By Gulu Punia
What’s an employer in Canada to do if an employee loses a required qualification? For example, if drivers lose their licenses? If professional employees lose their accreditation? Is there a requirement to provide notice or pay in lieu of notice of termination?
A recent appeal court decision in Ontario suggests that in such cases the contract of employment comes to an end because it has been “frustrated.” There is no requirement to provide any notice of termination or pay in lieu of notice in such circumstances.
Decision
The employee in Cowie v Great Blue Heron Charity Casino (2011) ONSC 6357 was a security officer. The law in Ontario was changed in 2007 to require that security guards had to be licensed. Those working in a casino had to possess a clean criminal record to be licensed. Those already employed as security guards were given until August 23, 2008, to get licensed.
Cowie started with the casino in January 2000 as a security officer. He had been convicted of an offense in 1983. When the law changed, as a result of his criminal record he couldn’t get a security guard license. Soon after the August 2008 deadline, Cowie was dismissed. He wasn’t given any notice or pay in lieu of notice.
After a trial judge found that Cowie was wrongfully dismissed, the casino appealed. The trial judge had awarded eight-months’ salary as damages for pay in lieu of the notice of termination.
The appeal court overturned the trial decision. In its analysis, the appeal court looked at when a contract can be ended because of “frustration.” It considered earlier cases in which a change in the law or the person’s conduct had made the continued performance of an employment contract illegal. In particular, in one case a nurse who lost her legal accreditation because of professional misconduct could no longer legally work as a registered nurse. Such circumstances had been found by the courts to result in frustration of the employment contract.
Turning to Cowie, the court noted that the change in legislation made it illegal for him to continue to be employed as a security guard. The court said that the casino couldn’t keep the position unfilled indefinitely (the potential time required to obtain a pardon for the criminal conviction was two years).
The court concluded that the trial judge was wrong in finding that the disruption of the contract must be permanent. The real question was whether the performance of the contract becomes “radically different” from what was undertaken. The court found that this was the case, and the employment contract was therefore frustrated.
Application for employers
There are many circumstances in which a loss of a required qualification may make it illegal for employees to continue to perform their duties. Drivers may lose their licenses. Professionals or tradespersons may lose their certifications. Or employees’ immigration status may suddenly prohibit them from working.
When circumstances such as these arise, an employer of a nonunion employee may well be justified in terminating the employee without notice because of frustration of contract. Note, however, that this case didn’t involve a unionized situation. The result may or may not be the same there.
While the court in this case made it clear that the loss of qualification doesn’t have to be permanent, it’s unclear how short the duration could be to have the same outcome. Clearly there are no hard and fast rules. However, this decision confirms that in the appropriate circumstances a radical change to an employee’s status can lead to frustration of the employment contract.