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When does a disability frustrate the employment relationship?

I routinely tell clients (and anyone else who cares to listen) that dealing with employees on extended disability leave is one of the toughest challenges facing the human resources professional. One of the very complex aspects of this challenge is determining the point in time when the absence “frustrates”, in a legal sense, the contract of employment. 
The B.C. Court of Appeal has explained the legal concept of frustration this way: “A contract may be brought to an end by operation of law and the parties discharged from further performance if, without the fault of either party, the circumstances in which it was expected to be performed have changed so radically that performance would be impossible or at least something fundamentally different than was initially contemplated”. In practice, this means that when a contract is interrupted by some outside influence making it impossible to perform, the contract simply comes to an end with no further obligations on the part of either party.
Employers, and their lawyers, struggle with deciding whether the nature and extent of a medical absence has reached the point where the employer can declare the relationship to be over. The stakes are high because a poor decision will usually result in a civil action for wrongful dismissal damages. In the case of an older, long-serving employee (especially one who has reached a management position) those damages can be quite significant and may range up to 24 months pay in lieu of notice.
Making the correct decision requires a lot from the employer’s management and human resources staff. First and foremost, they must be patient – this is often more difficult than it sounds. They must also be highly sensitive to the fact that recovery from disabling conditions occurs slowly and not necessarily in accordance with a pre-determined schedule.
In a recent B.C. Supreme Court case, the decision of North Star Mills Ltd. that the employment had been frustrated was tested. The Plaintiff, Sandhu, had been employed by North Star for about 20 years. He had been injured in a motor vehicle accident (which was unrelated to his employment) and went off work for an extended medical leave.
After approximately 16 months off work, Sandhu contacted North Star about returning to work. Some correspondence and a meeting with the employer didn’t resolve the situation. Eventually, the employer took the position that Sandhu’s employment relationship with North Star was frustrated due to his lengthy medical absence.
In its decision, the B.C. Supreme Court confirmed the concept of frustration of contract applies to the employment relationship. The Court emphasized, however, that when applying the concept of frustration to the employment context, employers must draw a distinction between temporary and permanent disabilities.
A temporary disability may require the individual to be away from work for a considerable period of time. Notwithstanding the length of the absence – in Sanhu’s case, 16 months – the employer must address the question of whether (and at what point in time) recovery can be expected.
Reading the future in this manner is one difficult aspect of deciding whether the employment has been frustrated. If the disability is not of such severity and duration that it is reasonably foreseeable the employee will never recover to the point of being able to return to work, then the employment has not been frustrated.
In Sandhu’s case, the answer to that question must have been fairly easily reached by the Court since his condition clearly had progressed to the point where he was able to return to active duties. That being the case, it seems there was little likelihood of North Star’s position on the frustration point being upheld. 
As a result, the Court found that Sandhu had been wrongfully dismissed by North Star. The Court determined that, for the purposes of addressing the damages awardable to Sandhu, the reasonable notice period was 12 months in duration.
All employers are likely to confront this difficult scenario on occasion. Obtaining training for human resources staff in dealing with employees who suffer disabling injuries and conditions is a good way to prepare for this inevitable scenario.
Robert Smithson is a partner at Pushor Mitchell LLP in Kelowna practicing exclusively in the area of labour and employment law. For more information about his practice, log onto