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Frustration of Contract vs. Just Cause: What is the difference?

Whitten and Lublin | Nov 01, 2017

There are various ways an employer may end an employment relation. An employer may end a contact by offering an employee advanced notice or equivalent payment of wage and benefits required under legislation or common law. Another way is dismissing an employee for just cause or by establishing the contract has been ‘frustrated’. In each of these scenarios, there is no payment or notice required. There is an onus on the employer to prove there is just cause to dismiss or that the contract has been frustrated, which makes it important to understand the difference of each principle.

The principle of ‘just cause’ requires an employer to show that an employee has done wrongdoing to the point that continued employment is unfeasible. For single instances of wrongdoing, the wrongful act must result in violating an essential characteristic of the employment relation. For instance, if a mortgage broker was found to commit mortgage fraud, this would undeniably violate an essential element of trust required between a mortgage broker and the brokerage firm (employer). Another scenario of just cause is where an employee has repeatedly failed to correct an undesirable behaviour after several corrective measures have been taken by the employer. This must include a series of progressive discipline consisting of, for instance, a verbal warning, then written warning, paid suspension and then termination, with each stage specifying the wrongful behaviour and next possible steps of discipline.

Conversely, frustration of contract results when an employee no longer is able to perform as intended when the parties each entered into the employment agreement. The changes in performance must be significant in order for dismissal to be lawful. Such a scenario may take place when an employee has fell ill to the point where he/she cannot perform the essential duties of the job. To establish frustration of the contract, analysis of the job duties and nature of the frustration must be carefully considered. For instance, if the employee occupied a distinct position with no other employees occupying a similar function, a long term absence will cause more frustration than if there were many employees able to cover the tasks of the employee during the absence. Whatever the case may be, careful examination and consideration must be given. Always seek services from an employment lawyer as errors in legal obligations may result in significant costs and harm to each party.