For almost 12 years Terry Ann Wilmot meaningfully contributed to her employer. But then emotional difficulties resulted in long-term absences from work. At first, her employer was accommodating. Wilmot was granted leaves of absence and used her sick leave credits and vacation time to get paid. But when her health didn’t improve, Wilmot was fired for cause and not offered any severance. She had lost her health but argued she shouldn’t have lost her job.


Wilmot’s employer, Ulnooweg Development Corp. had a different point of view. Wilmot had been ill for six months and her diagnosis for return was undetermined. Her illnesses impacted the company’s work and every effort was made to accommodate her illness. Further performance of her employment obligations was impossible, it argued.


Wilmot sued her employer, claiming for wrongful dismissal. In defending her claim, the company relied on the legal doctrine of frustration of contract in arguing her prolonged and indefinite absenteeism rendered further performance of her employment either impossible or radically different from what they had ever agreed to. Frustration, it argued, was tantamount to just cause.


The court disagreed with Ulnooweg. In finding the contract of employment was not frustrated, the court concluded Wilmot’s illness was not sufficiently permanent or long-term to have frustrated the contract. Ulnooweg appealed to the Nova Scotia Court of Appeal. It also agreed.


Employers may be able to treat an employee’s contract as at an end if the employee loses the capacity to perform the job because of illness or disability. However, as this case highlights, it is only an illness or disability that is permanent which can frustrate employment and justify dismissal without pay.

Employers and employees should consider the following advice:

  • Succeeding with a defence of frustration of contract is an oft-threatened employer tactic that seldom is successful at trial. To establish frustration of contract, a permanent illness must be indisputable and the medical evidence dispositive.

  • The illness’ nature, duration and prospects of recovery are the most important factors. Employers who proceed to terminate employees without considering these factors risk violating human rights legislation.

  • Employment contracts should be reviewed. Subject to human rights legislation, an express agreement can oust an employer’s obligation to pay severance.

  • Provincial legislation has minimum standards that must be met. In Ontario, statutory severance pay is mandatory even where frustration is proven.

Daniel A. Lublin is a Toronto employment lawyer, specializing in the law of discipline and dismissal. He can be reached at dan@toronto-employmentlawyer.comor you can visit him on the web at