Business Law / Litigation

Termination & the Effect of Signing a Release

Restructuring and mass terminations have become a common practice among large corporations in Canada. Employees, particularly those in large organizations, are used to watching for the signs that a round of layoffs may be on the horizon. Even if they haven’t been personally affected, many people know someone who has, and how the process goes. The employer will present the employee with a notice of termination (to take effect immediately or at some future date), along with a release document for the employee to sign. The document will most often include severance and termination pay that the employer will pay to the employee, which can be tempting to accept on the spot. However, it is vital that anyone presented with a release upon being terminated from their job seek legal advice before signing.

A release is a powerful document that can have the effect of prohibiting any future legal action against the employer with respect to the termination. If you sign one without proper advice, you could be throwing away your chance to get the compensation you deserve. This was the case in a recent decision of the Ontario Superior Court of Justice in an appeal from Small Claims Court.

The Employee Was Provided With Two Weeks to Review the Terms

In the case at hand, the appellant had been employed with Dell Canada since 2012. In 2016, the company merged with another organization, and the employee was made aware of his eligibility for two incentive awards totalling $8,000 USD. The appellant received notice of this offer in August of 2016, and the letter noted that both incentives were conditional on the appellant remaining an employee in good standing as of March 2017.

In January 2017, the appellant was terminated as part of a company restructure. He was presented with a letter of termination, an acknowledgment of the severance terms and a final release, which he was asked to sign and return within two weeks. Five days after receiving the documents, the appellant returned a signed release form and acknowledgment of the termination. In March 2017, the appellant was paid the smaller of the incentive awards, totalling $2,000 USD.

Eighteen months later, the appellant brought an action for wrongful dismissal against his former employer for payment of the larger incentive award, in addition to unpaid annual bonus payments and vacation pay. The appellant sought damages totalling just over $14,000, as well as his legal costs. The Deputy Judge dismissed the action, finding, among other things, that the signed release was a full defence to the appellant’s claim. The appellant then appealed the decision.

The ONSC found that the release in question pertained to any claim regarding damages for wrongful dismissal, bonus pay, benefits of every kind, wages, and more. As a result, there was no need to evaluate each of the items claimed on the merits, as the release was, in fact, a full defence to the claim. The Court stated:

The Appellant had the opportunity to seek independent legal advice before he decided to accept the severance offer. The Appellant acknowledged in cross-examination that after he accepted the severance offer and executed the acknowledgement and final release, he received everything he was supposed to receive from the Respondent pursuant to the accepted terms of severance. That is, the Respondent fulfilled its obligations. The acknowledgement and final release are clear – upon the Respondent fulfilling its obligations under the terms of the severance offer, the Appellant agreed not to make any further claims which included further claims for vacation pay, bonus, and wrongful dismissal. The terms of acknowledgement and final release are a bar to the Appellant’s action.

Advice Before Signing is Crucial

This case is a clear demonstration of the need for sound legal advice prior to signing away the right to bring an action for wrongful dismissal. Once a release has been signed, there is little that can be done if a terminated employee is later made aware of their right to additional notice or other compensation. While there are some circumstances in which a court will agree to set aside a signed release, there are strict conditions that must be met first. These include:

  • a finding that the termination terms failed to meet the statutory minimums provided under the Employment Standards Act;
  • a situation where the employee is not permitted to obtain independent legal advice before signing;
  • a clear imbalance of bargaining power between the employee and employer such as an employee’s illiteracy, blindness, illness or other disability and evidence that the employer has taken advantage of its position.

If you think that you have been wrongfully terminated or have questions about your termination package, contact GLG LLP in downtown Toronto. The firm’s litigation lawyers provide efficient and skilled trial advocacy for a range of employment litigation matters. Call the firm at 416-272-7557 or contact them online to schedule a confidential consultation.