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Termination of Employment during Illness or Disability

Frustration of contract occurs when an employee becomes ill to the point of being incapacitated. In this scenario, they are unable to return to work to perform their regular duties contemplated by the employment contract or it would be unreasonable for the employer to wait any longer for the employee to recover and return to work.


The employer bears the onus of proving that the employment contract has been frustrated. If the contract is frustrated, then the employer is not liable to the employee either under statutory legislation or the common law. If the contract is not frustrated, then the employer may be liable to pay damages to the employee under the statutory regime and the common law.


At Jagtoo & Jagtoo in Toronto, we review all of the circumstances and facts of each particular case in order to determine whether an employment contract has been frustrated due to an employee’s illness and absence from work.


When an employer has long term disability benefits in place, the employer has anticipated the possibility that employees may take sick leave. Therefore, these employers should be more tolerant when an employee is absent and a greater period of time should elapse before an employer takes the position that an employment contract has been frustrated. Other important factors to consider are the seniority of the absent employee, how important that employee is to the success of the employer’s business and whether a prolonged absence will be harmful to the employer; a short period of incapacity may frustrate a contract of employment if the absent employee is an executive, whereas a longer absence for an employee who does not occupy such a key role within the company may not.


A contextual analysis must be undertaken to determine whether an ill employee’s absence from work constitutes frustration of contract. While an employer is entitled to terminate an ill and incapacitated employee after a period of absence from work for frustration of contract, employers should carefully consider the above factors before taking action, including whether the termination violates the Human Rights Code. To learn more, please contact our office in Toronto.

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