Frustration, as that expression is meant to be used in the context of the employment relationship, is a cause for termination that doesn’t often arise, but is frequently misunderstood. As a legal concept, it is the contract of employment that is said to be frustrated and not the parties themselves. As early as 1956, the British House of Lords’ defined the legal principle of frustration as occurring “whenever the law recognizes that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract“. In the context of the employment relationship, frustration generally arises in the form of some type of protracted, long term illness affecting the employee. The employment contract is said to be frustrated because the nature of the employee’s illness has made the contract impossible to perform.
While the principle seems easy of enough to articulate, the difficulty is most often found in its application. When and how does an employer make the determination that a contract of employment has been frustrated? Not surprisingly, at the heart of these questions is the wording of the contract. For example, is the contract worded in such a way that it could survive the change in circumstances which is claimed to be frustrating the contract?
The Ontario Supreme Court stated, in 1999: “Whether a contract of employment has been frustrated by an employee’s illness or incapacity depends on whether or not the illness or incapacity was of such an 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 employment contract, or that it would be unreasonable for the employer to wait any longer for the employee to recover. To determine if a contract has been frustrated, regard must be had to the relationship of the term of the incapacity or absence from work to the duration of the contract, and to the nature of the services to be performed.”
Put more simply, the answer to the question of when an employer will be able to determine an employment contract to be frustrated, will vary with the facts of each individual case. For example, courts will generally consider the length of absence of an entry level line worker,that is required to support a finding of frustration, to be substantially longer than that for a senior manager upon whom the survival of a business may depend. In the former case, several years or more may be required. In the latter, six months might be considered sufficient, depending on all of the facts and circumstances.
One thing employers should be clear about, however, is that frustration does not constitute “cause” or “just cause” for termination. Frustration does not assign blame or fault to either the employer or the employee. Consequently, upon the determination that a contract of employment has been frustrated, the employee being terminated is entitled to all appropriate severance and/or notice provisions.
It is always safer and more cost effective to consult legal counsel in advance if you are considering terminating a contract of employment for frustration.
NOTE: adapted from Peter Neumann and Jeffrey Sack, eText on Wrongful Dismissal and Employment Law, 1st ed, Lancaster House, Updated: 2015-03-30 (CanLII), <http://canlii.org/en/commentary/wrongfuldismissal/>.