In a recent Ontario Court of Appeal decision, the court considered a case in which the employer claimed that the employee had resigned from or abandoned his employment while suffering from a medical condition.

Employee Suffers Medical Condition

The employee was employed by IBM Canada for over two decades and spent fifteen years in leadership or management positions.

In 2011, he began experiencing stress and mental health problems. By March 2012, his supervisor had become aware of the employee’s stress and mental health challenges but took few steps to address them.

In March 2013, the employee called in sick and told IBM that his doctor had recommended he take six weeks off, after which he commenced a leave of absence. He was referred to Manulife Financial Corp. (“Manulife”), which administers IBM’s Short-Term Disability (“STD”) Policy.

Under the STD Policy, qualified IBM employees with at least five years of service are provided 100% of their salary for the first 26 weeks of disability leave. To qualify, an employee must have an illness or injury that prevents the employee from performing the essential duties of the occupation. Where benefits were denied, the employee could appeal.

The STD Policy also provided that:

If you have not taken any action in support of your appeal within one month of the commencement of the unpaid leave, IBM will consider that you have abandoned your appeal. In this instance you will be expected to return to work immediately or will be presumed to have voluntarily resigned your employment with IBM. [Emphasis added.]

In May 2013, the employee was asked to provide documentation to support his claim for short-term disability benefits to Manulife, which he submitted in June and July.

However, Manulife denied the employee’s claim and he was told he had little chance to win an appeal.

IBM then gave the employee three return to work options. He was also told that if he did not respond to the options, he would be considered to have voluntarily resigned. The employee stated that he had no intention of resigning or abandoning his employment.

However, when the employee did not respond in time, IBM sent the employee a letter stating that it considered the employee to have abandoned his employment.

The employee thus commenced an action for wrongful dismissal.

In response, IBM brought a motion for summary judgment to dismiss the claim.

The motion judge dismissed IBM’s motion and instead granted summary judgment in favour of the employee, finding that, as the parties had agreed that if IBM could not successfully establish that he had resigned, abandoned his position or that the contract was frustrated, it followed that the employee had been wrongfully terminated and only an assessment of damages remained.

IBM appealed the decision.

Court of Appeal Dismisses Appeal

The court began by explaining the law on resignation, abandonment, and contract frustration as follows:

“[R]esignation must be clear and unequivocal. The evidence must objectively reflect an intention to resign, through words or conduct. Context is important. The totality of the circumstances must be considered…

The test for abandonment by contrast, is whether the statements or actions of an employee, viewed objectively by a reasonable person, clearly and unequivocally indicate an intention to no longer be bound by the employment contract and, in particular, the implied term of every employment contract that the employee must attend work unless excused or unable….

A contract is frustrated where, without default of either party, a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract….

The determination of whether a temporary incapacity to work constitutes frustration is also contextual. Illness alone is not a frustrating event and one must look at the length of the illness in relation to the duration of the employment contract…”

The court first held that there had been no error in the motion judge’s assessment, finding that IBM had not satisfied its onus to establish that the employee had resigned or abandoned his employment. The court came to this conclusion based on the facts that: the employee had made clear and unequivocal assertions that he was not resigning or abandoning his employment; he had advised IBM that he was suffering from ongoing mental health issues; and his healthcare providers had stated that he was “incapable of returning to work”. As such, the employee’s actions did not reflect a clear intention to resign nor did they indicate an intention to no longer be bound by the employment contract.

Additionally, the court held that there was no evidence of contract frustration, as the employee’s health care providers’ letters did not establish that his illness was so severe that he was likely unable to continue his employment after the expiration of the term of IBM’s long-term disability policy.

The court further rejected IBM’s two other grounds of appeal.

As a result, the court dismissed the appeal and remitted the case back to the motion judge on the issue of damages.

For Help 

The Kitchener-Waterloo employment lawyers at Petker Campbell Postnikoff have many years of experience advising non-unionized employees and employers on a variety of workplace issues, including wrongful dismissal. Our team will walk you through the details of your dispute, advise you on your rights, responsibilities and obligations, and help you understand your options. If your dispute cannot be settled through negotiation, we can represent you through mediation and the court process.

We represent clients throughout southern Ontario, including the communities of Cambridge, Guelph, Elmira, Brantford, Fergus, Elora and the surrounding area. Call 519-886-1204 or contact us online for a consultation.