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Not all releases are created equal

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A recent case from Ontario is cautioning employers to think twice before relying on a release from an employee to shield them from a future wrongful dismissal claim.

In Rubin v. Home Depot Canada Inc., 2012 ONSC 3053 Ontario Superior Court of Justice held that a release signed by an employee at the time his employment was terminated was unenforceable.

Eric Rubin, an employee with twenty years of service, was advised in a meeting that his position was being eliminated, effective immediately. In that meeting, Rubin signed a release in exchange for twenty-eight weeks’ pay in lieu of notice. Shortly thereafter, Rubin determined that this severance was insufficient and brought an action for wrongful dismissal. He contended that the release should not be enforced because he was not thinking clearly and did not believe that he had any other option. At the time he signed the release, he was not aware of his common law or statutory rights.

The employer argued that the release was fully enforceable. It submitted that the termination letter afforded him one week to consider the offer and Rubin was in no way pressured to make a decision at the meeting. Further, Rubin took the time to carefully read the letter and asked about the possibility of apportioning funds toward his RRSP.

The Court held that the release should be set aside on the basis that it was unconscionable. It found that Rubin did not have sufficient time to review the release and seek advice. Further, the employer took advantage of his vulnerable position and allowed him to believe that signing the release was his only option. Moreover, the offer was grossly unfair, particularly given Rubin’s long service, specialized skills and the fact that he was sixty-three years old.

The Court emphasized that while the decision should not be taken to detract from the right of parties to be bound by their agreements, it will not condone an employer’s use of its superior position to mislead an employee into an unconscionable agreement.

This case reminds employers that the circumstances of the execution of a release are crucial. Given the imbalance of power between employers and employees, courts will be reluctant to uphold an unfair release if the employee was unaware of their rights at the time of signing. Employers should ensure that employees are given time to consider the offer and seek legal advice. Otherwise, there is a significant risk that the release will not provide any meaningful protection from a wrongful dismissal action.

Alison Bird
Lawyer, Cox & Palmer

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Alison J. Bird

Employment Lawyer at Cox & Palmer
Alison Bird is a lawyer practicing in Halifax with the Atlantic regional law firm, Cox & Palmer. Alison is growing her practice in the areas of labour & employment law and litigation. Alison is a frequent presenter on employment law topics and recently presented on the challenges being faced by employers dealing with changing demographics in the workplace. Read more
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