The Customer is Always Right: Ontario Court of Appeal Upholds Dismissal for Frustration When Customer Requirements Change

The Customer is Always Right: Ontario Court of Appeal Upholds Dismissal for Frustration When Customer Requirements Change

In Croke v VuPoint System Ltd., 2024 ONCA 354, the Ontario Court of Appeal (“ONCA”) sided with an employer who had to institute a new workplace policy in response to a customer’s requirement. When an employee refused to comply with the policy, his employment was terminated for frustration. The ONCA agreed with the employer’s position that the employment relationship had been frustrated or ended through no fault of either party.

Background

            The employee worked as a technician for VuPoint Systems Ltd. (“VuPoint”) for seven years. Bell Canada and Bell ExpressVu (collectively, “Bell”) were VuPoint’s main clients, providing more than 99% of VuPoint’s income. All of the employee’s work was for Bell customers and he was required to enter Bell customer homes to provide satellite TV and “smart home” internet services.

On September 8, 2021, Bell implemented a mandatory vaccination policy (the “Bell Policy”). The Bell Policy required all vendor personnel and contractors who visit any Bell location or interact in-person with Bell customers to be fully vaccinated by September 20, 2021. The Bell Policy did not provide alternatives to vaccination—such as rapid testing—and stated that failure to comply would be a material breach of the agreement between Bell and VuPoint.

VuPoint subsequently implemented its own vaccination policy (the “VuPoint Policy”) mirroring the Bell Policy. According to the VuPoint Policy, employees who failed to become vaccinated by the deadline would be prohibited from working for certain customers, including Bell, and might not get assignments to replace lost work.

On September 28, 2021, VuPoint gave the technician two weeks of notice that his employment would be terminated due to his failure to provide proof of vaccination. On October 9, 2021, the employee wrote to VuPoint stating that he would not be complying with the VuPoint Policy and claimed that termination would be discriminatory.

The Decision

            The ONCA held that the Bell Policy was a supervening event that frustrated the employee’s employment contract. A contract is frustrated when “a situation has 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’”.[1] A party alleging frustration must therefore establish that there was a “supervening event” that: (i) radically altered the contractual obligations; (ii) was not foreseeable and for which the contract does not contemplate; and (iii) has not been caused by the parties.[2]

In finding there was a frustration of contract, the ONCA found the following:

1. The Bell Policy Was a Supervening Event

The implementation of the Bell Policy was a supervening event akin to a new regulatory requirement: absent vaccination, VuPoint’s employees were ineligible to work on Bell projects, which was nearly all of VuPoint’s work. The ONCA compared the Bell Policy to a licensing requirement placed on a truck driver. In such a case, it is not the employee’s decision to acquire or not acquire the license that prevents them from fulfilling their employment contract. Instead, it is the new licensing requirement itself that disqualifies them for the job until they get the license.

2. The Supervening Event Radically Changed Employment

Since all of the employee’s work was with Bell customers and there was no other work VuPoint could provide him, the employee was no longer able to perform the work for which he was hired. There was no evidence that the Bell Policy was a temporary, emergency measure, or that the employee wanted to become vaccinated with more time, both of which might have led the Court to find that the employment relationship had not radically changed.

The frustration analysis is to be conducted based on the information known at the point of termination.[3] Thus, as soon as the employee failed to provide proof of vaccination by the deadline and did not indicate he needed more time to become vaccinated, he was no longer able to perform the work he was hired for and frustration was triggered. The ONCA held that VuPoint had no obligation to give the employee the opportunity to “mend his ways” nor to employ lesser disciplinary measures before resorting to termination for frustration. However, the ONCA did indicate that, depending on the facts, employers that choose not to give notice or an opportunity to fix the situation may be unable to prove a radical change of the employment agreement.

3. The Supervening Event Was Not Foreseeable

The ONCA found that neither the employee nor the employer could have foreseen that Bell would implement a policy in response to an unprecedented global pandemic when they entered the employment relationship in 2014.

The employee argued that Bell and VuPoint contemplated the Bell Policy in a 2021 Supply Agreement they entered into before the Bell Policy was adopted. This agreement gave Bell the authority to implement new “health and safety requirements” which the employee argued included the Bell Policy. In response, the ONCA emphasized that the focal point of the foreseeability analysis is when the contract was signed which, in this case, was 2014, not 2021.

4. VuPoint Had No Control Over the Bell Policy

There was no evidence that VuPoint had any control over Bell’s decision to implement the Bell Policy. The ONCA found that termination of employment was an inevitable result and VuPoint was entitled to treat the employment contract as at an end.

Takeaways for Employers

Being able to successfully argue that the employment relationship was frustrated allows the employer to dismiss an employee without statutory or common law termination entitlements.[4] Where an employer can show it had no control over external limitations imposed that prevented an employee from being able to perform the role they were hired for, claiming frustration can be a significant advantage for employers to limit employee termination entitlements.

It should be noted that while accommodation was not an issue in this case, Courts place the onus on employers to accommodate employees who cannot comply with mandatory health & safety policies (like a vaccination policy) because of protected grounds such as creed or disability. Nonetheless, even if the employee in this decision had made an accommodation request, the facts suggest that the employer would still have been justified to claim frustration given the nature of the work and the client base.

Overall, this is a favourable decision for employers as it recognizes that employers have to respond to customer requirements and have some protection even where those requirements impact their relationship with their employees. In this decision, the ONCA acknowledged that the Bell Policy was put in place to ensure the health and safety of its customers and that VuPoint had no other option but to adopt the policy of its main client. VuPoint was not obligated to offer employees alternatives to vaccination such as rapid testing or a leave of absence but had to comply with the Bell Policy as it was drafted. There are situations where an employer has to respond to a customer’s new requirements (e.g., drug-testing, licensing, etc.) and if that new requirement cannot or will not be met by an employee, frustration may be the end result.

[1] Croke v VuPoint System Ltd, 2024 ONCA 354 [Croke], at para 21.
[2] Croke at para 22.
[3] Croke at para 67.
[4] Though there are exceptions, particularly in Ontario where a termination due to illness or disability does not disentitle an employee from notice or severance under the Employment Standards Act, 2000.

By Dave McKechnie, Ioana Pantis, and Ufuoma Akalusi (Summer Law Student)

A Cautionary Note

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2024