Did pandemic frustrate employment contract?

At the time, of course, nobody knew what was happening or how long the pandemic was going to last. Shelly had worked as a retail sales clerk in the shop for 10 years by then and was 78 years old.

Shelly was temporarily laid off. In B.C., if you are temporarily laid off for more than about five months, the layoff is deemed by the Employment Standards Act to be a termination.

Shelly was not called back within five months and the statutory minimum notice payments became due by operation of that act.

That would not have been the case in Ontario as the provincial government passed legislation suspending the operation of parts of its Employment Standards Act if somebody was off work as a result of the pandemic.

Shelly’s employer refused to pay out the minimums or the greater reasonable notice at common law that a judge awards. It took the position that the contract was frustrated by the collapse of its business and no monies were owing.

A frustration of contract can occur when there is a no-fault cessation of the relationship. That can mean the employee has been off work for an extended period of time for health reasons and there is no reasonable prospect of their return to work in the foreseeable future.

You might be interested in

• Dec 31, 1969
• Comments

• Dec 31, 1969
• Comments

It might also occur if your factory burns to the ground through no fault of the employer’s.

Shelly sued for pay in lieu of notice based on her age and seniority and the trial judge awarded her 10 months’ salary. Retail sales clerks would not usually be awarded one month salary per year of employment, but Shelly was well into the age bracket in which it is deemed more difficult, if not impossible, to find a new job.

The trial judge rejected the argument that there was a frustration of contract. The employer appealed and the matter ended up before the British Columbia Court of Appeal.

The employer argued that the context in which the termination occurred has to be considered. Shelly worked in a retail sales shop entirely dependent on cross-border travel. Given the unexpected and unprecedented closure of the border, the factory might as well have burned down.

Shelly pointed out that the duty free shop was not permanently shut down.

It reopened 20 months later. She was ready, willing and able to show up for work. The employer’s hardship, or reduced profitability does not frustrate the contract.

There were still essential travellers that could have visited the shop. The Court of Appeal agreed that two out of three elements of frustration had been proven: there had been a supervening event not contemplated by either party when they entered into the contract and it was not the fault of either party.

The last thing the employer had to prove, though, was that the supervening event rendered performance of the employment contract something radically different from what it had been.

The Court of Appeal agreed with the trial judge that while the border closure affected the employer’s ability to live up to its contractual obligations to Shelly, it did not change those obligations.

That obligation was to provide an hourly wage in exchange for Shelly showing up to work. Frankly, this case could have gone either way. In one sense it is hard to see the difference between a tornado carrying away a factory and all the customers disappearing in one day. Shelly’s employer was a small, family-owned business, not some duty free chain.

The justice system was given a choice between siding with the employer or employee. Like it or not, as is often the case, the employee’s interests came out on top.