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Ontario Court of Appeal Deems Employment Contract Frustrated When Employee Refused COVID-19 Vaccination

Practice Areas: Employment Litigation

An employment contract can become “frustrated” when a supervening event that was not anticipated by the parties to the contract makes performance of the contract “radically different” than what was undertaken.  Perhaps the most common form of frustration in the context of employment contracts happens when the employee becomes disabled and can no longer work.  When an employment contract is frustrated (for reasons other than the employee’s disability) then the parties are to treat the contract as ended and no compensation is owed to the employee.  That’s it, that’s all.

In Croke v. VuPoint System Ltd. the Ontario Court of Appeal held that an employment relationship was frustrated when the employee refused to abide by the employer’s mandatory COVID-19 vaccine policy.  The employee worked for about seven years as a technician installing satellite TV and “smart home” internet services for a contractor servicing Bell Canada and Bell ExpressVu.  More than 99% of VuPoint’s income came from the Bell contracts.

Bell instituted a mandatory COVID-19 vaccine policy for anyone servicing its customers, and VuPoint adopted its own policy in turn.  The employee refused to disclose his vaccination status, and later expressly refused to comply with the policy.  He was not permitted to service Bell customers pursuant to the Bell policy, and there was no other work that the employee could have performed for VuPoint.  Being able to service Bell customers was a fundamental part of the job that he could no longer perform.  Accordingly, the employee was terminated.

There was no question that the employee was aware of the policy’s requirement to be vaccinated.  He was given two weeks’ notice of termination on September 29, 2021, and was given severance pay on top of his two weeks’ notice.  VuPoint had work for the employee had he complied with the policy, but he expressly refused to comply.  The employee obtained a new job effective March 19, 2022, albeit with lower pay.

The lower court agreed with the employer that the Bell policy and the employee’s refusal to comply frustrated the employment relationship.  On appeal, the employee argued that there was no frustration since his own voluntary conduct of refusing to be vaccinated was the supervening event, and a party’s voluntary conduct cannot frustrate a contract.  He argued therefore that the termination had to be assessed on a just cause analysis, where just cause is considered an extreme measure in employment law.

The Employer of course disagreed, arguing that Bell’s policy, under which nearly all of VuPoint’s work was performed, was the supervening event.  The Court of Appeal agreed with the employer.  Bell’s policy, to which VuPoint was bound, was simply that unvaccinated people were not permitted to work on Bell projects.  The Court of Appeal said this was analogous to a situation where a truck driver would suddenly have to obtain a new class of driver’s license due to a regulatory change.  They could no longer perform their job without getting the new license.  Whether the employee will seek to become qualified (in this case, vaccinated) is not relevant to a threshold determination of frustration.

The next question was whether the supervening event was a “radical change” to the employment contract that was “not contemplated” at the time of contracting.  The employee argued that the Bell policy was simply a “business exigency” which normally is not considered an unforeseen event giving rise to frustration, and that a 2021 supply agreement between Bell and VuPoint gave Bell the predictable right to implement new health and safety requirements.  But the Court of Appeal agreed with the employer that the 2021 agreement was not relevant to what the employee and employer contemplated in their employment agreement in 2014.  Further, neither the employee nor VuPoint could have anticipated the global crisis caused by COVID-19 or the exceptional response by Bell.  Accordingly, the supervening event was not foreseeable and did radically change the employment contract.

Next, the employee argued (again) that the supervening event was not the Bell policy, but VuPoint’s choice to respond to the Bell policy by terminating his employment.  The employee argued that the Bell policy does not require VuPoint to terminate him, and that just like in cases where a third-party client issues a site ban to a contractor’s employee, the contractor bears the onus to prove just cause if they decide to terminate.  Again, the Court of Appeal reiterated that the implementation of Bell’s policy was the supervening event, and that in the circumstances, including the employee’s express refusal to comply, VuPoint was entitled to treat the contract as at an end.  They had no obligation to take non-disciplinary measures before resorting to termination.

The Court of Appeal unanimously dismissed the employee’s appeal, finding in the particular circumstances of this case that the employment contract was frustrated by Bell’s policy.  Employment contracts are rarely discharged by frustration, but the instant case certainly met the criteria.  This outcome is also a clear indication, consistent with other court decisions, that employees who refused to comply with COVID-19 policies face an uphill battle when they challenge reasonable actions taken by the employer.

The professionals at CCPartners are experienced in navigating the complications that arose from COVID-19 and the precautions employers were compelled to take, and interpreting and applying employment agreements.

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