Much chatter has occurred respecting COVID-19 and force majeure. The idea is that the pandemic should allow individuals to back out of obligations under existing or forthcoming contracts.
This is because force majeure is a legal concept which states that contracts should not be enforced when there is an unforeseeable event that makes carrying out the obligations under the contract impossible/near impossible.
A similar concept is called “frustration” of contract. Again, the idea is that a party to an employment contract should not be required to follow through on their obligations because of extraordinary circumstances that are not the fault of either party.
While employers may attempt to use this as a reason to avoid payment of wages, termination pay, or other obligations, it is important to keep in mind that establishing that a contract has been frustrated requires that specific criteria be met. This includes demonstrating not just that an extraordinary event occurred but also that it is not reasonably foreseeable that the relationship could continue as a result of this event.
It is accordingly likely difficult to demonstrate that COVD-19 makes it impossible for the employment relationship to continue, particularly since we don’t know how long COVID-19 will have a negative impact on the labour market, on what specific sectors and the extent of the damage in those sectors impacted.
Determining whether force majeure or frustration of contract applies to any specific contract or employment relationship, therefore, requires a case-by-case analysis and a thorough review of whether alternative legal principles apply more accurately to the circumstances.
The reason that this analysis is important is that if a court later determines that an employer misapplied a legal principle, it could result in significant damages payable to employees/former employees.
If you have any employment-related questions relating to COVID-19 or if you have questions related to leaves of absence, lay-offs, terminations of employment or otherwise, please contact Toronto employment lawyers, Sultan Lawyers at 416-214-5111 or via email at khayward@sultanlawyers.com.