When the employment relationship becomes impossible to perform because of a factor outside the control of a Canadian employer or employee, the employee’s employment can be terminated by virtue of frustration of contract. When an employee won’t be able to return to work because of injury or illness, the same applies. But not so for federally regulated employers such as banks, airlines, inter-provincial trucking companies, etc.
According to the recent decision of Kingsway Transport v. Teamsters, Local Union 91, the frustration argument is no longer available for those employers when the employee’s inability to return to work is because of a work-related injury or illness.
John Sears was a 62-year-old employee of a federally regulated trucking business who had been off work for 21 years following amputation of his arm resulting from a workplace injury. He maintained his employment status over the years, and the employer made benefits and pension plan contributions on his behalf.
The employer communicated infrequently with Sears during the course of his absence, and no efforts were made to return him to work after 1994. However, in 2010, the employer requested medical confirmation of his functional restrictions and fitness to work. When he responded, confirming that he was unable to work because of the workplace injury, his employment was terminated. He was paid no severance pay or pay in lieu of notice.
Sears grieved his termination on the basis of section 239.1 of the Canada Labour Code, which contains wording that prohibits dismissal of an employee because of absence for work-related causes, without any time limit to the protection.
The arbitrator concluded that section 239.1 of the Code means exactly what it says. It requires federally regulated employers to maintain employment status as well as benefit and pension plan contributions even for employees like Sears, absent for years with no prospect of ever returning to work.
In particular, he found that section 239.1 indicated “a clear intention to protect the employment status and benefits of workers who are injured on the job” and that those protections aren’t subject to a time limit. This is in contrast to the similar provision in the Code dealing with nonwork-related illness or injury, which limits protection to 12 weeks.
“Simply put,” the arbitrator said, “the employer cannot dismiss a worker because of absence from work due to work-related illness or injury.” He found further that subsections 239.1(5) and (7) of the Code require continuation of employer benefit and pension contributions during the absence and override any restrictions in the collective agreement, such as the requirement that employees be at work at some time during the month for which contributions are made.
The arbitrator rejected the employer’s argument that the employment agreement had been frustrated, an argument usually available where an extended absence for illness or injury results in no foreseeable chance of the employee returning to work. The arbitrator said that the language of the relevant provisions of the Code operates to override the common law doctrine of frustration and extinguishes an employer’s right to terminate employment when the employee’s absence is the result of a work-related illness or injury.
Accordingly, the arbitrator ordered Sears’ reinstatement to nonactive status (unless cleared to return to work by a physician), with corresponding reinstatement of his benefit and pension plan contributions.
This decision will make it difficult for federally regulated Canadian employers to dismiss an employee off work for work-related causes even when the absence is prolonged and the prospect of the employee ever returning to work is slim.
However, the decision makes it clear that section 239.1 is not an open-ended guarantee of employment status and benefits. Where circumstances change, for example where an employee is given clearance to return to work and attempts are made to accommodate the disability, any continuing absence couldn’t be said to be because of the work-related illness or injury and the requirements of section 239.1 wouldn’t be met.
Accordingly, federally regulated employers should be reminded of the importance of maintaining regular communication with employees during extended disability leaves with a view to establishing a return-to-work plan tailored to the employee’s functional restrictions. Although not subject to the same Code provisions, provincially regulated employers should also maintain regular communication with employees during extended leaves to ensure they follow up if the employment relationship becomes frustrated.
Nicola Sutton is an associate in the Labour, Employment and Human Rights Group. She advises clients on developing and implementing employment policies, and assists with drafting employment and consulting agreements. Her practice also includes providing advice regarding human rights, privacy and freedom of information issues, compliance with Employment Standards and wrongful dismissal actions. Nicola also practices in the area of workers' compensation and occupational health and safety, advising clients on claims and compliance issues. She also has experience in conducting workplace investigations.