Coca-Cola Termination Part 1: Frustration of Contract
The recent story of Shawne Hopkins, a 35-year veteran of a Coca-Cola bottling plant in Calgary, has come as a shock to a lot of people. CBC News broke this story earlier this week on their “Go Public” investigative journalism segment. After three and a half decades of service, Mr. Hopkins was reportedly terminated via a brief phone call after sustaining serious injuries on the job. The company’s legal justification? Frustration of Contract.
While this case is unfolding in Alberta, it offers a critical teachable moment for employees and employers here in Ontario. In this first part of a three-part series, we examine the doctrine of frustration, the high bar set by the courts, and why Ontario’s legislative framework provides a safety net for injured workers. In Part 2, we will look at how the facts of this case would play out with the Duty to Accommodate under human rights law, and in Part 3 we will conclude with an overview of how Workers’ Compensation programs come into play.
The Facts
Before getting into the details of this case, we want to highlight that none of these facts have been tested in court or been determined by an arbitrator. While a grievance has reportedly been filed by the union representing Mr. Hopkins, it will likely take many months before we have a more complete picture of events, assuming this case doesn’t settle in the meantime. For this series, we will assume that the allegations as reported by the CBC are true for the sake of illustrating how the law would apply, but with the caveat that as facts change, the application of the law to the facts will also change.
According to reporting by the CBC, Mr. Hopkins was injured by a roughly 900kg door, injuring his left shoulder, arm, and neck. He claims to have brought up safety issues with the door to his employer in the past, but apparently nothing was done to rectify the safety concerns.
After two years on Workers' Compensation and undergoing surgery, he was cleared to return to work with restrictions by Alberta’s Workers’ Compensation Board (“WCB”). As part of this plan, he is receiving retraining as he still has limitations on the use of his arm.
But instead of a return-to-work plan, he was met with a claim of frustration of contract by Coca-Cola Canada Bottling Limited. When he was notified of his termination, he was offered a lump-sum payment of $2,511 in exchange for a release and non-disclosure agreement.
In a unionized environment, such as the one Mr. Hopkins worked in, the collective agreement dictates many of the procedural steps. However, the underlying principles of frustration of contract are applicable to all employment relationships under common law.
What is Frustration of Contract?
In employment law, frustration can be described as the legal death of the employment relationship. In that sense, it is unlike a termination or resignation, which occur when one party unilaterally ends the contract. Frustration occurs when an unforeseen event—which is not the fault of either party—makes the performance of the contract impossible or "radically different" from what was originally intended.
The Supreme Court of Canada established the modern test for frustration in Naylor Group Inc. v Ellis-Don Construction Ltd., 2001 SCC 58 [Naylor]. To successfully argue frustration, an employer must prove that the event giving rise to frustration:
Radically altered the contractual obligations of the parties;
Was not foreseeable and which the contract does not contemplate; and
Was not caused by the parties.
While frustration of contract can apply to any contractual relationship, we are applying the test as stated in Croke v VuPoint System Ltd., 2024 ONCA 354 [Croke], a recent decision from the Ontario Court of Appeal. The decision deals directly with the law of frustration of contract, applying Naylor, in the context of employment law.
Frustration of contract in employment law is usually the result of a permanent disability of an employee. In this context, there is an extra step in the test to determine whether an employee is permanently disabled according to the law. The important distinction is between permanent and non-permanent disability, rather than a clear-cut amount of time that has passed. In Hoekstra v Rehability Occupational Therapy Inc., 2019 ONSC 562 [Hoekstra], the court stated that this is a contextual analysis, meaning that all factors surrounding the nature of the illness and the likelihood of a return to work must be considered. Either party could assert frustration of contract a short amount of time after an illness or injury if there is no reasonable likelihood of recovery, whereas courts have recognize relatively long absences, up to five years, as temporary (Hoekstra, paras 28 and 29).
So, how does this test stack up with the facts as presented by CBC? On the face of it, because the WCB has cleared Mr. Hopkins to return to work (though with retraining for a new role), he is not so permanently disabled as to be unable to perform work for Coca-Cola. This is skipping ahead a bit to the accommodation process, but the “radical alteration” of the employment relationship from the first part of the test for frustration really means “the employee’s duty to perform work in exchange for remuneration.” (Hydro-Québec v Syndicat des employées de techniques professionnelles et de bureau d’Hydro-Québec, section locale 2000, 2008 SCC 43).
Even if we accept that the other parts of the test are met, Coca-Cola will face it’s main hurdle in proving that it could not accommodate Mr. Hopkins’ return to work under either modified duties or in another role. And even though frustration acts as an operation of law, it is up to the party alleging frustration to prove that the contract was in fact frustrated.
The Ontario Lens: The ESA and O. Reg. 288/01
But what if this were frustration of contract? One could be forgiven after reading the CBC article and worry that once your contract is frustrated, you are entitled to nothing from your employer. At least in Ontario, this is not the case.
While O Reg 288/01 generally exempts employers from paying notice or severance when a contract is frustrated, there is a critical exception to the exemption. Under sections 2(3) and 9(2)(b) of the Regulation, if the frustration is the result of an illness or injury suffered by the employee, the employer must still pay statutory termination and severance pay.
So at the very least, an employer owes statutory notice (or pay in lieu) under section 54 of the Employment Standards Act, 2000, and statutory severance under section 63 (statutory severance only applies to workplaces where either the employer has a payroll of $2.5 million or more, or if the employee is one of at least 50 employees terminated within a 6-month period with the employer).
The 35-Year Reality Check
For a long-term employee like Mr. Hopkins, the stakes are incredibly high. In Ontario, the ESA would entitle a 35-year employee to a minimum of 34 weeks (8 weeks of notice plus 26 weeks of severance). However, at common law, a 35-year tenure often pushes notice periods towards 24 months.
When an employer alleges frustration, the burden of proof lies entirely on them. If an employee has been cleared to return to work—even with restrictions—arguing that the contract is frustrated becomes a very steep uphill battle.
Coming Up Next
The claim of frustration cannot be viewed in a vacuum. It is inextricably linked to an employer's obligations to accommodate. In Part 2 of this series, we will dive into the Duty to Accommodate and the high legal threshold of Undue Hardship in Ontario.
Disclaimer:The information provided in this blog is for informational purposes and does not constitute legal advice. If you are facing a situation involving disability or termination, please contact an employment lawyer to discuss the specifics of your case.
