In Hedrick v. Johnson Meier Insurance Agencies Ltd., 2026 BCSC 1250, the BC Supreme Court found that the plaintiff, Amber Hedrick, had been wrongfully terminated by her employer, Johnston Meier Insurance Agencies Ltd. (the “Employer”). Ms. Hedrick had been the victim of stalking by one of the Employer’s largest clients over a period of several years, without any real intervention from the Employer. Ms. Hedrick eventually went on leave in 2021 after her mental health deteriorated and she accessed temporary wage-loss benefits from WorkSafeBC. In a decision dated August 24, 2022, WorkSafeBC determined that Ms. Hedrick had suffered permanent injuries due to the stalking and inaction by her manager, which had stabilized as of August 29, 2022, warranting permanent disability benefits from that date. In the same decision, WorkSafeBC found that Ms. Hedrick would have difficulty returning to work with the Employer and concluded that she was entitled to a referral to vocational rehabilitation services. In September 2022, the Employer terminated Ms. Hedrick’s employment, taking the position that since Ms. Hedrick could not return to work, the employment contract had been frustrated by circumstances beyond its control.
The BC Supreme Court applied the test for frustration from Aldergrove Duty Free Shop Ltd. v. MacCallum, 2024 BCCA 28 (“Aldergrove”), which requires a party to establish:
The BC Supreme Court determined that the Employer’s attempt to establish frustration failed at the second prong of the Aldergrove test because the Employer’s conduct had directly contributed to Ms. Hedrick’s injuries and inability to return to work. In doing so, the BC Supreme Court noted that the Employer had a positive duty under section 23 of the Workers Compensation Act to ensure Ms. Hedrick’s health and safety and to remedy workplace conditions that were hazardous to its workers.
The BC Supreme Court concluded that Ms. Hedrick was entitled to $116,136 in wrongful dismissal damages (equivalent to nine months’ pay). The Employer took the position that all WorkSafeBC benefits received by Ms. Hedrick should be deducted from the damage award. The Court noted the existence of divided appellate authority on this issue across Canada. After reviewing the various case authorities, and aided by the testimony of Ms. Hedrick’s WorkSafeBC Case Manager, the BC Supreme Court distinguished between WorkSafeBC benefits intended to cover wage loss and those attributable to permanent disabilities and vocational rehabilitation, for the purposes of the damage calculations. The Court found that only wage loss benefits would result in a “compensating advantages problem” if they were not deducted from wrongful dismissal damages, because the latter benefits are intended to compensate for a worker’s loss of function, recovery, return to work, and permanent injuries, not wage loss. In Ms. Hedrick’s case, no deductions were made for WorkSafeBC benefits because the benefits she was receiving after her termination date were no longer wage loss benefits.
Takeaway
This decision highlights for employers the need for real caution when considering whether to assert frustration of contract, especially in circumstances where a workplace injury is the basis for frustration. Where the supervening event (the injury) was caused in part by the employer, the test for frustration of contract may not be made out. In this case, the employer took steps to end the employment contract due to frustration, and was ultimately held liable for wrongful dismissal damages as a result of the allegation of frustration not being made out.
This case also provides some clarity with respect to deductibility of different types of WorkSafeBC benefits. The outcome in this case demonstrates that benefits may be deductible depending upon the nature of the benefits at issue, highlighting the need for evidence as to the specific nature of the benefits in question.
If you have any questions regarding this article, please contact your Harris lawyer.
