News Article

latest news in employment law

Termination - Frustration of Contract

Published 17 Jul 2020

The law relating to 'frustration of contract' derives from contract law but can be applied in employment law matters also. It is referred to in cases where employees are absent from work for a long time, due to sickness or injury although the application of the principles of frustration in these cases may not result in the desired outcome for an employer.

An employment relationship ending due to frustration is not technically a dismissal, so the employee cannot claim a personal grievance alleging unjustified dismissal.  However, the employee may still be able to raise a case claiming unjustified disadvantage or other grounds.

Frustration of contract requires there to be an event of such significance that the performance of the contract becomes impossible or radically different. This event needs to be unforeseen and not due to any action or lack thereof by either party. The recent Covid-19 pandemic is an example of such an event, called a supervening event.

In law the question is, what is the precise degree of impossibility or difference that must be present before frustration occurs. In considering this question the Courts have outlined a number of factors that must be taken into account.  These include the employee’s length of service, the position held, the length of any absence and the importance of getting temporary cover. These factors are particularly relevant in medical incapacity cases. It is worth noting that the Courts will not allow the doctrine of frustration lightly and will keep it within very narrow limits and not extend those limits.

Beside the Court’s view of frustration of contract, the overriding obligation an employer faces is the good faith requirements laid down in the Employment Relations Act 2000.  Even if the employer is able to establish a good case for frustration a fair and reasonable process must be followed.  This includes open consultation, provision of all relevant information, allowing the opportunity for the employee to comment, genuinely considering those comments and not arriving at any decision until that consultation process is ended.  In any event it will be difficult for an employer to bring the employment arrangement to an immediate end.

Frustration of contract is not a straight forward process.  Whether the event relates to something like a significant change in business i.e. the impact of lock downs due to a pandemic, or something that prevents an employee performing the job they were hired to do, you need to take advice before taking action as the Courts hold a very high bar for allowing this action under Employment Law.