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  • Writer's pictureTony Wong

Interplay between Long Term Disability, Wrongful Dismissal, Disability Discrimination

Updated: May 8, 2022

The interests of employers and employees are always at odds when it comes to disability. Employers want to terminate employees who have been affected by illness or disability for frustration of contract. Employee wishes to keep his or her job by demonstrating a reasonable prospect of returning to work. In this post, we will examine the interplay between disability and Long Term Disability (LTD) claims, wrongful dismissal claims, Human Rights Code violations related to Disability Discrimination, and the Duty to Accommodate.

Topics Will be Covered in This Post:

Interplay between Long Term Disability, Wrongful Dismissal, Disability Discrimination
Interplay between Long Term Disability, Wrongful Dismissal, Disability Discrimination

If your sickness and disability is a result of harassment in the workplace, you may want to check out this article:

1. Considerations in Filing a Long Term Disability Claim

1. Take the time to fully review the applicable LTD policy before starting an application. This will help you in avoiding costly mistakes and wasting time throughout the application procedure.

2. Most plans will not cover employees whose disability is the result of a pre-existing condition that existed before they were covered, or the result of a crime, self-inflicted injury, or attempted suicide.

3. The elimination period is the number of days that a disabled worker must be out of work before obtaining LTD benefits. It is essential to examine the specific policy in order to determine the applicable terms.

4. When filing a claim, insurance companies require employee, employer, and treating physician statements:

a. Employee statements are submitted by the claimant employee. Typically, an insurance provider will have specific paperwork that the claimant must fill out. Employee comments must be brief and precise in describing how the claimant's impairment prevents them from performing essential tasks. Defining symptoms WILL NOT suffice unless there is a description of how the claimant's symptoms affect their ability to work, including a reference to specific activities required in that employee's job.

b. Employer statements are provided by the employers. Such statements are also required to be clear and concise. Most essential, employers must submit a full description of the claimant's responsibilities, as well as information regarding the employer's ability to make reasonable accommodations to enable the disabled employee to continue working.

c. Claims evaluators frequently look at statements from treating physicians. Treating doctors should clearly state the claimant's symptoms, diagnosis, suggested therapy, the claimant's involvement in treatment, and an evaluation of why the claimant is unable to work. Copies of evaluations and appointment records must also be included in the statement.

5. It is also important to note that when applying for LTD, a claimant must sign a declaration and authorization, and the terms of the declaration will likely indicate an agreement to authorize the insurance company to seek full recovery of any over-payment and to disclose information about the claimant for that purpose, including credit bureaus and the like.

You might also want to click here to check out our disability discrimination ultimate guide for an in-depth discussion of disability law and disability discrimination.

2. Wrongful Dismissal Cases Involving Employees with Sickness or Disability

After an employee has been sick or disabled for an extended period of time, an employer would usually attempt to have the employee terminated by claiming frustration of contract. If an employer is successful, there is no obligation to pay the non-statutory components of a severance package.

However, if an employee can show medical evidence that there is a reasonable prospect of returning to work, an employer will NOT be able to claim frustration of contract and terminate employment on that basis. Recent decisions from the Court has clearly shown that a long absence due to sickness or disability, standing alone, does not substantiate a claim that the employment contract has been frustrated.

a. Defining Frustration of Contract

Frustration of contract is typically pleaded by a defendant-employer in response to a plaintiff-employee suing for wrongful dismissal.

In Skopitz v. Intercorp Excelle Foods Inc., 1999 CanLII 14852, the Superior Court has held, in paragraph 21, that:

Whether a contract of employment has been frustrated by an employee’s illness or incapacity depends on whether or not the illness or incapacity was of such a nature or likely to continue for such a period of time that either the employee would never be able to perform the duties contemplated by the original employment contract or that it would be unreasonable for the employer to wait any longer for the employee to recover. To determine if a contract has been frustrated, regard must be had to the relationship of the term of the incapacity or absence from work to the duration of the contract, and to the nature of the services to be performed.

In 2001, the Supreme Court of Canada gave a definite answer to the issue of frustration of contract in the context of an employee’s disability or illness in Naylor Group Inc. v Ellis-Don Construction Ltd., 2001 SCC 58. The Supreme Court of Canada has held, in paragraph 53-55, that:

Frustration occurs when a situation has arisen for which the parties made no provision in the contract and performance of the contract becomes “a thing radically different from that which was undertaken by the contract”....

Earlier cases of “frustration” proceeded on an “implied term” theory. The court was to ask itself a hypothetical question: if the contracting parties, as reasonable people, had contemplated the supervening event at the time of contracting, would they have agreed that it would put the contract to an end? The implied term theory is now largely rejected because of its reliance on fiction and imputation.

