How soon can an employer claim frustration of contract?

Employers must be careful when claiming frustration
By Tim Mitchell
|Canadian Employment Law Today|Last Updated: 12/14/2011

Question: If the physician of an employee on long-term disability leave provides a note saying the employee is unlikely to ever be able to come back to work, can the employer terminate due to frustration immediately or is there a period of time it should wait?

Answer: It has long been recognized that an employee’s permanent disability can terminate an employment contract where the disability can “put an end, in [the] business sense, to [the parties’] business engagement” and thus to “frustrate the object of that engagement,” as stated by the Supreme Court of Canada in Marks v. Dartmouth Ferry Commission.

The guidelines determining whether the disability is permanent were set out in Marshall v. Harland & Wolff Ltd. That case describes the inquiry as requiring a determination whether the employee’s incapacity, looked at before the purported dismissal, was of such a nature or appeared likely to continue for such a period that future performance of his obligations would either be impossible or would be radically different from previous performance and accepted by the employer under the agreed terms of his employment.