What is an employer to do if drivers they have hired lose their licence? What if the professionals they employ lose their accreditation? Is there a requirement to provide notice or pay in lieu of notice of termination? A recent court decision 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.
The employee in Cowie v. Great Blue Heron Charity Casino was a security officer. The law in Ontario was changed in 2007 to require that security guards had to be licenced. Those working in a casino had to possess a clean criminal record to be licenced. Those already employed as security guards were given until August 23, 2008 to get licenced.
Cowie started with the casino in January of 2000 as a security officer. He had been convicted of an offence in 1983. When the law changed, as a result of his criminal record he could not get the security guard licence. Soon after the August 2008 deadline, Cowie was dismissed. He was not 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 due to "frustration". It considered various earlier cases where a change in the law had made the performance of the employment contract illegal. It also considered an earlier precedent where the conduct of the employee made it illegal to continue their employment in the same capacity. Specifically, in one case a nurse who lost her accreditation based on professional misconduct could no longer legally work as a registered nurse. Such circumstances had been found to result in frustration of the employment contract.
Turning to Mr. Cowie, the court noted that the change in legislation made it illegal for the casino to continue to employ him as a security guard. The court said that the Casino need not 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 the parties had agreed to. 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 licences. 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 non-union employee may well be justified in terminating the employee without notice, due to frustration of contract. Note, however, that this case did not 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 does not have to be permanent, it is 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.