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Can an Employee’s Permanent Disability Lead to a Lawful Termination?
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Can an Employee’s Permanent Disability Lead to a Lawful Termination?

By September 30, 2019 March 9th, 2022 No Comments

In Katz et al. v. Clarke, the Ontario Divisional Court considered the issue of whether an employee’s desire to work prevents the employer from terminating them. Employers find themselves in a dilemma when their employee expresses a desire to return to work from disability leave while their doctor recommends otherwise. The Ontario Court of Appeal upheld the decision and confirmed a rule that assists employers in determining whether they can terminate a disabled employee.

In Katz et al. v. Clarke, the employee had been on disability leave since 2008. The employee went on short-term leave which transformed into long-term leave. The employee’s doctor reported that he was unable to perform his essential duties and that he would be incapable of performing them in the foreseeable future. The employer told the employee he would be terminated because his contract was frustrated due to his continued illness. The employee wrote the employer expressing his desire to return to work. The employer asked for updated medical information supporting a potential return to work, but the employee did not respond. The employee was terminated shortly thereafter.

The employee sued and claimed he was terminated because of his disability, in violation of the Ontario Human Rights Code. The Court held that there existed a genuine triable issue as to whether the employer fulfilled its duty to accommodate the employee given his express desire to return to work. The employer appealed.

The Ontario Court of Appeal confirmed that the doctrine of frustration of contract applies where there is evidence that the employee’s disabling condition is permanent. When the contract is frustrated, the parties are generally released from their duty to provide reasonable notice of termination or pay in lieu thereof except as required by the Employment Standards Act.

The Court of Appeal held that the principle applied in Katz et al. v. Clarke because the employee’s permanent disability made the performance of the employment contract impossible. Accordingly, the Court dismissed the employee’s lawsuit. The Ontario Court of Appeal confirms that employees must communicate their ability, not just their desire, to return to work. The employer’s duty to accommodate ends where the employee is no longer able to fulfill the basic obligations of the employment relationship for the foreseeable future.

Going forward, employers should be highly vigilant when managing disability leaves. Amongst other things, employers must request updated medical forms outlining whether there is a foreseeable return to work. Employers have a duty to accommodate by assisting with plans to return to work, short of causing undue hardship. As the foregoing case confirms, an employer is
relieved of their duty to accommodate when the employment contract is frustrated (i.e. incapable of performance).

Takeaway: in dealing with an employee who has expressed a desire to return to work and who has produced medical forms confirming a permanent disabling condition, an employer can rely on the common law to draw a sharp line and end the employment relationship. The employee’s physician plays an influential role in communicating the frustration of the employment relationship, trumping the employee's desire to return to work.

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