The court is asked to intervene, not to enforce some fictional intention imputed to the parties, but to relieve the parties of their bargain because a supervening event ... has occurred without the fault of either party. For instance, in the present case, the supervening event would have had to alter the nature of the appellant’s obligation to contract with the respondent to such an extent that to compel performance despite the new and changed circumstances would be to order the appellant to do something radically different from what the parties agreed to under the tendering contract....

b. Frustration of Contract Legal Analytical Framework

Where frustration is pleaded by the employer on the basis of the employee’s disability or illness that allegedly rendered continued employment impossible or would have radically changed the obligations between the parties, the Court will determine whether the supervening event render continued performance of work impossible or radically change the relationship between the parties from what they originally contracted for or not?

Under this modern approach, the Court will consider a number of relevant factors, including the following, to determine if the contract was frustrated:

a. How long has the employee been unable to work due to illness or disability? Was the impairment or sickness short-term or long-term?

When can he expect to be able to return to work? The Court will consider medical and other evidence to address this question.

b. What was the relationship between the contract's term, the length of the absence, and the kind of services to be performed?

The Court will consider the length of disability leave in comparison to the term of employment.

The mere availability of LTD benefits DOES NOT in and of itself rule out frustration of contract. Ontario courts will typically consider LTD benefits and the specific terms of the contract in deciding whether they are a relevant factor in the frustration analysis and decide each case on its own facts. See e.g. Dragone v Riva Plumbing Limited, 2007 CanLII 40543, where the Court decided, in paragraph 22, that:

The presence of long-term sick leave and disability benefits indicates a greater tolerance for the duration of an employee’s absence before frustration occurs... because it may be inferred that the contracting parties anticipated that the employee might take leave for illness.

c. What was the employee's position in the organization? Was it a senior or a supporting role?

A shorter period of time before incapacity would jeopardize a contract for more senior and integral workers, while a longer period of time would jeopardize a contract for individuals with lower responsibilities in a company.

See e.g. Dragone v. Riva Plumbing Limited, 2007 CanLII 40543 (ON SC); Naccarato v. Costco, 2010 ONSC 2651.

c. Burden of Proof in a Disability Case

The principles that govern and guide the burden of proof and assessment of a frustration of contract defence in a wrongful dismissal lawsuit are as follow:

a. It is the employer’s onus to prove frustration of contract. See e.g. Lemesani v Lowerys Inc., 2017 ONSC 1808 at paragraph 137;

b. Frustration of contract is established at the time of termination. Naccarato v Costco Wholesale Canada Ltd., 2010 ONSC 2651 at paragraph 14; and

c. The Court will ONLY consider whether "frustration of contract" had happened prior to termination. An employer CANNOT rely on post-termination evidence to prove frustration of contract unless that evidence was not in its possession at the time of termination and the evidence relates to the nature and extent of incapacity at the time of dismissal. See e.g. Ciszkowski v. Canac Kitchens, 2015 ONSC 73 at paragraph 156.

d. Some Wrongful Dismissal Cases Involving Workers with Disability

Based on recent wrongful dismissal decisions, it's apparent that Courts are extremely reluctant to accept "frustration of contract" as a legal defence absent clear and convincing evidence, prior to termination, that the disability is permanent and not temporary in nature.

Skopitz v Intercorp Excelle Foods Inc., 1999 CanLII 14852 (ON SC)

15 months after taking medical leave for a back issue, the plaintiff attempted to return to work and requested accommodations in the form of changing from a full-time to a part-time job. The employer refused, and the plaintiff sued for wrongful dismissal.

After considering the facts that it was a medical leave for 15 months by a 10-year

employee; the nature of the employee’s role within the company; and the fact that the disability was temporary rather than permanent, the Court held, in paragraph 21, that:

Given the length of time Ms. Skopitz had worked for the Defendant; the fact that the Defendant had been able to manage during Ms. Skopitz’s absence without having to replace her with another full time employee; the nature of the duties performed by Ms. Skopitz and the fact that Ms. Skopitz did recover I find that the defence of frustration fails.

Altman v Steve’s Music, 2011 ONSC 1480

Ms. Altman was a 59-year-old employee who had worked for the employer for approximately 30 years. Approximately 16 months before she was terminated, in December 2007, Ms. Altman was diagnosed with cancer. During the period after her diagnosis and before her termination, Ms. Altman had periods of absence for surgery and on-going treatments, as well as reduced hours working at the store. The employer terminated her employment on April 7, 2009 citing frustration of contract on the basis that she had a permanent condition and was no longer able to perform her duties and responsibilities at work.

In rejecting the Frustration of Contract Defence of the Employer, the Court held, in paragraph 96, that:

I conclude that [the employer] has not established that on April 7, 2009 Ms. Altman’s illness was of such a nature that she was unable to perform the duties of her job. I base this finding on the following facts:

a. The uncontradicted evidence of ...Ms. Altman’s treating physicians, that she was able to work on April 7, 2009.

b. ...[The Employer] never expressed dissatisfaction with the quality of her work, or advised her that she was not performing her duties as required. [The Employer]'s complaint ... was with the number of hours she was working, not with her ability to do the job.

c. On April 1, 2009 Ms. Altman wrote [the Employer] indicating that she would be returning to work on April 8, 2009. She did not write that she was unable to work full time or that she was unable to perform any of her duties....

d. [The Employer] terminated Ms. Altman without inquiring about her ability to perform her job....

