Terminal Illness in the Workplace

When is an employer obligated to assert frustration of contract?

When an employee is absent due to critical illness, an employer may grapple with questions around whether and for how long the employment relationship continues. An employment contract can be legally "frustrated" and come to an end if the employee is no longer able to fulfill the core functions of employment for a significant term. If an employment contract is frustrated, the employer is required to provide only minimum statutory termination and severance pay, and is otherwise relieved of its common law and contractual obligations to the employee.

However, determining if and when an employment contract has been frustrated can be fraught with difficulty. Competing employment law and human rights considerations—as well as a desire to be magnanimous—may lead an employer to be conservative and safeguard the employment relationship.

This approach was recently challenged in The Estate of Christian Drimba v. Dick Engineering Inc.1 In this case, the Ontario Superior Court held that an employer was obliged to assert frustration of contract when it became clear that the employee was terminally ill and would never be able to resume employment.

Background

Christian Drimba was an employee of Dick Engineering for over 17 years. In May 2013, Mr. Drimba began a leave of absence for medical reasons. In June 2013, he was diagnosed with terminal cancer. Shortly thereafter, his employer wrote to confirm that his employment would continue until such time as he was well enough to return to work. Mr. Drimba passed away in September 2013.

The Court’s Decision

The Court was asked to determine whether Mr. Drimba’s estate was entitled to statutory termination and severance pay under the Ontario Employment Standards Act (ESA). Under the ESA, an employee is entitled to termination and severance pay where the contract of employment is frustrated due to an illness or injury, but not if the contract comes to end as a result of death. The estate alleged that Mr. Drimba’s contract of employment had been frustrated by illness when it became clear he would be unable to ever resume his employment. The employer argued that because it clearly affirmed Mr. Drimba’s continuing employment, notwithstanding his illness, the employment contract could not be frustrated and was only severed by Mr. Drimba’s death.

The Court held that the employer ought to have known Mr. Drimba would be unable to return to work due to his terminal illness and therefore, his employment contract ought to have been considered frustrated prior to his death. The Court found that while it may be difficult to pinpoint the exact moment when Mr. Drimba’s contract was frustrated, the employer had enough knowledge about Mr. Drimba’s critical illness to have known he would not return to work. Therefore, Mr. Drimba’s employment contract was considered frustrated prior to his death and his estate was entitled to statutory termination and severance pay under the ESA.

What Employers Need To Know

Employers should be aware of the following implications of this decision:

  • Seriousness of the illness: Terminal or critical illnesses may result in an employer’s obligation to frustrate an employment contract, where it is clear that an employee will never be able to resume employment.
  • Competing Interests: Employers have to carefully weigh competing employment and human rights considerations when dealing with terminally ill employees. If the employment contract of a critically ill employee is deemed to be frustrated before it is clear that the employee will never be able to resume employment, the employer could be subject to liability, including under the Ontario Human Rights Code.
  • Every Case is Different: Employers should remember to assess each individual employee’s situation on a case-by-case basis. It is not in every case that critical illness will give rise to frustration of contract. The employer should assess and consider the totality of factors and circumstances before deeming an employment contract to be frustrated. Some factors include the employer’s knowledge of the illness, well-known mortality rates of the illness, severity of the illness, foreseeability of returning to employment and known past medical history of the employee.

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1 2015 ONSC 2843, available here.

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This publication is a general discussion of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, we would be pleased to discuss the issues in this publication with you, in the context of your particular circumstances.

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