The Ontario Court of Appeal has raised the bar for employers trying to argue that an employee's disability frustrated their employment contract. Hill v. B&B Towing, 2026 ONCA 577 confirms that a temporary, accommodable limitation is not an exit ramp — and clarifies when company vehicles and phones count as damages.
A company can be tempted to treat a long medical leave as a convenient off-ramp. The role gets covered informally, someone else does the job for a year or two, and by the time the employee is ready to return, it feels easier to say the position "doesn't really exist anymore" than to work through accommodation.
The Ontario Court of Appeal just confirmed how expensive that instinct can be.
In Hill v. 1359768 Ontario Inc. (B&B Towing), 2026 ONCA 577, released August 10, 2026, the Court upheld a finding that a towing company constructively dismissed its "road boss" of seventeen years by quietly eliminating his position while he was on disability leave and offering him a driver's job at lower pay when he tried to return. The company argued his disability had frustrated the contract. The Court disagreed, and the employee walked away with a reasonable notice award that started at $236,163.77 before the Court of Appeal trimmed it to $110,523.77 on a narrower point about company property. Ogletree Deakins' analysis of the decision called it a reinforcement of "the high threshold employers must meet to establish frustration" — and that threshold is the part most Ontario employers underestimate.
Jack Hill spent roughly seventeen years managing fifteen to twenty-seven drivers for B&B Towing as its road boss — ordering parts, maintaining vehicles, handling complaints, hiring and firing, running the administrative side of the operation. Physical towing was about 10 percent of the job.
After emergency surgery in May 2020, Hill went on long-term disability. By late 2021, his doctors recommended a trial return with accommodations: no lifting over thirty pounds, and a preference for administrative duties over physical ones — exactly the kind of accommodation a road boss role could absorb, given how little of it was physical to begin with.
While he was out, the company's principals had simply absorbed his duties themselves. In September 2021, they told Hill the road boss position had been eliminated for financial reasons and that he would come back as a tow truck driver, at lower pay. He returned under protest in January 2022, injured his back a month later when an accommodation device malfunctioned, and formally claimed constructive dismissal.
At trial, the judge found the demotion was a constructive dismissal; the company argued it owed nothing, because Hill's disability had frustrated the contract before the demotion ever happened. If that argument had succeeded, the employer's notice obligations would have simply evaporated.
The Court of Appeal confirmed the trial judge applied the right framework, one every Ontario employer should recognize before reaching for a frustration argument:
On the facts, the answer ran against the employer at every step. Hill's absence — about nineteen months — was relatively short. The business had functioned without him, which is not the same as proving it could function without the role. His doctors supported a graduated return. And critically, the company had already accommodated his restrictions once before; it simply chose not to this time. His February 2022 injury, the Court noted, came from a malfunctioning accommodation device — not from his underlying limitations reasserting themselves.
Frustration is not a release valve for a role an employer has decided it would rather not keep filled. It is a narrow doctrine, reserved for incapacity that prevents a return to the role, or a comparable one, within a reasonable time even with accommodation.
The Court of Appeal did not side entirely with Hill. It trimmed the trial award by $125,640, finding the lower court wrongly treated his use of a specialized company tow truck and a company cellphone as personal employment benefits owed to him during the notice period.
The distinction the Court drew is a useful one for any employer that supplies equipment to employees: a company asset is a compensable benefit only if the employee can show it delivered a genuine personal benefit as part of their compensation — evidenced by things like T4 reporting, disclosure to the CRA as a taxable benefit, or a value proportionate to salary. Absent that evidence, it is simply a work tool, and its loss on termination is not a loss of compensation. Hill's negligible personal use of a specialized tow truck, never reported as a taxable benefit and disproportionate in value to his salary, didn't clear that bar. Neither did a bare assertion about the phone. The case gives Ontario employers guidance on both halves of this fact pattern, the accommodation question and the damages question, in a single decision. Gilbertson Davis's review focuses on the frustration analysis.
1. A long leave is not, by itself, a frustration argument. The bar requires showing the employee cannot return within a reasonable time, even with accommodation — not administrative convenience dressed up as a legal defence. If you have ever accommodated the same limitation before, that history will be used against a later frustration claim.
2. "We filled the role informally" cuts against you, not for you. The fact that Hill's duties were absorbed without a documented business case for eliminating the position undercut the company's position rather than supporting it. If restructuring is genuinely necessary, that case needs to be built and documented independent of the disability leave — not layered on top of it.
3. Undefined job descriptions are a liability during accommodation disputes, just as they were in Wilsher v. Olympic Wholesale on the investigations side. Without a written description of essential duties, an employer has a much harder time proving a role genuinely cannot be performed with accommodation.
4. Company property is not automatically compensation. Track which employees receive a taxable-benefit slip for vehicle or device use, and which are simply issued a work tool. That paperwork is now doing real legal work in notice-period damages calculations.
5. Accommodation obligations don't pause because a role is inconvenient to hold open. The duty to accommodate to the point of undue hardship under the Ontario Human Rights Code applies through the length of a leave, not just at its outset — and the Ontario Human Rights Commission's Policy on ableism and discrimination based on disability expects accommodation needs to be assessed on current information.
