In Croke v. VuPoint Systems Ltd., 2023 ONSC 1234, Ontario's Superior Court of Justice decided that an employee's refusal to comply with mandatory COVID-19 vaccination requirements resulted in the frustration of the parties' employment relationship. The employer, therefore, was entitled to terminate the employee's employment without providing notice of termination or damages in lieu of common law reasonable notice.
The employee was employed as a Systems Technician by VuPoint Systems Ltd. (VuPoint) from May 2014 to October 2021. VuPoint provides satellite television and smart home installation services for Bell Canada and Bell Express Vu (collectively, Bell). Bell provides 99% of VuPoint's annual income and the employee performed work for Bell.
In September 2021, Bell informed VuPoint that its installers would be required to receive two doses of an approved COVID-19 vaccine and non-compliance would constitute a material breach of Bell's supply agreements (Bell Policy). VuPoint then adopted a mandatory vaccination policy requiring its installers to be vaccinated and provide proof of vaccination (VuPoint Policy). The VuPoint Policy indicated that non-compliant installers would be prohibited from performing work for certain clients including Bell, and may not be assigned any jobs, but it did not mention termination of employment.
The employee was non-compliant with the VuPoint Policy. On September 28, 2021, VuPoint sent him a notice terminating both his employment and his group benefits effective October 12, 2021. On October 9, 2021, the employee sent a letter to his supervisor stating that he would not disclose his vaccination status due to privacy laws, and claiming the employer was discriminating against him because he did not become vaccinated. In addition to two weeks' working notice, the employee was paid $2,393 in severance pay.
When the employee claimed he was entitled to damages in lieu of
common law reasonable notice, VuPoint responded that because the
employee lacked a necessary qualification to perform his duties and
was ineligible to work for the foreseeable future, the
employee's employment was frustrated as of October 12, 202
2, and he was not entitled to common law
The court reviewed legal precedent recognizing the concept of “frustration of contract,” which explains:
Frustration occurs when a situation had arisen for which the parties made no provision in the contract and performance of the contract becomes “a thing radically different from that which was undertaken by the contract”…
[When frustration of contract is argued] [t]he court is asked to intervene, not to enforce some fictional intention imputed to the parties, but to relieve the parties of their bargain because a supervening event …has occurred without the fault of either party. [Emphasis added]
The court also shared the following explanation of the meaning of “radical change of obligation,” which has also been relied on in legal precedent:
The key to both the understanding and the application of the doctrine of frustration in modern times is the idea of a radical change in the contractual obligation, arising from unforeseen circumstances in respect of which no prior agreement has been reached, those circumstances having come about without default by either party. What would appear essential is the party claiming that a contract has been frustrated should establish that performance of the contract, as originally agreed, would be impossible.
In its decision, the court noted that Fraser Health Authority v Hospital Employees' Union, 2022 CanLII 91089 (Fraser) was of assistance. In that case, an arbitrator found that a hospital employee's employment contract was frustrated when she refused to become vaccinated and became legally unable to work. As was the case in VuPoint, in Fraser a third party required the employee to be vaccinated, i.e., British Columbia's Provincial Health Officer required employees in the health care sector to be vaccinated in order to be eligible to work. Notably, the arbitrator in Fraser mentioned that arbitrators have been known to apply the doctrine of frustration to situations where employees were barred from working due to security clearance failures.
For the following reasons, the court concluded that the Bell Policy frustrated the employee's employment with VuPoint, and the employee was not entitled to damages for wrongful dismissal:
- The VuPoint Policy was a supervening event that was beyond the parties' control and beyond their contemplation when they entered into the employment contract;
- Virtually all of VuPoint's business came from Bell, and VuPoint was required to comply with and enforce Bell's policies pursuant to the supply agreement;
- This resulted in a radical change to the employee's employment contract; he could not perform any duties of his employment while unvaccinated and he advised his employer in clear and unequivocal terms that he would not become vaccinated; and
- This supervening event and radical change to the employment contract was in place for the foreseeable future because there was no indication that the Bell vaccination policy would be lifted.
Bottom Line for Employers
VuPoint confirms that an employment contract may be frustrated when its performance becomes “a thing radically different from that which was undertaken by the contract” / a “supervening event” occurs that is unforeseen by the parties, beyond their control, not due to their fault, and would make performance of the contract, as originally agreed, impossible.
Although the arbitrator in Fraser found that the employment contract of an employee of a unionized employer was frustrated when the employee refused to become vaccinated against COVID-19 and became legally unable to work, VuPoint is the first judicial decision to find that the refusal of an employee of a non-unionized employer to comply with a COVID-19 vaccination policy amounted to frustration of their employment contract. In VuPoint, the court noted that, as was the case in Fraser, the frustration was caused by a vaccination requirement that was imposed on the employer by a third party and, accordingly, it was beyond the employer's control.
Employers are cautioned to refrain from automatically assuming that an adjudicator will follow the approach in Fraser and VuPoint and find that a non-compliant employee's employment contract is frustrated where the employer has control and implements its own COVID-19 vaccination policy, as that remains to be seen.
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