As most employers are well aware, a former employee can pursue a claim against their employer up to two years after the end of the employment relationship. That is quite a long time to “wait and see” if a problem might develop. As a result, it is not uncommon for employers to attempt to obtain closure and finality by offering some additional compensation to an employee at the end of the employment relationship in exchange for a full and final release. Even where there are no major issues in dispute, or where the employee’s entitlements appear to be clearly set out in an unambiguous employment agreement, the peace of mind that a signed release brings can be well worth the additional upfront cost.
However, the reality is that there are circumstances where a release will not act as a total shield against a claim for damages arising from the employment relationship. As the entire goal of a release is to close the door on any potential future claims, this can come as quite a shock to both parties.
In recent years, one of the recurring circumstances where the efficacy of a signed release has been debated is where a former employee files an application with the Ontario Human Rights Tribunal. It is important to understand right from the start that the Ontario Human Rights Code (the “Code”) does not explicitly bar applications where an applicant has executed a release in favour of a respondent. An employer can file a request for early dismissal of an application in reliance on a release, but the Tribunal ultimately must decide whether, in the specific circumstances, it would “constitute an abuse of the Tribunal’s process to allow the application to proceed to a hearing on the merits”.
The Tribunal, as well as the courts, recognizes that where a release demonstrates a clear intention to fully and finally resolve issues between two parties, it should not be easily disturbed. However, there are circumstances where deviating from this principle is necessary. We have previously written about the decision of the Ontario Divisional Court in Pritchard v Ontario (Human Rights Comm), which outlines factors to consider when assessing whether to enforce a release. These factors include whether the party fully understood the significance of the release, whether the party received sufficient and fair consideration for signing the release, evidence of economic pressure, and evidence of psychological or emotional pressure amounting to duress.
In Pritchard, the Divisional Court found that the Human Rights Commission (as it then was) had erred in dismissing the employee’s application due to the existence of a signed release, noting that the Commission had not properly considered whether the release should be upheld in the circumstances. Since this decision, the Tribunal has denied employers’ requests for early dismissal of applications, despite the existence of a signed release, if the evidence does not conclusively indicate that allowing the application to proceed would constitute an abuse of process (see, for example, Bielman v Casino Niagara).
However, in the right circumstances, the Tribunal has not hesitated to dismiss applications. We saw this outcome recently in Townsend v John Deere Financial Inc. In this case, the applicant had signed a release in exchange for a monetary payment following the dismissal of her employment. During the termination meeting, the employer had reviewed the termination letter and release with the applicant and gave her the opportunity to ask questions. The applicant was sent home with the offer and release and provided with just over two weeks to review and determine whether she would like to accept. Despite this, the applicant returned the signed release the following day.
Both the termination letter and the release indicated that by accepting, the applicant would be releasing all claims which could arise from her employment or the termination of her employment. The release specifically noted that this included any claim pursuant to the Code. Finally, the release included a declaration that the applicant had “the opportunity to receive” or had received legal advice regarding the release and was signing with a fully understanding of the terms.
After signing the release, the applicant had brought an application alleging discrimination on the basis of disability and reprisal. While she did not dispute that she signed the release, and that it purported to preclude her application, she maintained that her application should be allowed to proceed for a variety of reasons, including that she could not afford a lawyer at the time and her mental health issues prevented her from fully understanding the implications of signing the release.
The Tribunal was not convinced by the applicant’s arguments. It noted that the applicant had provided no medical information regarding her mental health issues, noting that, in fact, she had asserted that she read and reviewed the release and concluded that it did not prevent her from commencing a human rights application (despite the clear language stating otherwise). In addition, the Tribunal noted that the applicant appeared to have made no effort to obtain legal or other advice before signing the release the day after she received it.
As a result, the Tribunal dismissed the Application, finding that it would be an abuse of process to allow it to continue.
Key takeaways
Asking an employee to sign a release should never be treated as a mere formality. Rather, to ensure that the release effectively protects against future action, employers should always ensure that:
- the release contains clear, unambiguous language to protect against human rights complaints;
- the employer takes the time to explain to the employee the termination letter and release and allows them to ask questions;
- the offer provides sufficient and valid consideration to the employee in exchange for the release; and
- the employee is given sufficient time to obtain independent legal advice regarding the release. An employee should never be permitted to sign a release on the spot.
Similarly, an employee should never sign a release or agree to a termination package without obtaining independent legal advice and ensuring they fully understand what they are agreeing to. An employee should never count on a release not being enforced – the Tribunal, and the courts, will absolutely uphold a release unless there is good reason not to.
By Brittany A. Taylor for Rudner Law
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