An employment contract, unsurprisingly, is a type of contract. As a result, many of the regular principles of contract law apply in the employment law context too.

We regularly write about the implications of terminating an employee, which normally involves giving reasonable notice or making a payment in lieu of such notice. But can an employer terminate an employee without providing certain termination entitlements if the employment contract has become frustrated? 

This article looks at this question with reference to the recent decision of the Ontario Superior Court of Justice in Croke v VuPoint Systems Ltd. In this case, the employer terminated the plaintiff’s employment with two weeks’ notice after he refused to comply with its mandatory COVID-19 vaccination policy. 

What is frustration of contract?

Frustration of a contract may occur when a situation arises in which the parties made no provision for in the contract, which renders the performance of the contract a thing which is radically different from that which was previously undertaken under the contract. Performance of the contract, as originally agreed, needs to be more or less impossible due to the event that has happened.

When such an event occurs without the fault of either party, a court may be called upon to relieve them of the bargain they previously reached in the contract. 

What are the implications of a frustrated contract?

The legal effect of a frustrated contract is that the parties can treat the contract as being at an end, with no obligation to continue the contract and no entitlement to either party as a result of the end of the contract. 

In an employment law context, an employer may be entitled to end the contract without providing the employee with common law notice.

Defendant employer was required to institute a mandatory vaccination policy

Turning to the recent decision, the defendant employed the plaintiff as a systems technician starting in 2014. The defendant is a federally regulated employer, subject to the provisions of the Canada Labour Code, that provides services predominately to Bell Canada. The latter provided the defendant with more than 99% of their income.

In September 2021, Bell told the defendant that all installers would need two doses of a COVID-19 vaccine. This caused the defendant to institute a mandatory vaccine policy, which said that unvaccinated installers would be prohibited from performing work for certain customers and may not receive assignments.

Plaintiff refused to become vaccinated and was terminated

The defendant terminated the plaintiff in late September, effective October 12. He was given two weeks’ notice and severance pay of about $2,400. The plaintiff told his supervisor he was unprepared to disclose his vaccination status. He also said that he would never be vaccinated.

The plaintiff brought proceedings for wrongful dismissal. He argued that his employer failed to warn him of the consequences of not complying with the mandatory vaccination policy. He also contended that the employer could not establish that the employment contract was impossible to perform. 

The defendant responded that it was no one’s fault that the policy had come into effect, which required people entering the homes of Bell’s customers to be vaccinated, meaning the plaintiff was unable to continue to perform his duties. They had no other work for the plaintiff to do, so argued that his employment ended because the contract had been frustrated.

Plaintiff was warned that his employment would be terminated

Justice Pollak disagreed with the plaintiff’s claim that he was not told that he would be terminated if he did not comply with the mandatory vaccination policy. While the policy did not specifically mention termination, the evidence showed that he knew of the policy, only provided services to Bell and had told his employer that he would never become vaccinated. He was also told that his employment would be terminated in late September.

Court likened the case to a recent labour arbitration decision

Her Honour cited the 2022 labour arbitration decision of Fraser Health Authority v Hospital Employees’ Union, which she found was analogous to the plaintiff’s claim. In that case, the arbitrator decided that the employment contract of a unionized hospital healthcare assistant had been frustrated when she refused to comply with a mandatory COVID-19 vaccination policy. The employer was required to institute the policy under a provincial mandate.

Justice Pollak summarized the defendant’s position:

“The supervening event is Bell’s implementation of a mandatory vaccination condition on all subcontractors in order for those subcontractors to be eligible to perform installation services for Bell. [The defendant] submits that neither party could have possibly foreseen in 2014, when the parties entered into the employment contract, that an unprecedented global pandemic would occur that would cause Bell, to implement a policy requiring all [the defendant’s] installers to become vaccinated against said disease, failing which they would not be able to work for Bell.”

Radical change resulted in the frustration of the employment contract

Her Honour agreed that the vaccination policy was an unforeseen event not contemplated when the parties entered the contract. Neither party had a default, with the defendant contractually required to comply with Bell’s policies. The plaintiff’s inability to perform his duties constituted a radical change that frustrated the employment contract. Justice Pollak found that the defendant did not need to modify the contract to ensure he could continue to work and that the current situation was radically different from what the parties had intended in 2014.

The court dismissed the plaintiff’s wrongful dismissal claim.

Contact Haynes Law Firm in Toronto for Guidance on Employee Termination

The Haynes Law Firm helps both employers and employees deal with the termination process, reducing the chances of litigation and advocating for your rights. We also draft employment contracts, which are crucial documents, especially in the later event of a dispute. For all your employment law needs, contact us online or call us at 416.593.2731.