eCaseNote 2010 No. 04

Proving Frustration: Onus on employers to have medical evidence before terminating disabled employees

Nacaratto v. Costco, 2010 ONSC 2651

Mr. Nacaratto had worked as a return-to-vendor clerk for Costco in Ontario since 1990. Beginning in July 2002, he was absent from work and receiving short-term disability benefits for a depression-related illness. That November, Mr. Nacaratto began receiving long-term disability benefits. These benefits were terminated in May 2006. In January 2007, Mr. Nacaratto’s doctor wrote to Costco to inform them that he was unable to predict when he would be able to return to work and that he was still undergoing psychiatric treatment. In July 2007, Mr. Nacaratto’s employment with Costco was terminated and he received the statutory minimum termination pay in Ontario, which was approximately 25 weeks salary. Mr. Nacaratto successfully sued his former employer for wrongful dismissal and for damages for reasonable notice of his termination.

A contract can become frustrated in some situations where it cannot be performed due to the inability of a party to perform its obligations because of some intervening circumstance beyond its control. In terminating Mr. Nacaratto’s employment, Costco alleged that his employment contract had become frustrated due to his ongoing illness and absence from work. However, the Ontario Superior Court found that, when an employee is on disability leave, employers have a duty to accommodate that employee and not terminate employment until there is a degree of certainty that the employee will be “unable to fulfill the basic obligations associated with the employment relationship for the foreseeable future.”

When alleging that an employee is unable to perform his or her employment obligations, the onus of proof is on the employer. In alleging that Mr. Nacaratto’s employment contract had been frustrated, Costco only had his doctor’s letter to rely upon. Mr. Nacaratto’s doctor had not offered any long-term prognosis on his condition – only stating that he was unable to make a prediction. the court rejected Costco’s argument that it could be inferred that Mr. Nacaratto would never be returning.

Although this appears to be a fairly high burden for the employer, there are opportunities for an employer to allege hardship or disruption. This will be easier to do where the employee holds a senior position and his or her absence cannot be tolerated for very long without great hardship or disruption ensuing. An absent employee with lesser responsibilities, however, will cause less disruption and must be afforded a longer period before frustration can be claimed. In Mr. Nacaratto’s case, the court found no evidence that Costco had suffered any hardship or disruption from his absence, and evidence of his inability to return was needed in order to claim frustration.

The Nacaratto case clearly illustrates that employers intending to terminate employees for lengthy absences must first have unambiguous medical evidence in hand before doing so. One can not simply infer that an employee is unlikely to return. However, this also means that the length of duration is of less importance, and in the right circumstances an employer who can obtain a clear opinion that an employee will not return, after even a short absence, may be able to claim frustration and terminate employment early on.

The comments contained in this eCaseNote provide general information only and should not be construed as legal advice or opinion. For more information or specific advice on matters of interest, please call our offices at (709) 579-2081.