If you are on disability leave, you may be wondering whether your employer can terminate your employment. The short answer is: it depends.
In Ontario, employers cannot terminate employment because of a disability without first meeting their duty to accommodate the employee to the point of undue hardship. However, in some situations, they may argue that the employment contract has been frustrated if there is no reasonable likelihood of you returning to work.
This is where many employees are misled. Employers often rely on frustration of contract too early, before meeting their legal duty to accommodate. Understanding the difference can significantly affect your entitlement to compensation.
For a broader overview of this legal issue, see our guide on frustration of contract in Ontario.
Can You Be Fired While on Disability Leave?
In most cases, you cannot be fired because of a disability. Employers have a legal duty to accommodate your condition to the point of undue hardship.
However, termination may be possible if:
- There is no reasonable likelihood that you will return to work in the foreseeable future
- The employer has met its duty to accommodate
- The employment contract has been legally frustrated
What Is Frustration of Contract?
Under the Ontario Human Rights Code, employers cannot terminate employment because of a disability without first meeting their duty to accommodate. However, an extended medical leave of absence may lead an employer to argue that the employment contract has been frustrated.
Frustration of contract is a legal principle in which the employment agreement, through no fault of either party, has been effectively brought to an end because the circumstances make it impossible to continue the employment relationship. When this occurs, both parties may be released from their obligations under the contract.
With respect to a disability leave, according to the Supreme Court of Canada, an employer may claim that the employee’s inability to work due to a disability releases them from the duty to accommodate when the employee is no longer able to fulfill the basic obligations associated with the employment relationship for the foreseeable future.
An employee is still entitled to some compensation if the employment contract has been frustrated. Under the Ontario Employment Standards Act, 2000, an employee terminated due to frustration of contract may still be entitled to minimum statutory notice and, in some cases, severance pay.
The more difficult question is determining when the employer no longer needs to accommodate the employee’s disability and can properly claim that the contract has been frustrated.
If your employer failed to properly accommodate your disability before terminating your employment, you may have a claim for wrongful dismissal or human rights damages.
When Can an Employer Terminate Employment on Long-Term Disability?
An employer may attempt to terminate employment while an employee is on long-term disability if they can establish that the employment contract has been frustrated.
This generally requires showing that:
- The employee is unable to return to work in the foreseeable future
- The employer has fulfilled its duty to accommodate
- There are no reasonable alternatives that would allow the employment relationship to continue
Even in these situations, the employer must rely on clear medical evidence and cannot simply assume that the employee will never return to work.
The Relevant Case Law
The Ontario Superior Court cases of R. v. Rona Inc. and N. v. Costco help explain what may qualify as frustration of contract when a long-term disability leave of absence is involved.
In the Costco case, the employer argued frustration of contract after terminating an employee who had been on long-term disability leave for five years from a clerical position. Justice Pollak emphasized that the burden of proof rests on the employer. Because the employee’s doctor did not clearly state whether or when the employee would return to work, the employer was expected to make further inquiries and obtain additional medical information before relying on frustration of contract.
The Court also noted that factors such as minimal disruption to the employer’s business and the availability of long-term disability benefits may extend the reasonable duration of the leave before frustration can be established. On the evidence, the Court found there was no frustration of contract, and the employee was therefore entitled to common law notice.
In the Rona Inc. case, the Court further clarified that frustration of contract must be assessed based on the totality of the evidence. The employer relied on a letter from the LTD insurer, a return-to-work form stating that the employee could not work, and the absence of any evidence showing that the employee was no longer totally disabled.
Although the employee argued that the employer should have made additional inquiries, the Court found that the evidence showed there was no reasonable likelihood that the employee would be able to return to work within a reasonable period of time. In those circumstances, frustration of contract was established.
These cases show they are highly fact-specific. The outcome often depends on the quality of the medical evidence, the employer’s efforts to investigate the situation, and whether there is any realistic prospect of return to work.
The Duty to Accommodate
The duty to accommodate remains central to these cases. An employer cannot rely on frustration of contract if it has not first met its duty to accommodate the employee’s disability to the point of undue hardship.
That may include considering whether a longer leave is appropriate, whether modified work is possible, or whether additional information is needed before making a termination decision.
In some cases, an employee may also have a human rights claim if the employer ended the employment relationship without properly addressing accommodation.
Key Takeaways for Employees
If you are on disability leave, your employer cannot simply terminate your employment because you have a disability.
To rely on frustration of contract, the employer must be able to show that there is no reasonable likelihood of your return to work in the foreseeable future and that it has met its duty to accommodate. These cases are highly fact-specific, and employers often rely on frustration too early or without enough evidence.
If you have been terminated while on disability leave, you may be entitled to compensation beyond what your employer has offered. Contact Monkhouse Law Long Term Disability Lawyers for a free 30-minute consultation.