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By Henry Dinsdale and Jeff Goodman The frustration with frustration of contract Knowing when to proceed under this area of contract law can be a challenge. seen supervening event occurs through no fault of the parties. The unforeseen supervening event must make the further performance of the contract impossible or radically different from the original contractual intention. When frustration occurs, the contract is immediately at an end and no further contractual obliga- tions are required. There is no foundation for a claim of wrongful or unjust dismiss- al at common law or under a collective agreement. While frustration of contract works F well in the context of commercial con- tracts, the nature of the employment rela- tionship makes the doctrine of frustration of contract an awkward fit. Perhaps the trickiest intersec- tion between frustration of contract and employment law is in the area of employee illness or disability. An employer dismissing an employee for frustration because of illness or dis- ability will either make out its case for frustration or find itself in violation of human rights law. Fail to prove frustra- tion and the employer has terminated the employee because of the illness or disability. Human rights legislation has raised the standard required for frustra- tion in the context of illness and dis- ability. Courts will consider the nature of the employment and are more sympathetic to employers when dealing with key rustration of contract is a general doctrine of con- tract law that relieves par- ties from contractual obli- gations when an unfore- executives. They generally recognize a lower threshold of tolerance for tem- porary replacements in key roles. The terms of the employment contract will be an important focus. Have the par- ties addressed frustration in the body of the contract? Was the supervening event truly unanticipated? This can be complicated. Consider the impact of a comprehensive benefits package. Do disability benefits demonstrate that the parties anticipated protracted disability? Does this evidence of intention undermine the argument for frustration because of disability? In the unionized context there is still some div- ision on this point, but the weight of opin- ion suggests the frustration of contract in situations of "innocent absenteeism" will not be ousted by the existence of compre- hensive disability regimes. The question is less settled in the non-union context. Ultimately, the focus will be the med- ical condition of the employee. Employers must demonstrate no reasonable progno- sis of the employee ever returning to his job, even in an accommodated role. An uncertain prognosis will undermine the employer's position. Knowing when to proceed with a dismissal for frustration is a challenge. Recently, out of this morass, comes a refreshing Divisional Court deci- sion demonstrating there are circum- stances frustration can be applied with confidence in the employment context. Cowie v. Great Blue Heron Casino involves the alleged frustration of the employment of a security guard. The employee, Cowie, was required to be licensed, but during his employment the licensing requirements changed. The new requirements prohibited licensing individ- uals with unpardoned criminal offences. Cowie had been convicted of a criminal offence in 1983 and had not obtained a pardon. His re-licensing application was rejected and Cowie was dismissed for frus- tration of contract without severance or notice. He sued for constructive dismissal. The trial judge ruled in Cowie's favour noting that Cowie's position remained vacant for months following his dismissal and concluded the pardon could have been processed in the intervening period. She noted his long employment record and characterized the licensing problem as a temporary disruption, concluding the employer should have imposed a suspen- sion to allow the employee to obtain his pardon. On appeal, the Divisional Court would have none of it. The court concluded the trial judge placed too much emphasis on events that occurred after Cowie's dismiss- al. The focus should have been on what the employer knew at the time of dismissal. The court drew a clear distinction between the analysis in cases of frustration for illegality and in situations of illness or disability. In frustration for illegality, "the focus is not on when, if ever, the provision of those services will once again be legal." The illegality occurred at the time the licensing requirement became effective. So did the frustration. Beyond a con- sideration of whether the illegality can be immediately remedied, the careful consideration of the future, so critical in cases of disability, is not necessary. This decision is an important reminder that the illness and disabil- ity frustration analysis is a product of unique circumstances and should not distract from the proper application of the doctrine of frustration of contract in different contexts. IH Henry Dinsdale and Jeff Goodman are labour and employment law partners with Heenan Blaikie LLP in Toronto. INHOUSE FEBRUARY 2012 • 9