Can your employer end your job without severance by claiming frustration of contract in BC? Only in limited circumstances. Frustration of contract happens when an unexpected event, through no fault of either party, makes it impossible to continue the employment agreement.

Employers sometimes claim frustration when an employee has been away from work because of a serious illness or disability. But being off work for months, receiving long-term disability benefits or having medical restrictions doesn’t automatically mean your employment contract is frustrated.

⚠️ Employer says your contract is frustrated? Don’t assume you’ve lost your severance rights. Your employer must be able to justify its decision, including whether you could return to work with reasonable accommodation. Before you sign, always check first.

Reviewed by: Lior Samfiru, Employment Lawyer and National Co-Managing Partner

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What Is Frustration of Contract in BC?

Frustration of contract means an unexpected event has made an employment agreement impossible to carry out as originally intended.

The event must be beyond the control of both the employer and employee. It isn’t enough for the employment relationship to become inconvenient, expensive or difficult.

Examples that may support frustration include:

  • A permanent medical condition that prevents an employee from returning to work, even with reasonable accommodation.
  • A fire or natural disaster that permanently destroys the workplace and makes the employment agreement impossible to perform.
  • An unexpected event that makes the employee’s work legally impossible to perform.

Frustration isn’t the same as being fired for cause, laid off or dismissed without cause.

Read our Frustration of Contract in Canada guide for a broader explanation.

When Can an Employer Claim Frustration of Contract?

An employer can’t simply declare that a contract is frustrated because an employee has been absent or the business is struggling.

The employer must establish that an unforeseen event made the employment agreement impossible to perform.

The following situations don’t automatically establish frustration:

  • An employee taking extended medical leave.
  • An employee receiving long-term disability benefits.
  • A temporary workplace closure.
  • Reduced sales or financial difficulties.
  • An employer deciding that keeping an employee is too expensive.

BC’s Employment Standards Act recognizes frustration in limited circumstances. The employer must prove that the legal requirements are met.

See the BC government’s explanation of frustration of contract.

Can Illness or Disability Frustrate an Employment Contract in BC?

Yes, but an illness or disability doesn’t automatically bring your employment to an end.

A temporary medical condition, extended absence or uncertain return-to-work date isn’t necessarily enough.

What matters includes your medical prognosis, whether you can return to work in the foreseeable future and whether reasonable accommodation is available.

For example, an employer may have difficulty proving frustration if:

  • Your doctor expects you to return to work.
  • You could perform your job with modified duties.
  • A gradual return-to-work plan is possible.
  • Your employer hasn’t properly considered reasonable accommodation.

BC employers have a duty to accommodate employees with disabilities up to the point of undue hardship.

💡 Receiving LTD benefits? Being approved for long-term disability doesn’t automatically mean you’ll never return to work. An insurer’s decision doesn’t, by itself, prove that your employment contract has been frustrated.

Are You Owed Severance if Your Contract Is Frustrated in BC?

If your employment contract has genuinely been frustrated, your employer may not have to pay severance. But if frustration doesn’t apply, you may be entitled to termination pay or full severance.

Under section 65 of BC’s Employment Standards Act, the usual minimum termination pay requirements may not apply when an unforeseeable event makes the contract impossible to perform.

However, an employer can’t avoid severance simply by calling a termination “frustration of contract.”

If the employer’s claim is incorrect, a non-unionized employee may be entitled to wrongful dismissal compensation. Depending on factors such as age, position, length of service and the employment agreement, full severance can reach up to 24 months’ pay in appropriate cases.

If disability discrimination is involved, you may also have a human rights claim.

Learn more about workplace discrimination in BC.

BC Court Case: Employee Awarded $30,000 After Employer Claimed Frustration

In Aldergrove Duty Free Shop Ltd. v. MacCallum, Samfiru Tumarkin LLP represented a BC sales clerk whose employer refused to pay severance after temporarily closing during the COVID-19 pandemic.

Barbara MacCallum had worked at the duty-free shop since 2010. She was temporarily laid off in March 2020 when the pandemic disrupted cross-border travel.

Her employer argued that the border closure had frustrated her employment contract, meaning it owed her no severance.

The BC Court of Appeal rejected the employer’s argument and confirmed that MacCallum was entitled to $30,000 in wrongful dismissal compensation.

The court also determined that her Canada Emergency Response Benefit (CERB) payments shouldn’t be deducted from that award.

💡 What this case means: An unexpected event doesn’t automatically end an employer’s severance obligations. Even during a major disruption, the employer must establish that the legal test for frustration has been met.

Read more about our firm’s $30,000 BC Court of Appeal victory.

Employer Says Your Contract Is Frustrated? You May Still Be Owed Severance.

Before accepting a termination or signing a release, find out whether your employer is legally allowed to deny severance.

Get a Consultation

What Should You Do if Your Employer Claims Frustration of Contract?

  1. Don’t resign or sign a release. You may be giving up rights to compensation.
  2. Get the employer’s explanation in writing. Ask why it believes your contract can’t continue.
  3. Keep your medical records. If illness or disability is involved, your prognosis and ability to return to work are important.
  4. Save accommodation discussions. Keep emails about modified duties, medical leave and return-to-work plans.
  5. Speak with an employment lawyer. Find out whether frustration applies and whether you’re owed severance or other compensation.

⚠️ Don’t accept zero severance without checking. Your employer’s decision to call a contract “frustrated” doesn’t make it legally correct.

Frustration of Contract BC: Frequently Asked Questions

What does frustration of contract mean in BC?

It means an unexpected event, through no fault of either party, has made the employment contract impossible to perform as originally intended.

Can my employer end my job because I’ve been on disability leave?

Possibly, but being on disability leave isn’t enough on its own. Your employer must consider medical evidence, your ability to return and its duty to accommodate.

How long can I be off work before my contract is frustrated?

There’s no automatic deadline. The length of your absence matters, but your medical prognosis and realistic ability to return to work are more important than any fixed number of months or years.

Does frustration of contract mean no severance?

If frustration is legally established, severance may not be owed. If your employer can’t prove frustration, you may have a wrongful dismissal claim and be entitled to compensation.

Can a business closure frustrate an employment contract?

In limited circumstances. A truly unforeseeable event that makes the contract impossible to perform may qualify. Ordinary financial problems or a temporary closure aren’t automatically enough.

Employer Claims Frustration of Contract? Get Legal Help in BC

If your employer says your contract has been frustrated because of illness, disability or a business closure, don’t assume you’re owed nothing.

The employment lawyers at Samfiru Tumarkin LLP help non-unionized employees across British Columbia challenge wrongful dismissal, understand disability accommodation rights and pursue severance pay.

Our team can review your employer’s decision and determine whether compensation may be available.

For more information, see our BC Employment Law guide.

Before you sign, always check first.

➡️ Get a Consultation or call 1-855-821-5900.

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