In Katz et al. v Clarke 2019 ONSC 2188, the Ontario Divisional Court clarified an employer’s duty to accommodate an employee where there is a frustration of contract. The Divisional Court confirmed that an employer’s duty to accommodate ends when the employee is no longer able to fulfil the basic obligations associated with the employment relationship for the foreseeable future. In such circumstances, the employment contract terminates due to frustration.

The facts are as follows. Mr. Clarke was a former employee of Katz Group Canada Ltd. (“Katz Group”). Five years after Mr. Clarke stopped reporting to work due to a disability, Mr. Clarke’s long-term disability provider informed the Katz Group that based on the available medical evidence, Mr. Clarke was totally disabled. Mr. Clarke was unable to work in any occupation with no reasonable prospect of returning to work in any capacity in the foreseeable future. The Katz Group wrote to Mr. Clarke informing him that based on the information available to them, Mr. Clarke’s employment was frustrated and that they were terminating his employment.

In response, Mr. Clarke’s lawyer wrote to the employer that Mr. Clarke “had been working very hard to get well so that he can return to his former employment and perform the essential duties of his position”. The Katz Group responded on two separate occasions asking Mr. Clarke to provide updated medical information outlining his estimated date for return to work and his prognoses for recovery. The Katz Group did not receive a response and were not provided with updated medical information.

Consequently, the Katz Group terminated Mr. Clarke’s employment and provided Mr. Clarke with his statutory entitlements in accordance with the Ontario Employment Standards Act, 2000.

Mr. Clarke commenced an action against the Katz Group claiming damages under the Ontario Human Rights Code as well as damages for wrongful dismissal. The Divisional Court concluded that the doctrine of frustration of contract applied to the circumstances because Mr. Clarke’s permanent disability rendered performance of the employment contract impossible “such that the obligations of the parties are discharged without penalty”.

Furthermore, terminating Mr. Clarke’s employment on the basis of frustration of contract did not breach the Katz Group’s duty to accommodate because the duty to accommodate an employee is only triggered when an employee provides evidence of his or her ability to return to work. The Court determined that the Katz Group’s duty to accommodate ended when Mr. Clarke was no longer able to fulfil the basic obligations associated with the employment relationship for the foreseeable future as it is “inherently impossible” to accommodate an employee who is unable to work.

This decision is important for employers in that it confirms that, in a long-term disability situation, an employment contract may be terminated for frustration when the employee’s permanent disability renders performance of the employment contract impossible.

In the event the employee wishes to return to work, and has medical evidence supporting his or her ability to return to work, the employers duty to accommodate is triggered and the employee may not be terminated on the basis of frustration.