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Failure to vaccinate may be frustration of contract: Court weighs in on mandatory policies

In a recent court decision, Croke v VuPoint Systems Ltd., the judge found an employment contract had been frustrated by an employee’s refusal to comply with the employer’s mandatory COVID-19 vaccination policy.

As such, the court refused to award any wrongful dismissal damages to the terminated employee. Rather, the court found that the employment relationship ended due to “frustration of contract” and therefore the employee was not entitled to any severance pay.

Nevertheless, employers should be cautious when relying upon this case, as a significant factor in the court’s decision was the presence of a third-party binding obligation for the employer to require COVID-19 vaccination from its employees. (This case does not consider the situation in which a vaccination requirement was completely under the control of the employer).

What is frustration of contract?

Frustration of contract means that there are unforeseen circumstances outside of the control of the parties, which have made it impossible for one or more of the parties to fulfill their obligations under the contract.

Or, as the court cited in its decision, “frustration occurs when a situation has arisen for which the parties made no provision in the contract and performance becomes ‘a thing radically different from that which was undertaken by contract…’” (Naylor Group Inc. v Ellis-Don Construction Ltd., 2001 SCC 58, paragraph 53).

Background

The employer, VuPoint Systems Ltd., was a contractor providing services on behalf of Bell Canada and Bell ExpressVu. Bell was VuPoint’s main client, providing more than 99% of VuPoint’s annual revenue.

The plaintiff, Mr. Croke, was a systems technician for VuPoint and all of his work was in connection with Bell. This involved work as an installer, interacting with Bell’s customers in person and entering their homes — this work was fundamental to Mr. Croke’s employment and there was no alternative work available.

On or about Sept. 8, 2021, Bell introduced a mandatory COVID-19 vaccination policy which applied to its vendors and contractors, including VuPoint. Bell’s policy required all installers to receive the appropriate dose of an approved COVID-19 vaccine. If VuPoint did not comply with Bell’s policy, it would have been considered a material breach of the agreement between VuPoint and Bell.

In order to comply with Bell’s vaccination requirement, VuPoint then adopted its own mandatory COVID-19 vaccination policy. VuPoint’s policy required all installers to get vaccinated and to provide VuPoint with proof of vaccination.

The plaintiff, Mr. Croke, failed to provide VuPoint with proof of vaccination and on September 28, 2021 he was informed that his employment would be terminated, effective Oct. 12, 2021. (During the intervening period, Mr. Croke confirmed he was not going to comply with the mandatory vaccination policy).

Mr. Croke sued VuPoint for wrongful dismissal and punitive damages.

The court’s decision

In a summary judgement, the court determined that the employment agreement had become frustrated because:

1. The COVID -19 pandemic and Bell’s resultant mandatory vaccine requirement was an unforeseen circumstance that was not (and could not have been) contemplated by the parties when the employment agreement was entered into.
2. VuPoint was obligated by contract to comply with Bell’s policy and VuPoint had no control over Bell’s imposition of the vaccine requirement. In short, the mandatory vaccine policy was due to the requirements of a third-party and neither party to the contract had control over this requirement.
3. As a result of Mr. Croke’s refusal to comply with the vaccination policy, he did not meet the necessary qualifications to be able to perform any work pursuant to VuPoint’s agreement with Bell. This meant that Mr. Croke was unable to perform his job duties (i.e., his obligations under the employment contract).

Mr. Croke’s employment came to an end due to frustration of contract and as such, he was not entitled to wrongful dismissal damages.

Key lessons for employers

This case confirms that in certain circumstances, an employee’s refusal to comply with a mandatory vaccination policy could be a frustration of contract and, the employee would not be entitled to notice of termination or wrongful dismissal damages.

However, this was due to a third party imposing a vaccination requirement on its vendors and contractors. This case does not consider the situation in which there is no third-party obligation to require vaccination from employees.

John Hyde is the managing partner at Hyde HR Law in Toronto. He advises management on all aspects of employment and labour law, including representation before administrative tribunals, collective agreement negotiatio