When does the 'doctrine of frustration' apply? Court looks into dismissal dispute
The Court of Appeal for Ontario recently dealt with a case involving an employee who was terminated due to his refusal to comply with a COVID-19 vaccination policy.
The dispute centred around whether the doctrine of frustration applied to the employment contract, given the unique circumstances brought about by the pandemic.
The court discussed the complex issues at the intersection of employment law, public health measures, and contractual obligations.
The case highlights the challenges faced by organisations in balancing workplace safety with individual rights during unprecedented times.
The worker was employed as a technician by a company that primarily provided installation services for a major telecommunications firm. This employer was in the business of installing residential satellite TV and "smart home" internet services, with over 99% of its income coming from a single client. The worker exclusively performed tasks for this client, and it was undisputed that there was no other work the employer could provide to him.
In 2021, the client implemented a mandatory vaccination policy, following which the employer adopted its own vaccination policy. The worker refused to comply with the employer's policy by disclosing his vaccination status, which was deemed to mean that he was unvaccinated. Consequently, pursuant to the client's policy, he was not eligible to continue working as a technician providing services for the client's customers.
The employer terminated the worker's employment, citing frustration of contract due to the implementation of the client's vaccination policy. The worker then brought a wrongful dismissal action against his former employer.
The central question before the court was whether the doctrine of frustration could be applied in this case, given that the worker's inability to work stemmed from his own choice not to comply with the vaccination policy.
The worker argued that his voluntary conduct should have been dealt with through the law of just cause termination, rather than frustration.
He contended that applying frustration to his voluntary choice not to comply with the policy would incentivise employers to terminate employees immediately upon objecting to vaccination, without giving them a chance to change their minds.
On the other hand, the employer maintained that the client's vaccination policy was the supervening event that frustrated the contract, not the worker's conduct.
They argued that the policy's effect was akin to a new regulatory requirement, rendering unvaccinated employees ineligible to work on the client's projects regardless of individual circumstances.
In its analysis, the court emphasised that the focus should be on whether the client's vaccination policy constituted an unforeseeable event that “radically altered” the nature of the employment contract. The court stated:
"I agree that [the client's] mandatory vaccination policy was an unforeseen circumstance which was not contemplated by either party, when the [worker] and the [employer] entered into the employment relationship in 2014."
This finding was crucial in establishing that the doctrine of frustration could potentially apply to the case at hand.
The court also considered whether the worker's inability to perform his duties due to non-compliance with the vaccination policy constituted a "radical change" to the fundamental obligations of the contract. On this point, the court noted:
"[The worker's] complete inability to perform the duties of his position for the foreseeable future [constituted] a radical change that struck at the root of the employment contract."
The court took into account several contextual factors in reaching its decision. The client's vaccination policy was implemented around September 8, 2021, requiring all vendor personnel working on their projects to be fully vaccinated against COVID-19 by September 20, 2021. The employer then adopted its own policy on September 10, 2021, requiring all installers to be vaccinated and provide proof of vaccination.
The worker was given two weeks' notice of termination on September 28, 2021, to be effective October 12, 2021. During this notice period, on October 9, 2021, the worker sent a letter to the employer refusing to comply with the policy and claiming that the termination was discriminatory.
The court also noted that the worker was aware of the need to get vaccinated and had applied for a new job that did not require vaccination on September 12, 2021, indicating his understanding of the potential consequences of non-compliance.
Ultimately, the Court of Appeal upheld the lower court's decision that the employment contract had indeed been frustrated.
The court reasoned:
"Once the [client's] policy is recognized as the supervening event, the applicability of the doctrine of frustration turns on (i) whether, in light of [the client's] policy, performance of the employment contract had become something radically different than what the parties had contracted for, given that the [worker] was no longer qualified to undertake the work for which he was hired, and (ii) whether that change was foreseeable when the contract was formed."
The court further clarified the distinction between frustration and just cause dismissal:
"Frustration of contract is a 'no fault' termination of the contract. Where frustration is established, it has the effect of discharging the agreement, thereby releasing the parties from any further obligation to perform."
The court also emphasised the importance of focusing on the circumstances known at the time of termination, stating:
"To continue to bind [the employer] to an employment contract, when the employee by law is prohibited from performing any services under the contract for what appears to be a lengthy and open-ended period of time, is imposing something radically different from what the parties originally agreed to."
"The focus of the analysis was on whether the [worker] was eligible to continue to provide the services for which [the employer] had hired him, once the [client's] policy was in effect, and whether his ineligibility to provide those services due to his vaccination status constituted a thing radically different from that which was contemplated by the employment contract," the court said.
The court further elaborated on its reasoning:
“I am satisfied that in the circumstances here, when [the employer] sent its termination letter on September 28, 2021, it was entitled to conclude that there had been a radical alteration of its employment contract with the [worker].”
“[The employer's] policy, which it implemented on September 10, 2021, required employees to advise [the employer] of their 'vaccination status'. There was no evidence that the [worker] ever told [the employer] that he was either fully or partially vaccinated, despite the fact that he was aware of the policy," the court added.
“In short, this was not a situation where [the employer] knew that the [worker’s] inability to work on the [client’s] installation projects because he could not or would not provide proof of vaccination would be only temporary and relatively brief, and that the employment relationship would accordingly not be radically altered. [The employer’s] counsel acknowledged that the situation would have been different if the appellant had indicated that he wished to become vaccinated, but that he needed more time. However, there was no evidence that he ever made such a request,” the court said.
Thus, the court dismissed the worker’s appeal against the employer’s decision.
