Date: March, 2012
Author: Daniel Lublin
Seldom will a temporary illness justify dismissal. But what happens when a sick employee may never return to work? Can employers discard employees they view as festering on their disability insurance or must they keep their jobs available for an indefinite period of time? According to a recent Ontario case, employers may have more latitude than you think.
When Linda Fraser fell ill she did not think that she would never work again. Fraser, a long term employee of UBS Global Asset Management was forced onto UBS’s disability plan for depression and anxiety. Her departure was for good.
Fraser applied for and was granted long term disability benefits from UBS’ insurance provider in 2007. According to the terms of the insurance plan, Fraser received disability payments for up to two years since she was unable to perform her job. However, after two years Fraser no longer met the requirements for continued disability payments and the insurance company terminated her coverage.
Fraser did not tell UBS that her insurance coverage terminated and she did not return to work. Therefore, UBS fired her claiming that her employment was “frustrated” by virtue of her illness.
The legal principle of frustration of contract means that what you have initially bargained for no longer exists. In workplace law, the issue often arises when employees are absent for an indefinite period of time, without any reasonable likelihood of returning. If an employment contract is frustrated, then the employer has the right to walk away from the employee, without paying any severance.
Unlike other cases where it is unclear whether or not the employee would ever return to work, in this case, Fraser admitted that her disability was permanent and that she would never work again. As a result, a judge recently sided with her employer, and dismissed her case.
In the vast majority of cases, frustration of contract will be nearly impossible to prove. However, the findings of this case appear to turn that notion on its head. If an employee’s prospects for recovering from an illness are dim, companies may be able to rely on this principle and avoid paying damages to an employee it ultimately fired.