If you’ve been on a medical leave for nearly two years and your employer suddenly starts talking about “frustration of contract,” it can feel like the ground is shifting beneath you. Many employees in Toronto and across Ontario reach this moment while still recovering, still receiving long-term disability benefits, and still unsure whether returning to work is even possible.

This is one of the most stressful points in a disability claim. You may be asking whether your employer can legally end your job, whether your benefits are about to stop, and whether you are about to lose everything you worked for. The answer is rarely simple, and employers often get it wrong.

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The Context: Why the Two-Year Mark Matters so Much

In Ontario, the two-year mark is significant because it is where employment law and disability insurance law collide. Most LTD policies change their definition of disability after 24 months, and employers often assume that a long absence automatically allows them to sever the employment relationship.

That assumption is dangerous and frequently incorrect.

While two years of leave raises legitimate questions about the future of the employment relationship, it does not automatically mean your contract has ended. Ontario courts look far beyond the length of the absence and focus on whether a return to work is reasonably foreseeable and whether accommodation obligations have truly been exhausted.

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What “Frustration of Contract” Actually Means

Under Ontario employment law, frustration of contract occurs when an unforeseen event makes it impossible to continue the employment relationship through no fault of either party. In disability cases, employers often argue that an employee’s medical condition prevents them from ever returning to work.

If frustration is established, the employment contract ends automatically, without notice or severance. Because the consequences are so severe, courts apply this doctrine very narrowly, especially where disability is involved.

A contract is not frustrated simply because an employee has been away for a long time. The employer must show that the employee’s inability to work is permanent or indefinite and that there is no reasonable likelihood of return, even with accommodation.

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Why Employers Raise Frustration After Two Years of Leave

Employers often rely on the two-year timeline because it aligns with changes in LTD policies. At this point, many insurers shift from an “own occupation” test to an “any occupation” test, and employers mistakenly believe this means the employment relationship is no longer viable.

In reality, insurance definitions do not determine employment rights. An employee can be unable to meet an insurer’s definition of disability and still be protected under employment and human rights law. Conversely, an employee can be terminated due to frustration and still qualify for ongoing LTD benefits.

The systems are separate, but employers often blur the linesto the employee’s detriment.

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The Duty to Accommodate Does Not Disappear After Two Years

One of the most misunderstood aspects of the frustration of contract is its relationship with the duty to accommodate under the Ontario Human Rights Code.

Employers are legally required to accommodate employees with disabilities to the point of undue hardship. This obligation continues even during long medical leaves. The employer must actively consider whether modified duties, alternative roles, reduced hours, remote work, or gradual return-to-work plans could allow the employee to remain employed.

Frustration can only apply once accommodation options have genuinely been exhausted. Courts are clear that an employer cannot rely on frustration simply because accommodation is inconvenient, costly, or administratively difficult.

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Why Employees Lose Their Jobs, and Their Claims at This Stage

Employees often face a double threat after two years of leave. On one side, the employer may terminate the employment relationship, claiming frustration of contract. On the other, the insurer may deny LTD benefits under the stricter “any occupation” definition, arguing that the employee is no longer totally disabled.

What makes this moment particularly dangerous is that decisions are often made based on thin or outdated medical evidence. Vague doctor’s notes, unclear prognosis language, or silence about accommodation potential can be misinterpreted as proof that the employee will never return to work.

Once these assumptions are on record, they are difficult to undo.

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The Evidence That Decides Frustration of Contract Cases

The frustration of contract cases turns almost entirely on medical and functional evidence. Courts are not persuaded by assumptions or timelines. They want clarity.

Strong evidence addresses whether the employee’s condition is permanent, whether improvement is possible, and whether meaningful work could be performed with accommodation. Treating physician opinions, specialist reports, and functional assessments carry significant weight, particularly when they directly address return-to-work potential.

Equally important is what the evidence does not say. Medical opinions that leave the door open to future improvement often undermine an employer’s frustration argument.

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Where These Disputes Are Decided in Ontario

Disputes over the frustration of contract are often litigated in the Superior Court of Justice, particularly where wrongful dismissal damages are claimed. In many cases, human rights issues are also involved, bringing the Human Rights Tribunal of Ontario into play.

Courts consistently emphasize that frustration is exceptional. Where employers terminate too early, rely on incomplete evidence, or fail to properly accommodate, they expose themselves to significant liability.

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How LTD Benefits Interact with Frustration of Contract

Many employees assume that termination ends their disability benefits. This is not always true. LTD benefits are governed by the insurance contract, not the employment relationship.

However, termination letters, employer communications, and medical summaries provided to insurers can heavily influence benefit decisions. Poorly timed statements or inconsistent language can trigger denials and create Limitation Act, 2002 risks if appeals or lawsuits are delayed.

This is why legal advice should be obtained before responding to termination notices or insurer requests.

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The Legal Strategy at Randy Ai Law Office

At Randy Ai Law Office, frustration of contract cases is approached with precision and urgency. We focus on controlling the medical narrative, clarifying prognosis language, and ensuring that accommodation possibilities are properly documented.

Our strategy involves aligning employment law and disability law so that one process does not undermine the other. When employers act prematurely, we pursue wrongful dismissal and human rights claims. When insurers deny benefits, we prepare appeals and litigation with the long-term picture in mind.

Every step is taken with an eye toward protecting income, preserving benefits, and enforcing your rights under Ontario law.

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Frequently Asked Questions (FAQs)

Can my employer terminate me after two years of medical leave?
Not automatically. Length of absence alone does not establish frustration of contract. The employer must prove that your disability is permanent or indefinite and that accommodation has been exhausted.

Do I get severance if my contract is frustrated?
If frustration is legitimately established, severance is not owed. However, many frustration claims are improper and can result in wrongful dismissal damages.

Can I still receive LTD benefits if my job ends?
Yes. Employment termination does not automatically end LTD entitlement. The insurance policy governs benefit eligibility.

What if my doctor is unsure about my prognosis?
Uncertainty often works in the employee’s favour. Courts are reluctant to find frustration where future improvement remains possible.

When should I speak to a lawyer?
As soon as frustration is raised or termination is mentioned. Early advice can prevent irreversible damage to both employment and disability claims.

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Speak with a Toronto Disability Lawyer today

If your employer has raised frustration of contract after two years of leave, do not assume the decision is final or lawful. Your rights under Ontario employment and human rights law may still be very much alive.

Randy Ai Law Office offers free consultations at our Toronto office and serves clients across the GTA. We will review your medical evidence, employment history, and LTD benefits to give you clear, strategic advice before deadlines are missed.

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