FCA Confirms a Release Will Not Bar a Claim for Unjust Dimsissal
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Employers typically will have an employee sign a release document at the time of termination, which states that the employee has accepted the employer’s notice of termination and agrees not to bring any civil claims against the employer in the future. Such releases are executed to give employers peace of mind in knowing that the matter has been settled and there is no chance the employee will bring a claim for wrongful termination. However, the Federal Court of a Appeal recently affirmed a decision stating that a release will not bar a federally-regulated employee from bringing such an action, so long as they do so within three months of the dismissal date.

The employee in this matter had been employed with a national bank for six years as a financial advisor. When she was terminated, the bank offered her the option of remaining on the payroll for a period of 18 weeks or accepting a lump sum payment. She chose the lump sum, and in return was asked to sign a release in favour of the employer, which she did. The release contained the following clause:

In exchange for the consideration set out in paragraphs 2-3, the Employee hereby releases and forever discharges BMO, its subsidiaries, affiliates, and successors and each of their respective officers, directors, employees, and agents from any and all actions, causes of action, claims, demands and proceedings for whatever kind of damages, indemnity, costs, compensation, and any other remedy which Employee or Employee’s heirs, administrators or assigns had, may now have, or may have in the future arising out of Employee’s employment or the termination of employment.

Despite having signed the release, the employee later filed a complaint for unjust dismissal and for unpaid wages under the Canada Labour Code (the Code). The bank then requested a preliminary hearing to determine wither the Adjudicator had jurisdiction to hear the matter, given the fact that the employee had executed a release. The Adjudicator ultimately held that they were bound by the decision in National Bank of Canada v Canada (Minister of Labour), which stated that an employee was not precluded from relief under the Code by reason of an agreement made with the employer, including a release. The Federal Court upheld this decision, citing s. 168(1) of the Code.

The court noted that such a finding could create uncertainty in terminations across the country, but found that it would be up to Parliament to amend the legislation to change matters. The Federal Court of Appeal recently upheld the lower court’s decision.

What Federally-Regulated Employers Need to Keep in Mind

Given the fact that a release is not sufficient to prevent an action for unjust dismissal, what can federal employers do to protect their interests following a termination? One option would be to limit the amount paid upon termination to the statutory minimum, since even a generous package may still leave an employer open to a claim. However, the more generous the original payout, the more likely a court would be to find that there is no basis for awarding additional damages to the employee. It is also important to keep existing employee contracts in mind, as the terms set out may indicate an employee’s entitlement to termination pay beyond the legislative minimums. Failure to honour the terms of the contract could also expose an employer to a claim.

Does this Apply to Employees Governed by Provincial Legislation?

While a federal claim for unjust dismissal cannot be barred by the signing of a release, will the same be said for a claim for wrongful dismissal? Currently in Ontario, a release is still viewed by the courts as intended – a document that will prevent any further claims, so long as the release is fair. If the balance of power at the time of signing is uneven, if an employee is asked to sign the release before seeking legal advice, or if the terms are deemed unfair for any reason, the release may be disregarded by a provincial court.

At Baker & Company, we take the time to meet with you and understand your unique needs in order to offer solutions to the diverse problems you may encounter in the workplace. The highly skilled Toronto employment lawyers at Baker & Company can review your employment policies and contracts to ensure that you are meeting your legal obligations while addressing and mitigating risk. Protect yourself, your workplace, and your employees. We rely on our broad base of experience and expertise to provide clear, pragmatic legal advice, and representation in litigation. Call us at 416-777-0100 or contact us online for a consultation.

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