Employee Loses Battle with Cancer; Estate Entitled to ESA Notice and Severance Pay

The estate of an employee who died three months after being diagnosed with cancer and being placed on a medical leave of absence has been awarded the employee’s statutory notice and severance pay pursuant to the Ontario Employment Standards Act (“ESA”).  Justice Gray made the award in Estate of Cristian Drimba v Dick Engineering Inc., 2015 ONSC 2843 [“Dick Engineering”] based on his finding that the employee’s employment contract had become frustrated.

Dick Engineering is noteworthy because employees are typically not entitled to severance pay or pay in lieu of reasonable notice if they die.  However, Justice Gray awarded statutory notice and severance pay not because the employee had died but because he found that the employee’s relatively short terminal illness made it impossible for the employee to ever return to work, thereby frustrating the contract.  The learned judge reached this conclusion even though neither party ever took the position that the employee’s employment contract had been frustrated prior to the employee’s death.  On the contrary, the employer had offered to keep the employee’s position open for him in the event that he ever recovered, a decision that appears to have been primarily motivated by sympathy for the employee’s grave medical condition.

Gray J. found that although it was impossible to pinpoint when the employee’s employment contract became frustrated it was at some point after his diagnosis and before his death. His finding on this point was critical because an employee in Ontario is entitled to notice and severance pursuant to the ESA if his employment contract becomes frustrated “as the result of an illness or injury suffered by the employee” (see ss. 61 and 62 of the ESA and s. 2(3) of Ont. Reg. 288/01).

Neither the ESA nor the common law requires the employer to pay the employee with any sort of severance pay or pay in lieu of notice if the employee has died.

Dick Engineering raises as many questions as it answers. Presumably, the majority of deaths are preceded by at least some period of illness or injury, however short. Will the estate of an employee badly injured in a car accident, who dies shortly thereafter in the hospital, be entitled to severance pay? What is the minimum period of time an employee will have to be injured or ill before his or her death for it to be concluded that the employment contract was frustrated as a result of illness or injury and not the death of the employee?  The answers to these questions are not known.

Given the fact that an employee’s untimely death and his or her entitlement to statutory severance pay are factors entirely outside an employer’s control there is nothing that an employer can do to avoid being responsible for paying a deceased employee’s estate severance pay.  All that an employer can do is be aware of its potential liability in these type of unfortunate circumstances.

Employers may seek to rely on Dick Engineering to argue that an employment contract can be declared frustrated after a short medical leave of absence.  This is likely to be difficult.  It is typically very difficult for an employer to convince a court that an employment contract has been frustrated as a result of an employee’s illness, even in situations where the employee has been off work on a medical leave of absence for two or three years.  It seems clear that in Dick Engineering the judge was looking back in time and relying on the fact that the employee’s cancer had resulted in the employee’s death.  This is a very different fact scenario than a situation where an employee has been absent from the workplace for an extended period of time but is still alive and possibly able to recover.  It, therefore, appears likely that Dick Engineering will only be relevant in situations where an employee’s illness or injury has resulted in death or catastrophic injury where there is no hope for recovery.