Employers sometimes attempt to cancel their contracts with employees who have been on Long Term Disability (LTD) for a long period of time. When this occurs they often rely on the principle of frustration of contract.
Principles of Frustration of Contract
Frustration of contract is an ancient contract law principle. In situations where an intervening act, that is not the fault of either party, makes the contract impossible to complete both parties are relieved from having to perform their contractual obligations. For instance, in a shipping contract if the ship the items were supposed to be transported on sinks prior to the goods being transported, thus making the completion of the contract impossible. The result of frustration of contact is that both parties are relieved from having to perform their obligations under the contract.
Termination for being on Long Term Disability
In workplace law, this often occurs when an employee becomes disabled and therefore is no longer able to work. In such situations, employers then try to terminate the employee for frustration of contract. Whether an illness or injury will cause frustration depends on the facts of each case, taking into account the relationship, the incapacity, the absence from work and the duration of the contract. Factors also include the importance of the employee to the business and the presence of long-term sick leave. The employer must prove the contract of employment has become impossible to complete.
Must have no reasonable likelihood of returning to work
A person’s employment can only be terminated due to their disability if it can be established that at the time of the termination there is no reasonable likelihood that the employee will be able to return to work within a reasonable time. In Dragone v. Riva Plumbing Ltd in 2007 it was found that a length of 14 months absence was not long enough to be frustration although it was not said how long would be appropriate. Generally, the absence must be of a number of years (in most cases over 3 years).
Exceptions and application
It is also important to note that frustration of contract is curtailed in some instances, such as the federally regulated or unionized workplaces. For example, some arbitrators have ruled that employees of banks, railways and telecommunication sectors injured on the job cannot be terminated for frustration of contact.
Therefore in what instances an employer can end an employee’s contract for a long absence from work is subject to numerous factors. Generally as well even if an employee’s employment is terminated other disability benefits should continue.
If your employer is attempting to terminate your employment, or your benefits, while you are on LTD you should contact an employment lawyer at Monkhouse Law today to preserve your employee rights.
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