A recent Alberta decision provides useful guidance on when an employee’s disability may frustrate an employment contract and bring the relationship to an end without wrongful dismissal damages.
In Lai-Terke v EFW Radiology, 2026 ABCJ 114, the employee had worked as a part-time sonographer since 2011. She stopped actively working in 2017 and remained on disability leave for several years. By 2021, the medical information available to the employer indicated that her restrictions were permanent and that she could not perform modified work in her ultrasound position.
The Court found that her employment contract had become frustrated.
Frustration occurs where an unforeseen change makes continued performance of the contract impossible or fundamentally different from what the parties originally agreed to. In the employment context, a permanent disability may frustrate the contract where the employee can no longer perform the essential duties of their position. Temporary illness or a lengthy absence, without more, will not necessarily be enough.
Importantly, frustration is assessed based on the circumstances existing at or before termination. Although the employee later returned to ultrasound work elsewhere, the Court held that the relevant question was whether the employment relationship had become frustrated when EFW ended it in August 2021.
The Court also considered the employer’s duty to accommodate. The employee had retrained as an MRI technologist and argued that she could have been accommodated in that type of position. However, the evidence showed that MRI work was materially different from her sonographer role, no MRI position had been promised, and no suitable MRI technologist vacancy existed at the relevant time. The duty to accommodate did not require the employer to create an entirely new position or fundamentally change the employment relationship.
The wrongful dismissal claim was therefore dismissed.
Key Takeaway
Lai-Terke confirms that frustration based on disability is highly fact-specific and depends heavily on the medical evidence available at the time employment ends. Employers should not assume that a prolonged medical absence automatically frustrates an employment contract. The evidence must support the conclusion that the employee’s incapacity is sufficiently permanent and prevents them from performing the essential obligations of their position, even with reasonable accommodation.
For employees, the case is also a reminder that medical documentation describing restrictions as permanent or confirming an inability to perform the existing role can have significant consequences for both accommodation and wrongful dismissal rights.
*Always seek legal advice. The above is for information purposes only.
Stephen Dugandzic received his Juris Doctor degree from the University of Alberta in 2013 and is Calgary-based. He previously practised with Bennett Jones LLP and Taylor Janis LLP before founding YYC Employment Law Group in 2018 and Evolution Legal in 2026.
FAQs
What is frustration of an employment contract in Alberta?
Frustration occurs where unforeseen circumstances make continued performance of the employment contract impossible or fundamentally different from what the parties originally agreed to. In the disability context, this can arise where an employee becomes permanently unable to perform the essential duties of their position.
Does a long-term disability automatically frustrate an employment contract?
No. A lengthy absence, by itself, does not necessarily establish frustration. The key issue is whether the employee’s incapacity has become sufficiently permanent that they can no longer perform the essential obligations of the job.
When is frustration assessed in a wrongful dismissal case?
Frustration is assessed based on the circumstances existing at or before the time the employment relationship is terminated. Later improvement in the employee’s condition does not necessarily determine whether the contract had already become frustrated.
Does an employer still have a duty to accommodate before relying on frustration?
Yes. The duty to accommodate remains an important part of the analysis. However, accommodation does not require an employer to fundamentally alter the employment relationship or create an entirely new position that it does not need.
Is an employee entitled to wrongful dismissal damages if the employment contract is frustrated?
Not necessarily. In Lai-Terke v EFW Radiology, the Court found that the employment contract had been frustrated by permanent disability and that the employer had satisfied its accommodation obligations. As a result, the employee’s wrongful dismissal claim was dismissed and no damages were awarded.