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Long-Term Illness Frustrates Employment Contract
November 6, 2006

The B.C. Court of Appeal recently relieved an employer from its obligation to provide reasonable notice to an employee upon dismissal, finding that the employee’s long-term illness had frustrated the employment contract.

The employee, Mr. Wightman had been employed by the employer, Canada Inc., for approximately 27 years until he stopped working for health reasons. He remained on long-term disability benefits for two years until his death.

Several months before Mr. Wightman’s death, Canada Inc. had reached an agreement with another company whereby it would terminate the employment of those of its employees who were not going to be hired by the new company. As part of that agreement, it dismissed Mr. Wightman without cause or notice. At the time of dismissal, Mr. Wightman was 61 years old and suffering from kidney failure, arthritis, angina, gout, and symptomatic carotid artery disease.

Mr. Wightman’s estate sued Canada Inc. for the wrongful dismissal of Mr. Wightman. The trial judge dismissed the action, finding that Mr. Wightman’s disability, at the time of his termination, was likely to continue for such a period that performance would either be impossible or “radically different” from what the parties had originally agreed upon. The court held that the employment contract had been frustrated, relieving the employer of its obligation to provide reasonable notice.

The Court of Appeal upheld the findings of the trial judge. It ruled that the critical question to ask was whether the parties in this particular case intended Mr. Wightman’s employment to continue despite sickness if it should occur.

The contract in question provided that, in the case of disability, Mr. Wightman would receive long-term disability benefits during his period of incapacity even if that period was to extend to the end of his working life. However, the court determined that the contract envisaged that Mr. Wightman’s employment might come to an end in certain circumstances, such as serious illness, if such illness frustrated the employment contract. In the event of a frustration of contract, Mr. Wightman still would be entitled to long-term disability benefits, which in fact he did receive until his death.

Employers should be cautious about dismissing disabled employees, notwithstanding the Court of Appeal’s decision. First, the test for frustration of contract is difficult to meet. Second, in Wightman the court found that the parties had contemplated that employment could end during a disability. In other cases, however, a court could conclude that the parties intended for the employment relationship to continue, despite a disability. In those circumstances, an employer could be liable for wrongful dismissal if it terminates the disabled employee.

(Click here for full copy of judgment)