Work Permit Expiry = Frustration of Contract?
A contract is a binding agreement that sets out each party’s rights and obligations. Sometimes, an unexpected event makes it impossible to carry on—this is where the doctrine of frustration of contract can apply. In employment, frustration can end the relationship without fault and typically without common-law notice or pay in lieu.
This article explains how a work-permit expiry can (and sometimes cannot) amount to frustration of an employment contract, and what employers and employees should consider.
What is “Frustration of Contract” in Employment?
An employment contract is frustrated when circumstances outside the control of both parties make performance impossible or make a return to work not reasonably foreseeable (for example, a devastating injury/illness or the workplace being destroyed).
In a true frustration scenario, the contract ends without fault. Generally, that means no reasonable notice or pay in lieu at common law. Employment-standards entitlements still need to be checked:
Ontario ESA & O. Reg. 288/01: Employees are not entitled to termination or severance pay where the contract becomes impossible to perform or is frustrated by an unforeseen event.
Important exception: If the frustration is due to the employee’s injury or illness, termination and severance pay may still be owed under the ESA, along with other potential remedies.
Does a Work-Permit Expiry Frustrate the Contract?
Employers in Canada may only employ people legally entitled to work (citizens, permanent residents, or foreign nationals with valid authorization). Hiring or continuing to employ someone without valid authorization can lead to penalties. For the worker, once a permit expires or is revoked, they generally cannot continue working.
Whether that situation frustrates the employment contract is fact-specific:
Often yes: If it is unlikely the employee will regain the legal right to work in the foreseeable future—for example, a work-permit extension is refused—the employer may be able to establish frustration.
Often no: If there’s a realistic path back to authorized work in the near term—for example, a pending permanent-residence decision that could soon confer work eligibility—the contract may not be frustrated.
In short, the closer the scenario is to impossibility with no near-term solution, the stronger the frustration argument; the more temporary or resolvable the barrier, the weaker it is.
Risks for Employers
Act carefully on expiry. Ending employment immediately on permit expiry may avoid immigration-compliance risk but can create employment-law exposure if frustration isn’t clearly met.
High threshold, close scrutiny. Courts scrutinize frustration claims because the stakes are high (employees can lose termination/severance pay). Employers must prove the contract was truly frustrated.
Document everything. Keep records of status, correspondence, and timelines supporting the conclusion that continued employment is legally impossible in the foreseeable future.
Guidance for Employees
Don’t accept labels at face value. “Frustration” is a legal conclusion, not just a label.
Gather the facts. Save immigration filings, decisions, timelines, and employer communications.
Get advice promptly. If frustration isn’t established, a termination may be wrongful, and ESA/common-law entitlements may be owed.
How Vanguard Law Can Help
We advise both employers and employees on work-authorization issues and frustration-of-contract disputes—assessing immigration timelines alongside ESA and common-law obligations, and charting practical, compliant next steps.