Frustration of Contract Ontario: What Employees Need to Know

What Is “Frustration of Contract”?
In Ontario, frustration of contract happens when something unexpected makes it impossible for you or your employer to continue the employment relationship.
It’s not the same as being fired or quitting — it’s when an event occurs through no one’s fault that prevents the contract from being fulfilled.
Common examples include:
- A serious illness or injury that permanently prevents you from doing your job
- A catastrophic event (like a fire or flood) that destroys the workplace
- A change in law or permit loss that makes your job illegal or impossible to perform
Under Ontario’s Employment Standards Act (ESA), frustration ends the contract automatically once it becomes impossible to perform.
When Does Frustration Apply in Employment?
Frustration applies only in rare circumstances — courts set a high bar. For an employment contract to be frustrated:
- The change must be permanent or indefinite.
Short absences or temporary medical leaves usually don’t qualify. - Neither party must be at fault.
The event must be beyond both the employee’s and employer’s control. - The job must truly be impossible to perform.
It’s not enough that the employee can’t perform some duties — it must be impossible to reasonably continue the role.
Frustration of Contract and Disability or Illness
Employers sometimes claim frustration when a worker has been off on long term disability Ontario (LTD) or sick leave for an extended period.
However, this doesn’t automatically mean the contract is frustrated.
Key considerations include:
- Has your doctor confirmed your condition is permanent?
- Are you still receiving LTD benefits and under active treatment?
- Has your employer gathered up-to-date medical documentation before making a decision?
If your medical condition might improve, or if you can return to work with accommodation, the contract may not be frustrated — and a termination could instead amount to a wrongful dismissal in Ontario.
Does Frustration of Contract Affect Severance Pay?
Yes — and this is where most confusion lies.
When a contract is frustrated under Ontario’s ESA:
- The employer must still provide minimum termination pay, unless the frustration is caused by an employee’s own illness or injury.
- Common law severance pay in Ontario (up to 24 months, much higher than ESA minimums) still apply, depending on the circumstances.
In other words: Even if an employer claims the contract was “frustrated,” you might still be owed months of severance pay.
Before accepting any explanation from your employer, get legal advice — this area of law is often misunderstood.
Frustration of Contract vs. Termination Without Cause
It’s easy to confuse the two. Here’s the difference:
Frustration of Contract | Termination Without Cause |
---|---|
Caused by an unforeseen event beyond anyone’s control | Employer decides to end the job for business or performance reasons |
Usually no fault on either side | Employer’s choice, still must provide full severance |
May limit ESA severance in some cases | Always triggers severance obligations |
Often linked to illness, injury, or external events | Common in restructuring or downsizing |
If your employer cites frustration but you suspect a hidden reason (like wanting to avoid paying severance), it may legally qualify as a termination without cause in Ontario instead.
Examples of Frustration of Contract in Ontario
Here are common situations that might (or might not) meet the legal test:
✅ True Frustration
- Permanent disability after a major accident
- Loss of a work permit or license essential to the role
- Destruction of a workplace due to fire, with no alternate job available
❌ Not Frustration
- A temporary illness with a reasonable chance of recovery
- Layoff due to financial losses or restructuring
- Employer inconvenience or dissatisfaction with absence length
Each case turns on medical evidence and whether a return to work was realistically possible.
What Should You Do if Your Employer Claims “Frustration”?
- Ask for the reason in writing.
Get clear details on why your employer believes the contract is frustrated. - Request medical review.
If illness or injury is cited, your doctor’s input is crucial. - Don’t sign anything immediately.
Employers may misapply frustration to avoid paying full severance. - Speak with an employment lawyer.
Our team can confirm whether your contract was truly frustrated or if you’ve been wrongfully dismissed.
Speak to an Employment Lawyer About Frustration of Contract
If your employer ended your job and claimed your contract was “frustrated,” you may still be entitled to significant compensation.
At Samfiru Tumarkin LLP, we’ve helped thousands of Ontarians recover severance pay after employers misused this legal concept.
Our employment lawyers understand the impact a dismissal can have — financially and personally — and we’re here to help you move forward with clarity and confidence.
Our team has:
- 👥 Successfully represented 50,000+ Canadians
- 💰 Secured millions in severance payouts
- ⚖️ Settled over 99% of cases out of court
- 📱 Free Termination Consultations — in some, but not all, cases
- ⭐ Earned 3,000+ 5-star Google reviews
- 🏆 Named on of Canada’s Best Law Firms
Call 1-855-821-5900 or request a consultation online.
You must go through your union. By law, employment lawyers can’t represent unionized employees.