We have an employee who has been absent due to sickness for two years. For the last year the employee has not provided any evidence of ongoing sickness and we have not attempted to contact him. Due to the length of absence can we now say that his contract is terminated by frustration?


Sharon McArdle writes:


A contract which is frustrated is discharged by operation of law, and in the case of an employment contract, this does not count as a dismissal under the Employment Rights Order. Frustration is usually deemed to occur independently of the fault of either employee or employer.

Case law concerning the doctrine of frustration indicates that Courts will be slow to treat a contract of employment as frustrated. Employment tribunals are also keen not to allow employers to circumvent their obligations under disability discrimination law and unfair dismissal law by claiming that a contract has been frustrated.

A leading case of Marshall v Harland and Wolf Limited [1972] set down guidance on issues a tribunal should take into account when determining whether an employee’s incapacity is likely to continue for such a period, that further performance of their contractual obligations would be rendered impossible or would fundamentally alter the nature of previous agreements between the parties such as to frustrate the employment contract. Factors to be taken into account are:

• The terms of the contract, including provisions as to sick pay
• How long the employment was likely to last in the absence of the sickness
• The nature of the employment and how quickly the employer needs to fill the post
• The nature of the incapacity in question, how long it has lasted to date and the expected duration
• Length of past employment

Subsequent cases have also found that the conduct of the parties is also relevant in ascertaining the severity of the change of circumstances. In one recent case (Hogan v Cambridgeshire County Council EAT/0382/99), an employment contract was found to have been frustrated when an employee on long term sickness absence had undertaken a degree course whilst absent from work.

The risks associated with relying on the doctrine of frustration are as follows:


1. A claim for unfair dismissal


The employee could claim that his employment was not frustrated and that instead he has been dismissed by the Employer. The burden of proving frustration will be on the Employer.
In addition, if the Tribunal found that frustration did not apply and that instead the employee had been dismissed, it would likely find the dismissal to be automatically unfair on procedural grounds, as no dismissal procedure will have been followed. It will therefore also consider uplifting the compensatory award, for failure to follow the statutory dismissal procedures.


2. A claim of disability discrimination


The employee could claim that he is disabled and that the employer has failed to consider making reasonable adjustments to allow him to return to work.


3. Notice Pay


Note that if applying the doctrine of frustration to this employment contract, the Employer would not be paying notice pay, as to do this would imply that the Employer had terminated the employment contract rather than it having been frustrated. The employee would therefore claim notice pay.


4. Holiday Pay


There is also potential liability for holiday pay, if the employee has neither taken holiday nor been paid holiday pay during his absence.

The alternative to arguing that the employment contract has been frustrated is to initiate a capability procedure. Medical evidence would be required containing an opinion as to whether the employee was likely or ever going to be fit to return to work and recommendations for reasonable adjustments, if appropriate.

The Employer would be obliged to consider whether there are any reasonable adjustments which could be made to enable him to return to his original role, or whether there are any alternative positions which he could undertake given his medical condition. The employee would need to be consulted about these matters. The Employer would then consider whether accommodations could be made or whether it can wait for a further period for his return to work, or whether it should then terminate employment.