Quick Hits
- In Hill v. 1359768 Ontario Inc. (B&B Towing) (2026 ONCA 577), the Ontario Court of Appeal unanimously held that a trial judge did not err in finding that an employment contract was not frustrated where an employee’s physical limitations were temporary, could be accommodated, and did not prevent the employee from performing the essential duties of his position within a reasonable time.
- However, the court allowed the appeal in part on the issue of damages, holding that the trial judge erred in awarding more than $125,000 in damages for the loss of use of a company tow truck and cellphone that were work tools rather than personal employment benefits.
The decision reinforces the high threshold employers must meet to establish frustration and provides a practical framework for distinguishing compensable fringe benefits from mere employment tools in damages assessments.
The Facts
Jack Hill worked for B&B Towing for approximately seventeen years as its “road boss,” managing fifteen to twenty-seven drivers, ordering parts, maintaining vehicles, handling complaints, hiring and discharging employees, and overseeing administrative work; physical towing comprised about 10 percent of his duties. After emergency surgery in May 2020, he received long-term disability benefits and, by late 2021, his doctors recommended a trial return with accommodations, including lifting no more than thirty pounds and a preference for administrative duties.
While Hill was on leave, B&B’s principals assumed his road boss duties and told him in September 2021 that the position had been eliminated for financial reasons; he would return as a tow truck driver at lower pay. He returned under protest in January 2022, injured his back on February 17 when an accommodation winch malfunctioned, and formally took the position that he had been constructively dismissed on February 25. He never returned to work.
The Decisions Below
The trial judge found that the appellant had constructively dismissed Hill by demoting him and rejected the employer’s frustration defence. She assessed the reasonable notice period at twenty-two months and awarded damages of $236,163.77, which included $123,000 for the loss of use of a company tow truck and $2,640 for the loss of use of a cellphone during the notice period.
The Court of Appeal’s Analysis
Frustration: Defence Dismissed
Despite the trial judge’s brief reasons, the court of appeal held that she applied the correct contextual framework, which required consideration of:
- whether Hill could perform the material duties of the road boss position at termination of employment;
- whether he could return to a comparable position within a reasonable time with reasonable accommodation; and
- whether his limitations were temporary or constituted a frustrating event.
The court upheld the result: Hill’s nineteen-month absence was relatively short; the business operated without him; his doctors supported a trial return; and B&B had previously accommodated his restrictions. His February 2022 injury resulted from a malfunctioning accommodation device, not his underlying limitations.
Damages: Tow Truck and Cellphone Not Compensable Benefits
The court allowed the appeal on damages, deducting $125,640 for the tow truck and cellphone, and distinguished employment tools from compensable fringe benefits.
A company vehicle or cellphone is compensable only if the employee proves it provided a personal benefit as part of contractual compensation; otherwise, it is an employment tool. The court found that Hill’s negligible personal use of the specialized tow truck—which was not pleaded or reported as a taxable benefit and had a lease value disproportionate to his salary—did not establish a compensable benefit, and that his cellphone claim likewise failed for lack of evidence beyond a bare assertion.
What This Means for Employers
Frustration remains a high bar, and accommodation history matters. Employers must show that a disability is serious, lengthy, and ongoing, prevents performance of essential duties within a reasonable time, and cannot be accommodated without undue hardship; a relatively short absence, medical evidence supporting a return, or prior accommodation will undermine the defence.
Work tools are not fringe benefits. Specialized equipment supplied to perform the job—such as tow trucks, radios, and machinery—does not create damages exposure merely because the employer tolerates negligible personal use.
Evidentiary markers of personal benefit matter. Courts will consider objective indicia such as T4 reporting, Canada Revenue Agency (CRA) disclosure, pleadings, and the benefit’s value relative to salary; employees must prove meaningful personal benefit, not merely assert it.
Documenting the purpose of company assets. Employers may want to state whether vehicles, phones, and other equipment are work tools or personal benefits, and align reporting practices accordingly.
The Bottom Line
Hill v. B&B Towing provides useful guidance on frustration and damages, confirming that temporary disabilities may not frustrate an employment contract where accommodation is feasible and that specialized company equipment is not a compensable benefit absent evidence of personal use. The decision offers a practical, evidence-based framework for employers that provide specialized equipment to their workforce.
Ogletree Deakins’ Toronto office will continue to monitor developments and will post updates on the Canada, Cross-Border, and Leaves of Absence blogs as additional information becomes available.
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