Employee's failure to comply with mandatory vaccination policy leads to finding of frustration of employment contract

The Ontario Superior Court's recent decision in Croke v. VuPoint Systems Ltd., 2023 ONSC 1234 ("Croke") provides welcome news to employers in the province as it concerns mandatory vaccination policies. In Croke, the Superior Court found that an employee's refusal to comply with their employer's mandatory COVID-19 vaccination policy amounted to frustration of contract.

Background

The Plaintiff, Alan Croke ("Mr. Croke"), was employed as a Systems Technician by VuPoint Systems Ltd. ("VuPoint") from May 29, 2014 to Oct. 12, 2021.  VuPoint is a federally regulated employer, which provides satellite television and smart home installation services on behalf of Bell Canada and Bell ExpressVu (collectively, "Bell"). Bell provides VuPoint with more than 99 per cent of its annual income.

On or about Sept. 8, 2021, Bell implemented a mandatory COVID-19 vaccination condition applying to its vendors and contractors. To ensure compliance, VuPoint adopted an internal mandatory COVID-19 vaccination policy for its installers, which required proof of vaccination (the "VuPoint Policy").

The VuPoint Policy indicated that non-compliant VuPoint installers would be "prohibited from performing work for certain customers (including Bell)" and such non-compliant installers "may not receive the assignment of any jobs." The Policy did not address termination of employment.

Mr. Croke failed to provide VuPoint with proof of vaccination. As a result, VuPoint was unable to assign Mr. Croke to perform work for Bell. VuPoint did not have other assignments for Mr. Croke and did not have control over Bell's mandatory vaccination condition.

In response to Mr. Croke's failure to provide proof of vaccination, VuPoint advised Mr. Croke on Sept. 28, 2021 that his employment would be terminated, effective Oct. 12, 2021. Within this intervening period, Mr. Croke confirmed to his supervisor that he would not be providing proof of vaccination due to privacy laws—Mr. Croke claimed that VuPoint was discriminating against him based on vaccination status (although he did not raise any protected grounds under the Canadian Human Rights Act).

Superior Court decision

Mr. Croke sought summary judgement against VuPoint for wrongful dismissal damages, and for aggravated, punitive, and/or moral damages. Mr. Croke argued that VuPoint cannot be allowed to ignore its duty to warn employees of consequences (i.e., termination of employment) for non-compliance of employer policies by characterizing the termination as a "frustration of contract."

VuPoint argued that Mr. Croke's employment was frustrated because, neither it, nor Mr. Croke, were responsible for Bell's implementation of a mandatory vaccination condition for its vendors and contractors. Both Mr. Croke and VuPoint agreed that a fundamental part of his employment was his ability to provide services to Bell. More specifically, Bell's mandatory vaccination condition barred Mr. Croke from interacting with Bell customers.

The evidentiary record confirmed that there were no alternative assignments for Mr. Croke and that VuPoint was subject to a Supply Agreement with Bell. Under this agreement, Bell reserved the right to audit compliance with the mandatory vaccination condition, which included proof of vaccination. Contravention of the mandatory vaccination condition would constitute a material breach of the Supply Agreement. Given this, the Court found that Bell's mandatory vaccination condition resulted in Mr. Croke "lacking a necessary qualification to perform any of his duties."[i]

In assessing whether Mr. Croke's employment agreement was frustrated in light of the Supply Agreement requirements, the Court quoted the Supreme Court of Canada's decision in Naylor Group Inc. v. Ellis-Don Construction Ltd., 2001 SCC 58 for the principle of frustration of contract:

[53] Frustration occurs when a situation has arisen for which the parties made no provision in the contract and performance of the contract becomes "a thing radically different from that which was undertaken by the contract…" [Emphasis added]

The Court's main focus was on "radical change." On the issue of radical change, the Court made two findings of significance, as follows:

• There was a "supervening event" which was Bell's mandatory vaccination condition on all subcontractors. This condition could not have been contemplated by the parties when they entered into an employment agreement in 2014 and there was no indication as to when Bell would lift the mandatory condition.
• VuPoint was required by contract (i.e., the Supply Agreement) to comply with Bell policies. VuPoint had no control or knowledge over the timeline of Bell's mandatory vaccination condition on subcontractors—it was an externally-imposed requirement.[ii]

In light of the above factors, the Court found that Mr. Croke's employment agreement had been radically changed as a result of Bell's mandatory vaccination condition on subcontractors. The radical change went to the heart of Mr. Croke's employment relationship with VuPoint.

Ultimately, the Court held that Mr. Croke's employment contract was frustrated as a matter of law and therefore he was not entitled to wrongful dismissal damages, but was entitled to severance and his other entitlements owing under the Canada Labour Code, R.S.C., 1985 c. L-2.

Key takeaways for employers

Although the decision in Croke provides that an employee's failure to adhere to a mandatory COVID-19 vaccination policy may result in frustration of contract, it is important to note that this decision involved an externally-imposed vaccination condition. The jurisprudence has yet to consider the frustration of contract argument in situations where an employer has full control on whether to implement or uphold a mandatory vaccination policy.

If you would like to discuss the Croke decision further or have any questions, please contact the authors or a member of the Employment, Labour & Equalities Group.