‘Drastic’ changes for disabled employees

Landmark Ontario decision, if not overturned, means employers will have to pay severance to employees whose contracts are frustrated due to disability
By Stuart Rudner
|Canadian Employment Law Today

A recent decision of the Ontario Divisional Court may have drastically changed employer obligations when it loses an employee due to disability. Up until recently the doctrine of frustration relieved an employer of its obligations to provide severance pay and notice or pay in lieu. However, if the recent decision is not overturned, the law will require an employer in those circumstances to provide severance pay to the employee. Since severance pay can be as much as half a year’s salary, this obligation can be substantial.

The decision of the Divisional Court makes sense when one considers the purpose of severance pay, as opposed to other obligations such as notice of termination. As set out by the Divisional Court in

O.N.A. v. Mount Sinai Hospital