An unfortunate reality of business is that employers are required to conduct employee terminations. In cases where cause is not alleged, employers typically offer severance packages in exchange for the employee executing a full and final release.
The release typically includes a release of all matters relating to human rights. From time to time, employees attempt to challenge these releases. Most recently, our firm argued such a case at the Ontario Human Rights Tribunal. We were successful, and we believe that the case is illustrative of the approach the Tribunal is currently taking with respect to the reliability of releases.
The case involved William Coutts Company Limited (operating as Hallmark Canada), and the facts are fairly straightforward. The applicant worked as a manager for Hallmark for approximately 13 years. On June 4, 2008, Hallmark closed its manufacturing plant in Toronto and was required to terminate the employment of more than 200 employees, including the applicant.
As part of the mass termination, Hallmark made written severance offers to all employees whose employment was terminated, including the applicant.
After receiving notice of termination, the applicant was offered and accepted work with Hallmark beyond his termination date in exchange for being paid at a rate of 1.5 times his regular salary.
On June 20, 2008, and while still working, the applicant delivered a letter to Hallmark, which acknowledged that he had “always received fair treatment, good working conditions, and fair wages” at the company, but requested a higher severance payment because he was fifty years of age and had four children to support.
On July 21, Hallmark denied that request stating that all employees received a severance offer based on a formula. In response, the applicant signed the release. The release contained explicit language regarding human rights complaints.
After receiving the settlement funds, the applicant sent a letter to Hallmark alleging that he was discriminated against during his entire tenure and brought a human rights application.
Hallmark immediately moved to have the application dismissed, relying on the release.
The Human Rights Tribunal held that the release was enforceable and dismissed the application. In its reasons, the Tribunal stated that a release might not be enforceable in certain circumstances where the facts show that the employee misunderstood the significance of the release, received little or no consideration for it beyond statutory entitlements under employment standards legislation, or was in such serious financial need that she or he felt there was no choice but to accept the package offered.
The Tribunal rejected that the applicant met any of those situations. First, it held that the applicant had possession of the release for over two months prior to executing it. Second, the Tribunal noted that the applicant tried to negotiate the settlement and acknowledged that he read the release which specifically precluded a complaint under the Human Rights Code.
Finally, while the applicant stated that he was distraught and in need of money to survive, the Tribunal rejected that this vitiated the release. The Tribunal stated that while the applicant may have been distraught “his situation was undoubtedly no different than many, if not most, of the more than 200 other employees who were laid off at the same time as him.” Furthermore, it noted that Hallmark did not threaten to withhold his statutory entitlements if he did not sign the release.
What Does this Mean for Employers?
- Releases can be enforceable, but steps should be taken to help ensure their enforceability including:
- Ensure the release is clear and specifically states that acceptance of the offer precludes all claims, including human rights, employment standards and workplace safety and insurance claims;
- Give employees time to review the severance offer and consider the release – where an employee seeks a short extension, provide that time; and
- Ensure employees are offered more than their minimum statutory entitlements and/or what is promised under their contract of employment.