Law Times

Law Times • December 12, 2011 NEWS Court clarifies test for frustration BY JULIUS MELNITZER For Law Times employment contracts due to il- legality. At the heart of the clarifi - T cation in Cowie v. Great Blue Heron Charity Casino is the distinction between illness and disability cases and those where frustration arises from a change in the law that makes the em- ployment illegal. "As enunciated by the court, the diff erence is that when a change in the law frustrates an employment contract, an em- ployer is not obliged to consider whether the circumstances are temporary or can be remedied within a reasonable length of time and the contract is immedi- ately frustrated," says Jeff Good- man of Heenan Blaikie LLP. "In the case of illness or dis- ability cases, an employer can spend years accommodating the employee before the em- ployment contract is frustrated because frustration is assessed by asking whether the disabil- ity prevents the performance of the job's essential function for so long that the employment contract is no longer capable of being fulfi lled." Cowie arose in August 2007 when the enactment of Ontario's Private Security and Investigative he Ontario Divisional Court has clarifi ed the test for frustration of Employers should advise employees in writing of any new legal requirements to protect themselves, says Sarah Crossley. Services Act mandated that no one could act as a security guard without a licence under the legislation. George Cowie, who had worked for the defendant casino in a variety of security positions for seven years, applied for a li- cence within the one-year grace period provided by the legisla- tion but was unsuccessful be- cause he had a criminal record for break and enter for which he hadn't obtained a pardon. Following the expiry of the grace period, the casino ter- minated Cowie's employment without notice or pay in lieu of notice on the grounds that the employment contract had been frustrated because he was unable to perform his duties as a secu- rity team leader. Although no other positions that he might be qualifi ed to perform were available at the time, the casino advised him that if he received the appropriate li- cence, he'd be eligible for re-em- ployment in security positions. Both parties believed it could take up to two years to obtain a pardon, but Cowie got one with- in three months of his termina- tion. However, he never applied for a licence and instead chose to sue for wrongful dismissal. Th e trial judge concluded that the casino's obligation was to suspend Cowie, hire a tempo- rary replacement, and grant him a reasonable period of time to obtain the pardon. But the Divisional Court ruled last month that the proper time for assessment of whether frustration had occurred was at the point of termination. Based on the information available at the time, the trial judge had erred in concluding that the failure to obtain the licence was only a "temporary inconvenience" that didn't merit termination. Still, the Divisional Court left certain questions open. "Th e judgment only deals with frustration in the case of a longer delay and does not pro- vide guidance on what would happen if it was known at the time of termination that the il- legality would exist for a shorter period of time than in Cowie," says Sarah Crossley of Norton Rose OR LLP. She, along with colleague Michael Kotrly, repre- sented the casino. However that may be, the fact remains that Cowie has im- portant implications for employ- ers whose workforces include regulated employees. "If an employment contract is frustrated for whatever rea- son, the employee is not entitled to common law damages," says Crossley. "But whereas an em- ployee whose contract is frus- trated due to illegality is also not entitled to statutory notice or severance in Ontario, that does not apply where the frustration is due to illness or injury." According to Crossley, em- ployers should protect them- selves by advising employees in writing of any new legal require- ments and their expectations in terms of compliance. "Failure to do so could re- sult in the employee's entitle- ment to compensation on ter- mination," she says. 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