October 2004FRUSTRATION OF THE CONTRACT OF EMPLOYMENT AND LONG TERM ABSENCE FROM WORKbyRobert Guthrie, Curtin University of Technology BJuris, LLB, LLM, MCom, PhDandFrances Meredith, Flinders University BA (Hons) MA (Adelaide) PhD (Flinders)Flinders UniversityISSN: 1321-7828ISBN: 1 74067 381 6Frustration of the Contract of Employment and Long Term Absence from WorkRobert Guthrie, Curtin University of TechnologyandFrances Meredith, Flinders University AbstractThis paper considers the issues that arise when a worker becomes incapacitated for work and suffers a long-term absence from work. It examines the doctrine of frustration of the contract of employment and its contemporary application, and focuses particularly on a recent decision of Hilton Hotels of Australia Limited v Pasovska which purported to apply the important authority of Finch v Sayers which has been influential in the interpretation of the application of the doctrine in employment matters. The paper also canvasses the effect of provisions in workers compensation statutes on frustration where the worker has been absent for a lengthy period and examines a number of cases where industrial tribunals have found unfair termination of employment of long term injured workers who have been dismissed without full consideration of their capacity for work. The paper concludes by suggesting that the decision in Finch v Sayers should be reconsidered having regard to contemporary influences and changes in labour market regulations.IntroductionThis paper considers the issues that arise when a worker becomes incapacitated for work and the contract of employment is put in peril by reason of long-term absence from work. As a consequence it examines the doctrine of frustration of the contract of employment and its contemporary application, and the effect of provisions in workers compensation statutes on the frustration of contract of employment circumstances. The doctrine of frustration, in general terms, provides that a contract comes to an end by operation of law when the obligations become incapable of performance for reasons other than the parties conduct or behaviour, most typically in the employment context, the death or serious injury of the worker. However, all State and Territory workers compensation statutes require employers to provide suitable duties to workers who are able to return to work, after a work related disability, within prescribed periods. For example section 122 Accident Compensation Act 1985 (Vic), section 84AA Workers Compensation and Rehabilitation Act 1981(WA), section 58B Workers Rehabilitation and Compensation Act 1986 (SA). These so called return to work provisions limit the prerogative of an employer to terminate a workers employment because they prevent the contract of employment from being terminated prior to the prescribed time limit. Arguably they also effect the operation of the doctrine of frustration. In examining the interaction of these concepts the paper examines the contemporary application of the case of Finch v Sayers 1976 2 NSWLR 540. which has been influential in the interpretation of the application of the doctrine of frustration of contract in employment matters. In the final section of this paper the decision in Finch v Sayers is reconsidered having regard to contemporary influences and changes in labour market regulations.Frustration of Contract of EmploymentThe doctrine of frustration of contract, as it applies to the contract of employment, generally provides that the contract of employment will terminate without any action on behalf of the employer or worker where it can be established that either or both of the parties to the contract of employment is unable by reason of circumstances or events beyond their control to perform or complete the contract of employment. Durham v Westrail 1995 WAIRC 56 at per Sharkey P referring to various authorities mentioned below. The event, which takes place, must be something which was not provided for or anticipated to be part of the terms of the contract. The law in relation to frustration of contract was recently reviewed by Ipp J in City of Subiaco -v- Heytesbury Properties Pty Ltd 2001 WASCA 140 at paras 66-71 (emphasis added). who observed (at para 71) that:In determining whether a frustrating event has occurred, regard may be had to all relevant circumstances. The evidence in question is not admitted so as to construe the contract and the parol evidence rule has no relevance. The purpose of the evidence is simply to show the change in obligations and that the contract cannot be performed in the way contemplated by the parties. Thus, in Brisbane City Council v Group Projects Pty Ltd the economic and other consequences of the relevant event were examined. In Finch v Sayers 1976 2 NSWLR 540, a case where it