It is the (hopefully) near future and the world has recovered from the effects of COVID-19. The courts have decided to either forgive or impugn the way in which employers treated their employees. Now the question on every employer’s mind is: how do we avoid these pandemic pitfalls in the future?
The first and obvious step will be for employers to revise or implement employment contracts with temporary layoff provisions. That way they can rest assured that future layoffs will be protected. But what if a future event causes temporary layoffs to last longer than the statutory limits?
Ah, frustration of contract! That trusted legal principle which, under the common law, holds that where an unforeseeable event occurs, rendering the contract impossible to perform, the contract will simply end. The employer and employee shall have no further obligation towards one another. Legally, the contact ceases to exist. My colleague, Ross Dunsmore, wrote about this in a recent article.
Until now, business closures as a result of an infectious disease could be fairly classified as “unforeseeable”. But will the courts’ sympathy for employers affected by COVID-19 extend to another economic shutdown? Arguably, business closures forced by government—previously unprecedented—is now a precedent. In the future, can such an event be considered “unforeseeable”? The key to claiming frustration is that the supervening event must have been unforeseeable.
This is a question employment lawyers and courts will have to grapple with in the future. Perhaps the legal fix will come in the form of force majeure clauses in employment contracts—a legal concept familiar in the commercial realm, but less so in employment. Force majeure clauses are a contractual tool (not a common law or statutory principle, like frustration). Such clauses provide for an exit ramp, so to speak, where one party is no longer able to perform the contract due to circumstances beyond its control, an “act of God”.
Force majeure clauses are not typically found in employment contracts. The likely explanation is that the Employment Standards Act, 2000 (“ESA”) provides for frustration of contract, and so does the common law. But if future judges decide that government-ordered business closures are no longer unforeseeable, and therefore not a frustrating event, force majeure clauses may be a way for employers to protect themselves. Keep in mind – contractual clauses which attempt to avoid ESA obligations are unenforceable. Careful drafting is key!
For now, we must all take one step at a time as we wade through this new territory. While it is prudent to look ahead, the future is uncertain and we must be ready to adapt.
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