COVID-19 Updates & Frustration of Employment Contracts

Written on behalf of Peter McSherry
A distressed woman looking at a laptop, representing an employee who is let go due to COVID-19
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Ontario has announced that the present emergency status throughout the province will likely continue through to June 2. Schools presently remain closed until May 31.

The Province has also stated that the process of re-opening businesses and services will come in three stages. Stage one was announced on Thursday, May 14, and will take effect in full as of Tuesday, May 19. Low-risk retail stores such as all nurseries, garden centres and hardware stores as well as provincial parks are currently allowed to open. In addition, all retail stores with street entrances are allowed to provide curbside pick-up, and will be allowed to open their doors to customers as of Tuesday, provided adequate safety measures are in place. Many retailers who are currently open, including the LCBO, are now permitted to extend their hours as well.

It is also expected that there will be a more generous interpretation of “essential services”.

The details of the remaining stages of the re-opening will be released soon. The process is not quite as fixed and reliable as a Swiss train schedule, as there will be adjustments based on the emergence of reported cases as time proceeds. Hopefully, the number of newly reported cases will continue to decline. If not, the schedule will be delayed, and may even be reversed in some respects.

Non-essential border traffic to and from the United States remains closed and is expected to be extended at least until June 21. The Prime Minister has advised that this restricted travel ban on traffic entering Canada will be lifted only when it is very clear that it is safe to do so. These rules are changing every day. Stay tuned to this station for further updates.

Employment Contracts & Frustration

In our last post, we discussed the issue of an employment contract with a pre-determined severance sum. The following may apply to this or any other employment contract issue, such as a post-termination covenant preventing competition or soliciting business from certain customers after termination, or even a bonus question which is due about now, based on earnings from the prior calendar year.

All contracts may be vulnerable to an argument that they are not enforceable based on the concept of “frustration”. Essentially, and employer could argue that at the time the contract was signed, neither party could possibly have foreseen an event such as the current pandemic and the catastrophic impact it would have on the business. Nor could either party have imagined that such an impact would result in a mass layoff of staff.

The theory is that the parties to the contract should be released from the contract terms as neither one could reasonably have foreseen such calamity and hence the essential purpose of the contract has been “frustrated” (an apt word for today’s world, indeed) by this unexpected and unforeseen event.

A good example of such a successful argument is one on which a performer is hired to sing at a major venue that burns down the night before the event. In this case, the theory would likely apply, and both sides would then released from the agreement.

Might this submission succeed in the context of this coronavirus nightmare? It is not entirely out of the question. Many companies facing such claims, particularly where large severance payments have been set out in writing, may well argue this defence. More pragmatically speaking, management may use this a negotiating tactic to get the employee back to work once the sky clears and avoid the need to make an immediate payment.

During Times of Uncertainty, Seek Experienced Legal Advice

Our lives are changing in real-time as this crisis continues. Hopefully, the Premier’s stage one will be a success, and the province will begin making its way toward stage 2 and 3. No doubt the legal issues will continue, as will the ongoing revisions to the rules at the federal and provincial levels. We will be here for you as this saga continues. We will monitor and update the all news as it develops in this space. In the meantime, contact the offices of Guelph employment lawyer Peter McSherry if you have any questions about your rights as an employee or employer. We can guide you through the issues, help you understand your rights, and defend your position. Contact us online or by phone at 519-821-5465 to schedule a consultation.