Alberta Court of Queen’s Bench , 2009

Sandra Lippa was employed by Can-Cell Industries Inc. for just over nine years as a payroll administrator. Her annual salary was $45,000.00. Shortly before her ninth anniversary of employment she encountered health problems. She planned on returning to work a week later, but was told by her immediate supervisor during a telephone conversation that she was not to return to work without a doctor’s note which indicated that she was fit for employment. During the telephone conversation, the employee advised her supervisor that, based on her family doctor’s evaluation, she possibly had multiple sclerosis and her return date was unknown. The employee never returned to work, despite an intention to do so, and was terminated five months after she first experienced her health problems. The company never requested any medical information from her until after her termination date. At the time of trial, the employee’s condition had not been diagnosed despite being examined by several specialists, and she remained unable to work.

The main issue to be decided by Justice Gerald A. Verville was whether the employee was wrongfully dismissed or did she abandon her position and/or frustrate her employment contract.

Justice Verville held that the employee was wrongfully dismissed and was entitled to pay in lieu of reasonable notice equal to nine months. He also held that the employee’s settlement with Manulife Canada should not be deducted from the wrongful dismissal award.

With respect to the wrongful dismissal issue, the company had argued that the employee’s five month absence due to illness amounted to an abandonment of her position and that the employment agreement was frustrated due to her illness. However, because the evidence was that the employee had always intended to return to work, Justice Verville held that she did not abandon her position. In reaching his decision regarding frustration, Justice Verville canvassed several authorities that espoused differing views concerning what information an employer can rely on to justify frustration of the employment contract. In particular, whether the employee’s medical prognosis in a frustration context should be assessed as of the date of the dismissal, as of the date of trial or as of the date of dismissal but with the benefit of the hindsight available at the time of trial.

Ultimately, Justice Verville agreed with and applied the authorities in support of the first position: the employee’s incapacity must be assessed prior to her dismissal when considering whether the employment contract has been frustrated due to the employee’s incapacity. In this instance, the employer terminated the employee without making any attempt to ascertain her medical condition prior to her termination. As such, the employer had no knowledge of whether the employee’s incapacity, looked at before the dismissal, was of such a nature, or appeared likely to continue for such a period, that further performance of her obligations in the future would either be impossible or would be a thing radically different from that undertaken by and accepted by the employer under the agreed terms of employment.

Based on Justice Verville’s decision, if an employer encounters a situation where an employee becomes incapacitated and will be absent from work for an extended period of time or will be unable to continue her employment in the capacity contemplated in the employment agreement, the employer should ensure that they have obtained all relevant information concerning the employee’s incapacity prior to deciding to dismiss her, as any such information obtained subsequent to her dismissal will not be considered germane to the issue of whether the employee’s incapacity has frustrated the employment contract.