Ontario, Canada: When an Employment Contract Is Frustrated Due to the Employee’s Permanent Disability, the Employer’s Duty to Accommodate Ends

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Employers in Ontario will likely welcome the decision in Katz et al. v. Clarke, 2019 ONSC 2188 (Divisional Court), which addressed the scope of the duty to accommodate in the event of an employee’s permanent disability. It clarifies that when undisputed medical evidence indicates that an employee with a disability will not be able to fulfill the basic obligations associated with the employment relationship in the foreseeable future (i.e., that the employee’s disability is permanent), the employment contract is frustrated, the employer’s duty to accommodate ends, and the employer may terminate the employee.   

The decision indicates further that when an employee with a disability merely informs the employer of the desire to return to work, the employer’s obligation to accommodate the employee will not be triggered; the duty will be triggered only when the employee also provides evidence of the employee’s ability to return to work. 

Background

The employee was hired in 2000 but was off work since 2008 due to a disability. He left work initially due to depression. Later in 2008 he broke a knee cap, however, and in 2011 he further injured the same leg. The employer’s disability carrier approved short-term and then long-term disability. 

In 2013, after the employee was absent from work for five years, the disability carrier advised the employer that based on medical information available to it, the employee was unable to perform the essential duties of his position and there was no reasonable expectation that he would be capable of doing so in the foreseeable future. Approximately six months later, the employer wrote to the employee, informing him that:

  • Based on the information received to date and his prolonged absence from work, it believed he was incapable of performing the essential duties of his position due to illness, and that there was no reasonable expectation that he would become able to return to his position in the foreseeable future.  Therefore, his employment had been frustrated;
  • His employment and benefits would cease on December 31, 2013; and
  • He would be provided with his entitlements under the Employment Standards Act, 2000 (ESA) and they would be paid to him on January 9, 2014.

Almost three months later, the employee’s counsel responded that the employee “has been working very hard to get well so that he can return to his former employment and perform the essential duties of his position.” The employer’s counsel wrote to the employee’s counsel twice, requesting updated medical information outlining the employee’s estimated date for return to work and his prognosis for recovery. The second communication indicated that unless updated medical information was received, the employer would deem the employee’s employment to be frustrated effective December 31, 2013, on the basis that there was no reasonable prospect that he would be able to perform the essential duties of his position in the foreseeable future. No response was received to either letter. The employer terminated the employee’s employment effective December 31, 2013, and on January 9, 2014, the employee was paid his statutory entitlements under the ESA.

The parties agreed that the employee’s medical documentation and other materials indicated that the employee was totally disabled and unable to work in any occupation. Moreover, he had no reasonable prospect of returning to work in any capacity in the foreseeable future. In fact, the employee acknowledged during discovery in 2013 that he could not perform any work.

The Employee’s Action

The employee filed suit, alleging that he was terminated because of his disability in breach of the Ontario Human Rights Code (“Code”). He sought:

  • Damages under the Code for lost wages, and damages of $25,000 for injury to dignity, feelings, and self-respect;
  • A declaration that he was wrongfully dismissed;
  • In the alternative to the damages set out above, damages of $75,000 as compensation in lieu of reasonable notice; and
  • Moral damages of $25,000 for the alleged bad faith conduct by the employer in the manner of his dismissal.

The Employer’s Defence

The employer defended the action on the basis that the employee’s contract of employment was frustrated due to his absence from work for five years and the absence of any reasonable prospect of his returning to work. The employer moved for summary judgment.

Decision of the Motion Judge

In denying the motion for summary judgment, the motion judge decided the following genuine issues necessitated trial:

  • Was the employee terminated because of his disability?
  • Was the employee’s contract of employment frustrated by his inability to work?
  • Did the employer fulfill its duty to accommodate the employee, given his express desire to return to work?

The employer appealed this decision to the Ontario Divisional Court.  

Decision of the Divisional Court

The Divisional Court held that, for the following reasons, the motion judge erred when he denied the employer’s motion for dismissal of the action:

  • The law requires more of the employee than an expression to the employer of a wish to return to full employment to trigger the employer’s duty to accommodate;
  • An employer’s duty to accommodate is triggered when an employee communicates the wish to return to work and also provides evidence of his or her ability to return to work, including any reasonable accommodations that would allow the employee to do so;
  • The doctrine of frustration of contract applies when there is evidence that the employee’s disability is permanent. When performance of the employment contract is impossible, the parties’ obligations are discharged without penalty;
  • When an employee is no longer able to fulfill the basic obligations associated with the employment relationship in the foreseeable future, the employer’s duty to accommodate ends. It is ”inherently impossible” to accommodate an employee who is unable to work, and in these circumstances the employer is entitled to treat the employment relationship as ended;   
  • An employer has no duty to contact an employee while he or she is off work regarding accommodating the employee, when the medical documentation provided to the employer indicates that the employee is unable to return to work; and
  • Summary judgment may be granted on the basis of frustration of contract where there is no dispute as to the underlying facts.

In this particular case, although the employee informed the employer that he wished to return to work, he did not provide the employer with evidence of his ability to return to work. The test for frustration of contract was met because the employee’s undisputed medical documentation indicated that he was totally disabled and unable to work in any occupation for the foreseeable future. Accordingly, the employer had no duty to accommodate the employee, and it was entitled to end the employment relationship. The Divisional Court set aside the motion judge’s order and granted the summary judgment motion dismissing the employee’s action. 

Bottom Line for Employers

Employers are often unsure of their rights with respect to employees with disabilities who are absent from work for prolonged periods of time. Katz et al. v. Clarke alleviates this uncertainty, especially when the medical documentation is unequivocal. The decision reaffirms that if the medical documentation confirms that, following a prolonged absence, the employee is unable to return to work in the foreseeable future, the employer may deem the employment relationship at an end for “frustration of contract” even if the employee expresses a “desire” to return. Absent medical evidence substantiating that the employee is in fact medically able to return, his or her “desires” are irrelevant.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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