“Frustration of contract” occurs when unforeseen circumstances radically change the performance of a contract. Frustration of an employment agreement allows the parties to end their relationship with no obligation on the employer to pay severance. In the employment context, frustration usually arises from situations where a disabled employee has been unable to attend work for an extended period of time and will for the foreseeable future. However, as the case below demonstrates, it can also arise when an external factor makes the employment impossible to perform as originally intended.
In Croke v. VuPoint Systems Ltd., the plaintiff was employed as a systems technician by VuPoint Systems Ltd. Vupoint provided satellite television and smart home installation services for Bell Canada. 99% of VuPoint’s business came from Bell, and it was required to comply with and enforce Bell’s policies by contract. The plaintiff’s work required him to interact in-person with Bell’s customers. In September 2021, Bell required all installer contractor’s crews to be vaccinated against COVID-19, leading VuPoint to adopt a mandatory vaccination policy for its installers, including the plaintiff. The plaintiff refused to disclose his vaccination status and was subsequently terminated by VuPoint for non-compliance with the policy. VuPoint argued that the plaintiff’s employment was frustrated due to his inability to perform his duties, as he was unable to work for Bell, its only substantial customer, due to his unvaccinated status.
The court agreed, finding that being vaccinated to comply with Bell’s policy was a necessary qualification to perform his duties. The plaintiff was aware of the policy and its consequences and had refused to confirm he was vaccinated. The imposition of Bell’s vaccination requirement was a supervening event not contemplated by the parties when the plaintiff was hired and not under VuPoint’s control. As the plaintiff was unable to perform his work as a result of the policy, VuPoint was entitled to treat the employment as frustrated and to terminate the plaintiff’s employment without advance notice or severance.
Employers can learn a number of lessons from the above decision:
- An external requirement imposed by new legislation or, as in this case, the business’ or employee’s primary or sole customer can frustrate an employee’s employment, entitling the employer to terminate without notice or severance consequences. That said, prior to ending the employment for frustration, an employer should explore any available alternatives, such as reassignment or remote work. In the case above, given the nature of VuPoint’s business and the plaintiff’s position, there were no suitable alternatives to termination for frustration.
- Note that not all customer requirements would necessarily be given the same weight e.g. a customer requirement that “no women” be hired to perform services. In this case, the customer requirement was based on legitimate public and workplace health concerns.
- Where it is necessary for an employee to have a certification or professional accreditation to meet a certain requirement to perform their duties, employers should include a term in their employment agreement to that effect. Including such a term could strengthen an argument that the employment has been frustrated or, if the employee is responsible for failing to meet the condition, that the employer has cause for termination without notice or severance.
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