On the termination date the employee was told that he was fired and called to an office. He was then presented with the termination documents, which included a release, and pressured to sign that day. He signed after about 15 minutes. The Court found that while the employee “read” the termination documents, he did not understand them. Further, it was found that the employee could not have understood the consequences of the release. The Court stated:
…The atmosphere during the termination meeting was tense and awkward. The plaintiff was in shock he was being terminated…To hold the plaintiff to the termination documents in the circumstances would be unconscionable. Neither Mr. Pink nor Mr. Davis explained any of the termination documents to the plaintiff…It was a grossly unfair and improvident transaction. The plaintiff received no legal or other suitable advice. Ultimately, the circumstances and resulting stress of the termination resulted in an imbalance in bargaining power and the defendant knowingly took advantage of the plaintiff’s vulnerability to its advantage…The offer contained in the termination documents was presented in a way that was directed to getting the plaintiff to accept, and in a manner set to take advantage of the plaintiff’s vulnerability.
This case is a good reminder of a classic lesson: never let an employee sign the release at the termination meeting. Never ever. While it can be tempting, just don’t do it. An employer could be dealing with an employee who is eager to sign a very generous package. Perhaps the employee knows that he/she will find new work soon, making the package even more generous. The employee may also be sophisticated and make comments that quite obviously show that he/she understands the situation and the fact that he/she will be releasing all of his/her legal rights.
Don’t be tempted. Our usual advice is to give the employee between 1–2 weeks to consider the severance package and, barring exceptional circumstances, not accept the returned release for at least a few days after the termination meeting. While the above case had some exceptional facts, it shows that accepting it earlier creates a risk that it could be challenged on the basis of unconscionability. This scenario may leave you in a costly legal fight that could have been avoided with a little more patience and good practice.
By: Benjamin Aberant and Shana Wolch, McCarthy Tetrault LLP
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