New Human Rights Decision Provides Guidance on Frustration of Contract

We are often asked by our clients how long one of their employees has to be off work before it can justifiably take the position that an employment relationship has been “frustrated”.  Employers often wonder this because when an employment relationship is frustrated, the employee is not entitled to common law notice or pay in lieu of such notice [1]. So, how long does it take? 1 year? 18 months? 2 years? 5 years?

A recent Human Rights Tribunal decision, Gahagan v. James Campbell Inc., 2014 HRTO 14, appears to provide some guidance on this issue.

In this Case – Frustration After 2.5 years

The Respondent James Campbell Inc. (James Campbell) operates a number of McDonalds, one of which employed the Applicant Cathy Gahagan (Gahagan).  She worked at a grill station, making and wrapping burgers. Gahagan alleged that James Campbell terminated her employment as a form of reprisal.

In May 2009, Gahagan twisted her back while working. The Workplace Safety and Insurance Board granted her loss of earnings benefits. A possible return to work was looked at, but it was ultimately determined that accommodation was not possible. In October 2010 she was approved for a Canada Pension Plan (CPP) disability pension.

By October 2011, Gahagan had not returned to work. James Campbell terminated her employment, taking the position that she could not return to work, with or without accommodation, and that her employment was frustrated. Gahagan filed two complaints with the Tribunal against James Campbell. One alleged that it had not participated in her return to work process. The other alleged that James Campbell had committed a reprisal when it terminated her employment. The applications were consolidated.

The first allegation was dismissed. Responding to the second allegation involving reprisal, James Campbell argued that it terminated Gahagan’s employment because it reasonably concluded that she could not “return to work without or without accommodation because of her permanent medical restriction”.

Ultimately, the Tribunal agreed with James Campbell’s position that the employment relationship was terminated because of frustration, not because of a reprisal. It noted that:

  • at the time of termination, Gahagan had not worked for James Campbell for close to 2.5 years.  Likewise, she had not worked anywhere else since 2009 because of her physical restrictions;
  • Gahagan had been receiving a CPP disability pension from October 2010 until the termination in October 2011. As the Tribunal noted, “[to] obtain these benefits, she was professing both an inability to perform her job and a severe and prolonged disability. All of this evidence supports the conclusion that at the date of termination, the applicant could not work with accommodation”; and
  • Gahagan had no evidence that James Campbell intended to retaliate against her.

Lessons Learned

Employers often face a tough decision when evaluating the risks of taking the position that an employment relationship is frustrated. These situations often involve complicated facts, limited medical information and uncooperative employees. When frustration occurs will ultimately depend on the particulars of each case and employers will usually not have any real comfort that their decision to claim frustration will ultimately be upheld by a reviewing body.

In this case, the Tribunal concluded that the employment relationship was frustrated after nearly 2.5 years of the employee first being injured. Of course, the employer had good facts in its favour, including an employee who had not provided any service for those roughly 2.5 years and who was receiving a CPP disability pension. As such, this decision will not help an employer navigate every situation that it faces. Nevertheless, it does provide some guidance on when frustration will be found to have occurred, especially for employers faced with a similar fact scenario.

[1] In Ontario, employees are entitled to statutory termination/severance pay if the frustration is the result of an illness or injury suffered by the employee.

Canada Pension Plan Cathy Gahagan disability pension frustration illness injury James Campbell Inc. loss of earnings benefits McDonald's permanent medical restriction reprisal return to work process uncooperative employee Workplace Safety and Insurance Board



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