Get current medical evidence before deciding a role is unfillable. A prognosis that supports a graduated return, with defined restrictions, is the single most important document in this fact pattern — and one this employer did not follow up on.
Document the essential duties of every role that could face an accommodation question. If 90 percent of a job is administrative and 10 percent physical, that ratio needs to be on paper before a dispute, not reconstructed afterward in litigation.
Separate any genuine restructuring decision from the timing of a disability leave. If a role is being eliminated for real financial reasons, build and date that business case independently. Doing it while someone is out on leave, without that paper trail, looks exactly like what it looked like here.
Audit how company vehicles, phones, and equipment are treated on your books. If personal use is permitted and intended as compensation, report it as a taxable benefit. If it is a work tool, say so in policy. Ambiguity here now has a quantified cost.
Bring in outside capacity when an accommodation file gets complicated. Long-term disability returns that touch job design, compensation structure, and legal risk simultaneously are exactly where an internal HR function benefits from experienced outside support — see our HR services for how we structure that work, or read our companion piece on what employers can demand from medical documentation before triggering the duty to accommodate.
Hill v. B&B Towing is not a case about a company acting in bad faith. It is a case about a company taking the path of least resistance during a long leave, then discovering at trial that "we found it easier to run without him" is not a legal defence — it is evidence against the defence.
The correction on damages is a reminder that legal risk cuts both ways. Get the accommodation analysis right, and get the compensation paperwork right, and the exposure on both sides shrinks considerably.
Navigating a complicated disability return or accommodation file? Our HR services work covers accommodation process design, job description documentation, and manager training so these decisions get made correctly the first time. Book a 30-minute consultation or contact us.
1205 Consulting provides HR and workplace investigation services. This article is general information, not legal advice. Court decisions are summarized from public sources and published legal commentary; read the primary decision and consult employment counsel before acting on any specific situation.
In Hill v. 1359768 Ontario Inc. (B&B Towing), 2026 ONCA 577, the Court of Appeal upheld a finding that a towing company constructively dismissed a long-serving "road boss" by demoting him to driver after he returned from disability leave. The Court rejected the employer's argument that his disability had frustrated the employment contract, because his limitations were temporary, medically supported for a trial return, and could have been accommodated. The Court did reduce the damages award by $125,640, finding the trial judge wrongly treated a company tow truck and cellphone as personal benefits rather than work tools.
Frustration occurs when an unforeseen event makes performance of the employment contract radically different from what was agreed, through no fault of either party, releasing the employer from its notice obligations. Ontario courts hold employers to a high bar. Hill confirms the analysis asks whether the employee could perform the essential duties of the role at the time of termination, whether he could return to a comparable role within a reasonable time with accommodation, and so whether the limitation would prevent a return within a reasonable time. A short absence, supportive medical evidence, and a history of prior accommodation will defeat the defence.
Not automatically. The Court of Appeal held that specialized equipment supplied to do the job — a tow truck, a company phone — is a work tool, not a compensable personal benefit, unless the employee proves it provided a genuine personal benefit as part of their compensation. Evidence of that includes T4 reporting, CRA disclosure as a taxable benefit, and a lease value proportionate to salary. A bare assertion of occasional personal use is not enough. This reduced the damages award in Hill by $125,640.
Get current medical evidence on prognosis and expected return-to-work timelines before concluding a role cannot be filled. Document whether the essential duties of the position are defined in writing, and whether any physical limitation is truly incompatible with those duties or is being used as a convenient reason to restructure. Explore accommodation, including temporary modified duties, before treating an absence as a frustrating event. This is a legal test with a genuinely high bar, and it should be assessed with employment counsel on the specific facts, not assumed from the length of a leave alone.
Fractional HR for Canadian employers: senior HR leadership for a defined period, from stabilizing employee relations to building the people function.
Independent, employer-side workplace investigations for Canadian organizations, with a named investigator, a written scope, and a documented report.
Strategy and execution support for Canadian companies: a strategy that ships, with the operating plan, cadence, and accountability to deliver it.
The Ontario Court of Appeal has confirmed that a temporary layoff clause is not a termination clause, even when it sits under the 'Termination' heading and the termination language around it is void. Taylor v. Salytics Inc., 2026 ONCA 621 gives employers a workforce-flexibility tool most contracts still lack.
The HRTO has clarified what employers can — and should — demand of medical documentation before triggering the duty to accommodate. Baker v. Firon Roofing, 2026 HRTO 292 raises the evidentiary floor for disability accommodation claims in Ontario.
The Court of Appeal has held that 'at any time' and 'for any reason' termination language does not breach the ESA. It is the most consequential Ontario employment decision of the year — and the relief is narrower than the headlines suggest.
Practical perspectives on fractional leadership, workplace investigations, and Canadian market entry. Delivered monthly.
Free: HR Compliance Scorecard for Ontario Employers
Practical frameworks for consequential business and workplace decisions — no fluff, no spam.
Get your scorecard