Frustration of contract is a legal concept that means the original “employment contract” as agreed to can no longer be performed due to an unforeseen circumstance that neither party has control over. Where frustration of contract is proven, the employee is not entitled to wrongful dismissal damages at common law.
Statutory Severance Pay – More Employees Will Be Entitled
Pursuant to the Ontario Employment Standards Act, 2000 (“ESA”) which governs provincially regulated companies, where an employee is wrongfully terminated, the employee has “statutory rights”.
If an employee has been with a company for five years or more and the company has a 2.5 million dollar payroll, the employee is also entitled to statutory severance pay on top of statutory notice or pay in lieu.
Statutory severance pay under the ESA is calculated based on one week per year of service up to a maximum of 26 weeks with a partial year calculated on a pro rata basis. The employee’s common law rights are inclusive of their ESA entitlements.
In a very recent decision (June 2021), the Ontario Superior Court of Justice, (Divisional Court) overturned the Ontario Labour Relations Board on a judicial review, stating:
“The calculation of payroll under s.64 of the ESA is not restricted to Ontario employment; employment outside of Ontario, including employment outside of Canada, must be included.”
Ontario Superior Court of Justice (Divisional Court), June 2021
In other words, if the company is related or associated with another company outside of Ontario, the payroll of that other company(s) will also be included in the calculation of “payroll” for the purposes of determining the Ontario employee’s entitlement to statutory severance pay under the ESA.
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