Summary
Hill v. 1359768 Ontario Inc. (B&B Towing), 2026 ONCA 577 offers practical guidance for employers responding to an employee’s return from disability leave and assessing damages where workplace tools and equipment are alleged to be compensable benefits. The ONCA confirmed that frustration of an employment contract based on disability requires clear evidence that the employee cannot perform the essential duties of the position within a reasonable time and cannot be accommodated without undue hardship. It also clarified that work tools and equipment, such as a company vehicle or cell phone, will not necessarily form part of an employee’s compensation package merely because it is used incidentally for personal purposes.
Background
The respondent, Mr. Hill, had worked for the appellant, B & B Towing, as a road boss for approximately 17 years before resigning and alleging constructive dismissal. Before his resignation, he had been on long-term disability leave for about two and one-half years. During his absence, the appellant’s owners assumed his former road boss responsibilities.
In or around September 2021, the respondent met with the appellant’s owners to discuss his return to work. At that meeting, he was told that the road boss position had been eliminated for financial reasons and that he would return as a tow truck driver at a lower rate of pay. The appellant offered to pay him at the road boss rate for eight weeks after his return before he transitioned to the tow truck driver role.
On February 25, 2022, the respondent advised the appellant that he regarded the proposed demotion and reduction in pay as a constructive dismissal. He commenced an action on March 3, 2022.
In its defence, the appellant argued that the employment contract had been frustrated because the respondent’s injuries prevented him from performing the duties of the road boss position. On that basis, it denied that the respondent had been constructively dismissed.
The trial judge rejected the appellant’s frustration argument and found that the respondent had been constructively dismissed. The respondent was awarded 22 months of common law reasonable notice damages.
No Frustration of Employment
The ONCA began by restating the governing principles on frustration in the disability context. Frustration will only be established where there is no reasonable likelihood that the employee will be able to return to work within a reasonable period of time. Employers also remain subject to the duty to accommodate disabilities to the point of undue hardship. Nonetheless, an employment contract may be frustrated where an employee’s disability is serious, long-term, and ongoing, preventing the employee from performing the essential duties of their position within a reasonable time.
Applying these principles, the ONCA agreed with the trial judge that the appellant had not established frustration. The evidence did not show that the respondent was permanently unable to perform the essential duties of the road boss position, or that accommodation would have caused undue hardship.
The ONCA upheld three key aspects of the trial judge’s reasoning:
- The physical aspects of the road boss role were not essential duties that could not be accommodated, nor would accommodating them have fundamentally changed the nature of the position;
- The appellant had not accommodated the respondent or shown that accommodation would cause undue hardship, particularly given that it had accommodated his limitations in the past and the physical duties of a tow truck driver were similar to those of a road boss; and,
- The respondent’s physical limitations were temporary. The medical evidence did not indicate that he was permanently disabled from performing the essential duties of the road boss position. For example, one doctor recommended a “gradual transition to work”, which supported the conclusion that a return within a reasonable time remained possible.
The Court of Appeal therefore concluded that the trial judge applied the correct legal analysis and properly found that the respondent could have continued working as a road boss, with or without appropriate accommodation.
No Loss of Fringe Benefits
The ONCA allowed the appeal in part by overturning the trial judge’s finding that the respondent had suffered a compensable loss of employment benefits relating to his use of a tow truck and cell phone.
The Court of Appeal held that the tow truck was clearly provided as a work vehicle, not as a personal employment benefit. The ONCA compared it to a school bus or farm tractor because it was a specialized, heavy-duty vehicle. The respondent’s personal use was incidental, limited to activities such as commuting or small errands during lunch breaks. The documentary evidence, including tax forms, also did not show that the tow truck had been treated as a taxable employment benefit.
The ONCA reached the same conclusion regarding the company cell phone. The evidence showed that the phone was provided for business purposes and did not form part of the respondent’s overall compensation package.
The Court of Appeal accordingly reduced the damages award by more than 50%, from $263,163.77 to $137,523.77, to remove the amounts attributed to the tow truck and cell phone.
Key Takeaways
This decision is useful for employers because it confirms both the evidentiary burden required to establish frustration and the importance of a careful accommodation analysis before altering or changing an employee’s role after disability leave. An employer relying on frustration must be able to demonstrate that the employee’s disability is sufficiently serious, prolonged, and ongoing that the employee cannot perform the essential duties of their position within a reasonable time. The employer must also be prepared to show that reasonable accommodation was considered and that further accommodation would amount to undue hardship.
The decision also gives employers helpful guidance on the treatment of work tools and alleged fringe benefits. Equipment supplied primarily for work purposes that are not considered to be taxable benefits will not necessarily be compensable on termination simply because the employee had some incidental personal use of it. To reduce risk, employers should clearly document whether vehicles, phones, laptops, and similar tools are provided for business use only or form part of the employee’s compensation package. Employment agreements, policies, handbooks, and tax documentation should be aligned so that the intended treatment of these items is clear.
Need More Information?
For more information or assistance with employee accommodations, policies or wrongful dismissal actions, contact Naomi Santesteban at nsantesteban@filionlaw.com or your regular lawyer at the firm.