of total disability from “any occupation”;
3. Following the cessation of his LTD benefits, Costco requested further medical information from Chohan and asked that Chohan’s physician complete a questionnaire; and
4. In answering the questionnaire, Chohan’s physician could not provide a positive prognosis. Notably, Chohan’s physician stated that Chohan was “incapable of returning to any form of gainful employment.”
In his complaint to the Tribunal, Chohan alleged that Costco had discriminated against him because of his disability by terminating him whilst he was on medical leave. Costco applied to have the complaint dismissed.
The Tribunal granted Costco’s application and dismissed Chohan’s complaint in its entirety. The Tribunal found that, given the consistent reports to Costco that Chohan was unable to return to work, Costco was not obliged to offer Chohan alternative positions or duties. The Tribunal held that Costco had reasonably accommodated Chohan to the point of undue hardship. In the Tribunal’s opinion, Costco had asked the appropriate questions and received a response that indicated that Chohan was unlikely to return to their duties or any other duties with Costco within the reasonably foreseeable future.
The Tribunal noted that it is a best practice for an employer to provide an employee advance written notice that, absent any change in their ability to return to work in the reasonably foreseeable future, their employment will come to an end at a certain date due to frustration of the employment contract. The Tribunal added that doing so provides the employee the opportunity to submit further up-to-date medical information about their potential for returning to work and allows the employee a chance to make necessary preparations, emotional or otherwise, for the upcoming end of an employment relationship that they may have invested much into. The Tribunal concluded that, considering the medical information provided, Costco did not necessarily have to warn Chohan in this instance of their intention to terminate his employment.
On the basis of all the material provided, the Tribunal concluded that it was reasonably certain that the Tribunal would, at a hearing, conclude that the point had been reached in the employment relationship where Chohan’s disability had prevented the performance of the functions of his job for such a lengthy period that the object of the employment had been frustrated, that there was no reasonable prospect that Chohan would return to his employment with Costco in any capacity within a reasonably foreseeable timeframe, and that Costco reasonably accommodated Chohan throughout the course of his medical leave.
Take-Aways for Employers
Considering the principles outlined above, employers should take care when determining whether to terminate an employee who has been absent as a result of injury, illness, or disability. In addition to evaluating an absentee employee’s situation on the basis of the Marshall factors, employers should:
1. Regularly inquire about the employee’s prognosis and their ability to return to work;
2. If appropriate, provide a questionnaire regarding the employee’s prognosis for the employee to answer;
3. Where possible, provide the employee with the opportunity to perform light duties or offer the employee an alternative position;
4. Continue to provide the employee with disability benefits, unless otherwise advised by the insurance provider;
5. Where it seems that the employee will not return within a reasonably foreseeable timeframe, provide the employee with advance written notice that their employment will be terminated due to frustration of the employment contract.
Whilst it is somewhat outside the scope of this article, if it is accepted that the employee was injured in the course of their employment, the employer should cooperate with WorkSafe BC.
Take-Aways for Employees
While employees may, to a certain extent, be unable to control their own prognosis, there are steps that an employee can take in resisting a claim of frustration:
1. Employees facing a prolonged injury, illness or disability should volunteer any evidence that may indicate that they can perform duties or an alternative position.
2. Where possible, employees should cooperate with their employers and accept their reasonable solutions or return-to-work plans.
3. Employees should propose alternative duties or positions, thereby putting the onus on the employer to show that they cannot accommodate those requests or that the requests are unreasonable.
4. If terminated, employees should determine whether they were able to return to their original position or whether they required accommodation in an alternate position or with alternative duties. Where accommodation was required and not provided, an employee should elect to file a BC Human Rights Complaint, as there is risk that a court, in applying Marshall and Wightman, would find that the original employment agreement was frustrated despite a lack of accommodation.
We recommend that you always obtain legal advice, as your particular facts may make your situation unique. Please contact us at 604-705-0022 for a consultation and we will be happy to assist you.
1 Naccarato v. Costco Wholesale Canada Ltd., 2010 ONSC 2651 (CanLII),  O.J. No. 2565 (QL) (S.C.J.) at para. 13; Dragone v. Riva Plumbing Limited, 2007 CanLII 40543 (ON SC), at para. 17
2 Fraser v. UBS, 2011 ONSC 5448 (CanLII), at para. 15; Fazekas v. Ault Foods Ltd.,  O.J. No. 913 (QL) (S.C.J.); Mandavia v. Central West Health Care Institutions Board, 2005 NLCA 12 (CanLII)