The Ontario Court of Appeal recently held that an employee's failure to meet COVID-19 vaccination requirements imposed by a third party amounted to frustration of the employment contract.
As a result, there was no obligation for the employer to provide notice of termination or pay in lieu of notice.
Background
The employee was employed by a TV installation service company, VuPoint, as a technician doing work for only one client, Bell. In 2021, Bell adopted a mandatory vaccination policy, informing VuPoint that technicians working on Bell projects needed to be vaccinated against COVID-19, and that non-compliance would constitute a material breach of Bell's supply agreements. In response, VuPoint implemented its own vaccination policy, which required that non-compliant installers be ‘prohibited from performing work for certain customers (including Bell)', and ‘may not receive the assignment of any jobs'.
The employee refused to comply with the VuPoint policy, asserting that he did not intend to get vaccinated or disclose his vaccination status. Pursuant to the Bell policy, he was no longer eligible to continue working as a technician on Bell projects. On September 28, 2021, the employer provided him with two weeks' written notice of termination. The employee brought a wrongful dismissal action.
Decision of the lower court
The employer argued that the employment contract had been frustrated by the Bell vaccination policy, as both parties agreed that being able to work for Bell was a fundamental part of the technician's employment, and that his failure to become vaccinated resulted in a complete inability to do so. The judge considered the requirements of frustration and sided with the employer. The judge found that the Bell policy was a supervening event that was not contemplated by the parties, which neither VuPoint nor the employee could have foreseen when his employment contract was signed. Moreover, the judge found that the employee's intention not to become vaccinated clearly indicated that his inability to work was not temporary and that he was aware of the consequences of the vaccination requirements.
The employee appealed the lower court's decision to the Court of Appeal.
Decision of the Court of Appeal
As part of its analysis, the Court restated the test for frustration in contract law: A party alleging frustration must establish that there was a supervening event that (i) radically altered the contractual obligations; (ii) was not foreseeable and not contemplated in the contract; and (iii) has not been caused by the parties.
First, the employee argued that because his choice to refuse vaccination was voluntary, the termination should be considered a just cause dismissal, rather than frustration. The Court did not accept this argument. It confirmed the motion judge's finding that the supervening event which led to frustration was the implementation of the Bell vaccination policy. This meant that the reason for the employee's termination was not his personal choice with regard to his vaccination status, but that VuPoint was contractually obligated to comply with Bell's vaccination policy. Therefore, neither party could be said to have caused the supervening event.
Second, the employee argued that the Bell policy was a business exigency that should not be considered unforeseen. The Court rejected this argument, finding that there is no broad exception for business exigencies with regard to frustration. In addition, the Court confirmed that neither the onset of the COVID-19 pandemic nor the extraordinary response from Bell were events that the parties could have reasonably foreseen at the signing of the employment contract in 2014.
Third, the employee argued that it was VuPoint's choice to terminate his employment, as opposed to taking other non-disciplinary action, such as suspension without pay. He further claimed that VuPoint should have offered him an opportunity to become vaccinated and continue to work. The Court rejected this argument, accepting that VuPoint had no control over the Bell policy and that VuPoint had no obligation to take other non-disciplinary measures before resorting to termination. The employee was clearly aware of the policy, refused to comply, and knew that termination could result. There was no evidence he intended to get vaccinated in order to continue employment.
Finally, the employee argued that he did not receive adequate warning that non-compliance with the vaccination policy would result in termination, and that his termination letter did not provide him with an opportunity to ‘mend his ways'. He claimed he was unaware his termination would be revoked if he ultimately complied with the policy, and that he understood the termination to be final. The Court rejected this argument as well, and reiterated that frustration results in the immediate discharge of the obligations in the contract. Therefore, the employee did not have a fixed legal entitlement for such notice, nor an opportunity to rectify his non-eligibility. While these factors may be important in determining whether the supervening event radically altered the fundamental obligations of the contract, the employer was entitled to conclude there had been a radical alteration of the contract with the employee. There was no evidence that the employee had told VuPoint that his inability to work would be temporary or brief.
The employee's appeal was therefore dismissed.
Takeaway for employers
When dealing with the frustration of a contract, a court's focus is on whether the contract's performance has become radically different from that which was undertaken by the contract. If so, the employer does not have an obligation to provide notice or pay in lieu of notice. However, where there is evidence that the event is temporary and of short duration, or that an employee intends to comply (i.e. be vaccinated) shortly, there remains the possibility that the employment contract has not been radically altered.
The case does not clarify whether an employment contract would be considered as frustrated in circumstances where the vaccination policy that renders an employee ineligible to work is controlled and implemented by the employer directly.
Originally published by Mathews Dinsdale
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