Home Employment Contracts Canada-U.S. border closure did not frustrate contract for duty-free shop worker, rules B.C. appeal court in upholding 10 months’ notice

Canada-U.S. border closure did not frustrate contract for duty-free shop worker, rules B.C. appeal court in upholding 10 months’ notice

by HR Law Canada

A duty free shop in British Columbia that refused to pay severance to a retail sales clerk, arguing that the COVID-19 pandemic and the closure of the U.S.-Canada border frustrated her employment contract, has lost an appeal of a lower court ruling that awarded her 10 months’ notice.

The Aldergrove Duty Free Shop laid off its employees, including 78-year-old BM, following the closure of the border in March 2020. BM, who had been a retail sales clerk at Aldergrove since 2010, filed a civil claim for wrongful dismissal when it refused to pay her severance, alleging the employment contract had been frustrated by the pandemic’s unforeseen circumstances.

The Court of Appeal for British Columbia underscored that while the border closure severely impacted the shop’s customer base, it did not fundamentally alter the nature of the contractual obligations between the employer and employee.

The employment contract’s essence remained intact, as the duties and compensation structure did not radically change due to the pandemic, it said.

The ‘frustration defence’

“The frustration defence is only available where new and changed circumstances caused by a supervening event that was neither contemplated by the parties, nor induced by one of them, would require that one or more of the parties do something fundamentally (“radically”) different from what was originally intended in order to perform their contractual obligations,” it said.

It was not enough for a party claiming frustration to “show that complying with their contractual obligations will result in… hardship, onerousness, inconvenience, or material loss,” the Court of Appeal said.

The trial judge had awarded BM 10 months’ salary, a decision unchallenged by Aldergrove. Additionally, the company’s contention that the trial judge failed to appreciate the employment contract’s fundamental purpose and to give due consideration to evidence was not substantiated.

Cross-appeal on CERB deduction

Moreover, the cross-appeal by BM regarding the deduction of Canada Emergency Response Benefit (CERB) payments from the damages award was allowed, following the precedent set in Yates v. Langley Motor Sport Centre Ltd. (2023).

The court clearly stated that in British Columbia, CERB benefits are not to be deducted from wrongful dismissal damages.

The court dismissed Aldergrove Duty Free Shop’s appeal and allowed BM’s cross-appeal, ordering full payment of the damages without any reduction for her CERB benefits

For more information, see Aldergrove Duty Free Shop Ltd. v. MacCallum, 2024 BCCA 28 (CanLII).

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