On June 15, 2010, the Ontario Superior Court of Justice ruled that Costco Wholesale Canada Ltd. wrongfully terminated the employment of Frank Naccarato, one of its return-to-vendor clerks.
Naccarato began to work for Costco in 1990, but became depressed and began sick leave in July 2002. Four years later, Costco stopped his long-term disability benefits, and ultimately terminated his employment in July 2007. Costco alleged a frustration of the employment contract, citing written comments by Naccarato’s doctor indicating that Naccarato’s return to work could not be predicted.
Burden of Proof for Frustration of Contract
In his ruling, Justice A. Pollak cited the case of Dragone v. Riva Plumbing Limited (2007), in which the onus was placed on the employer to prove a frustration of contract, rather than on the employee to provide medical evidence of a prognosis.
Justice Pollak found that Costco had not provided sufficient evidence “that there is no reasonable likelihood that Mr. Naccarato will not be able to return to work in the reasonably foreseeable future.” Although the comments from Naccarato’s doctor did not provide a prediction for a return to work, they also indicated that Naccarato was still receiving medication and weekly psychiatric treatment, and was also in the process of seeking further psychiatric treatment.
Justice Pollak noted Costco’s failure to follow up with the doctor to further probe the likelihood of Naccarato’s return to work. The judgment also inferred that the nature of Naccarato’s work duties was such that Costco’s business would not be harmed or disrupted by continuing his status of employment.
The decision of Dragone v. Riva Plumbing Limited also indicated that the availability of long-term sick leave and disability benefits implied a longer toleration for an employee’s absence due to sickness. As such, Naccarato’s absence, although lengthy, was not sufficient proof for frustration of contract.
Naccarato was seeking damages of $50,000 for wrongful dismissal. However, the Court awarded him the equivalent of ten months pay, plus interest and minus any termination pay previously provided by Costco. Naccarato was also awarded costs of $12,600, whereas Costco’s claim that the more reasonable cost of $5,000 was rejected since no bill of costs was provided.
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