This case is also notable because the Court awarded the plaintiff $35,000 in damages for mental distress and $20,000 in punitive damages on top of wrongful dismissal reasonable notice.

The Court of Appeal has yet again rejected a frustration of contract defence by the Defendant Employer. The Court held, in paragraph 46 to 51, that IBM’s frustration claim was undermined by evidence in the form of ongoing correspondence from the employee’s legal counsel that clearly established the employee’s intention to return to work, and their willingness to provide ongoing medical updates as required. All of these letters helped to show that the employee had not quit or abandoned his job, and that there was a reasonable prospect that he might return to work. As a result, IBM was responsible to the employee for wrongful dismissal damages.

3. Human Rights and the Duty to Accommodate Employees with a Disability

a. Legal Analytical Framework of Disability Discrimination

i. Human Rights Code Protection Against Disability Discrimination

Ontario’s Human Rights Code (the Code) provides protections from discrimination for disabled employees, prohibiting discrimination in employment on the ground of disability (section 5) and, where a disabled employee can perform the essential duties of his or her job, imposing a duty on the employer to accommodate a disabled employee short of undue hardship.

Section 17 of the Code is an interpretative clause that essentially imposes a responsibility on an employer to accommodate a disabled employee who can still perform the essential functions of their work to the point of undue hardship.

Section 17 (2) specifies the factors relevant to undue hardship, being cost, outside sources of funding, if any, and health and safety requirements, if any. Business inconvenience is NOT a factor in the analysis.

This means that when an employer seeks to terminate an employee because of their disability, it will be at risk of incurring significant human rights damages, unless it can demonstrate a bona fide operational requirement (BFOR) that prevents it from facilitating the employee’s continued employment.

ii. Defining Undue Hardship

The test is not whether it was impossible for the employer to accommodate the employee’s characteristics. The employer does not have a duty to change working conditions in a fundamental way, but does have a duty, if it can do so without undue hardship, to arrange the employee’s workplace or duties to enable the employee to do his or her work.

The obligation to accommodate is borne by both the employer and the employee. The employee's responsibility to make reasonable efforts to engage meaningfully in accommodation planning and to return to work under modified conditions is MATCHED by the employer's duty to make reasonable efforts to provide necessary accommodation.

iii. Defining bona fide operational requirement (BFOR)

In British Columbia (Public Service Employee Relations Commission) v British Columbia Government Service Employees' Union, 1999 CanLII 652 (SCC), the Supreme Court has created the Meiorin test to determine if a violation of human rights legislation can be justified as a BFOR.

Under the Meiorin test, an employer can justify the impugned standard by establishing on the balance of probabilities:

  1. that the employer adopted the standard for a purpose rationally connected to the performance of the job;

  2. that the employer adopted the particular standard in an honest and good faith belief that it was necessary to the fulfilment of that legitimate work-related purpose; and

  3. that the standard was reasonably necessary to the accomplishment of that legitimate work-related purpose. To show that the standard is reasonably necessary, it must be demonstrated that it is impossible to accommodate individual employees sharing the characteristics of the claimant without imposing undue hardship upon the employer.

b. Some Cases Highlighting the Duty to Accommodate An Employee With Disability

A court's determination of what constitutes reasonable steps with regard to the obligation to accommodate, like the legal test to show whether an employment contract has been frustrated, is a matter of fact that will vary depending on the facts of each case.

To preserve the employee's right to not be fired because of their disability, accommodation measures may need a modification in the form and function of the employee's position in the company.

While the bar for undue hardship is high, the employee should be aware that he or she will not be guaranteed a "ideal" situation, and that compromises may be required in terms of accommodations.

In that case, the Human Rights Tribunal of Ontario dismissed two consolidated applications on the basis that there was no failure to accommodate since the evidence showed that the applicant was incapable of performing the essential duties of the job; and that the applicant’s termination was a result of the contract being frustrated due to her lengthy absence without any prospect for return to work with or without accommodation.

Because of its limited approach to considering accommodation alternatives, the Arbitrator concluded that the employer had not shown frustration.

In that instance, the employer neglected to examine if the grievor might be reintegrated into the workforce via changes to their previous job and the use of assistive technology, or whether alternative types of work were available at other locations.

As a consequence, the employer was deemed to have violated its procedural obligation to accommodate the grievor employee, which was in violation of the Human Rights Code, resulting in compensatory damages being awarded.

4. Conclusion

There's a delicate balance between the Employers' and Employees' ever conflicting interests. It's a very complicated employment law topic touching upon the issues of Long Term Disability (LTD) claim, wrongful dismissal, Disability Discrimination, Duty to Accommodate. Many claims have strict time limits and time is of essence. If you involved in a disability scenario as an employer or an employee, you are well advised to consult an an employment lawyer consultation as soon as possible to preserve your employment law legal entitlements.

Call us now at 647-849-6582 or Contact Us Now if you have any questions or concerns in related to employment contract, or you want to book an appointment for a legal consultation.


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