Did You Know That an Employment Agreement Can Be “Frustrated”?

3 minute read
June 1, 2026
Employment & Labour Law

Jennifer Zeilikman

In this blog we will discuss what it means when an employment agreement or employment contract is said to be “frustrated.” We will go on to look at common examples of when an employment agreement can be said to be frustrated and how illness or disability can factor in determining when an employment agreement is frustrated (or not).

What is Frustration of Contract?

This is not a common occurrence in employment law. However, when it does happen, the situation can be complicated. The standard that must be reached in order to state with confidence that an employment contract is frustrated is high.

In employment law, an employment contract or employment agreement can be “frustrated” when:

there is no reasonable likelihood that an employee can return to work to do their job; and
that this set of circumstances is not the fault of either the employee or the employer.

As such, the employment contract cannot be fulfilled and will be seen to be “frustrated,” meaning that the employment relationship is no longer possible and the employee is not owed notice of termination or pay in lieu of notice of termination under the common law. However, in Ontario the Employment Standards Act, 2000 (“ESA”) specifically carves an exception for individuals who experience permanent job loss as a result of a disability. In such a case (a frustrated employment contract due to the employee’s disability), the employer still must pay the employee or provide to the employee the minimum entitlements as set out statutorily under the ESA.

What are Examples of Frustration in Employment?

There are several common ways in which an employment contract can become frustrated:

the employee may be experiencing a serious illness or disease that will be permanent;
the employee may have a permanent disability;
the employee may have experienced a tragic personal event causing a permanent nonattendance at the workplace;
the employee may have been deported to another country or were sentenced to jail;
the employee cannot comply with certain qualifications that are necessary in order to work (such as ensuring that they are complaint with professional designations that may be necessary in order to be licensed in certain professions);
the employer may also have experienced a tragic event that has resulted in the workplace being permanently destroyed or closed (such as the workplace premises being totally destroyed by fire or flood); or
there is a change in laws or rules of the jurisdiction that causes the employer to no longer be able to carry on business enterprise or the employee to no longer be able to work (such as a loss of a work permit).

How can Illness or Disability be a Factor in Frustration?

Sometimes it can be difficult to assess if the employment contract is truly frustrated when an employee is on sick leave or cannot attend work due to an illness, a medical condition or disability and that the nonattendance has been for a sustained period of time. As such, employers should approach an employment lawyer to assist them in determining if an employment agreement with an employee is actually frustrated or not in order try to minimize their risk of litigation.

Employment lawyers can help the employer by assessing certain factors such as:

is the employee’s illness or disability actually permanent?
are there any accommodations that could be made in order for the employee to be able to work and participate in the workplace?
has the employer communicated with the employee about their illness or disability?
has the employee provided to the employer any documentation related to their medical condition?

If the contract is ultimately not found to have been frustrated and the employer took steps as if the contract was frustrated, then the employer may be at risk of litigation or compensating the employee for wrongful dismissal. Once a claim for wrongful dismissal has been made, the employee will generally claim common law and statutory damages in a wrongful dismissal lawsuit. The employee may be entitled to severance pay and / or termination pay. Depending on the circumstances, the employee may also be entitled to punitive and general damages for discrimination, harassment or bad faith.

How can Zeilikman Law Help?

We have other blogs about the topic of frustration and other related employment law issues. For example:

Contact Zeilikman Law today at (905) 417-2227 or online here to get your questions answered about this topic and other employment law issues.

The above article is for general information purposes only, does not constitute legal advice or create a solicitor-client relationship. Because each case is unique and factually driven, if you have concerns with regard to the foregoing issues, please make an appointment with one of our lawyers or a qualified legal practitioner elsewhere. We represent clients in the Greater Toronto Area including Toronto, North York, Markham, Vaughan, Thornhill, Newmarket, Aurora, Brampton, Mississauga, Barrie, Ajax, Whitby, Pickering and Oshawa.