Recently, Ted Flett, Zubas Flett Lawyer, spoke with Jeffrey Smith of Canadian HR Reporter. The opinion piece, which discussed a Superior Court of Justice ruling that an employer’s closure after a fire didn’t frustrate the contracts of its employees.
Hotel’s closure after fire doesn’t frustrate employment contracts
Ted Flett, principal lawyer at Zubas Flett Law, provided his insights on a recent decision by the Ontario Superior Court which upheld that an employer’s closure after a fire did not constitute frustration of contract since the employer planned to resume operations in the same business upon the completion of repairs.
“It goes to show that frustration of the employment contract is difficult to prove and may not apply even if a disaster shuts down operations. The test with respect to frustration – already outlined by the Supreme Court – is that hardship or inconvenience is deficient for frustration of contract” Flett told Canadian HR Reporter.
The employer was a hotel that ceased its operations due to a fire, resulting in the layoff of its unionized employees. A grievance was filed by the employees for payment of termination pay, or in the alternative, severance pay. The arbitrator dismissed the Union’s claim for severance pay but ordered the employer to pay termination pay after finding that the hotel’s closure did not frustrate the employees’ contracts. The Court upheld that the arbitrator’s decision was reasonable in that the evidence showed that when the hotel reopened, it would still operate as a hotel and not a different enterprise. Furthermore, the temporary break in operations did not cause the contract of employment and the collective agreement to become something radically different.
“The decision reinforces that there is a high standard for proving frustration of the employment contract, something that is particularly important to remember in the wake of many employers shutting down temporarily during the pandemic.” Flett said.
See Clarion Lakeside Inn v. UFCW Local 175, 2022 ONSC 3850.
We encourage employees who are denied entitlements due to frustration of contract and employers to speak with one of our lawyers to carefully determine if they meet the test for frustration of contract. Contact Zubas Flett Law at 416-593-5844 or firstname.lastname@example.org.