A recent case,1 heard by the Superior Court of Québec, raises the issue of the validity of releases or, in other words, “transactions” (settlements) entered into by parties and applicable to a notice of termination of an individual contract of employment governed by the provisions of the Civil Code of Québec.2 The relevant articles provide that either party to a contract with an indeterminate term may terminate it by giving notice of termination in reasonable time to the other party, taking into account, in particular, the nature of the employment, the special circumstances in which it is carried on and the duration of the period of work (Art. 2091). The employee may not renounce his right to obtain compensation for any injury he suffers where insufficient notice of termination is given or where the manner of resiliation is abusive (Art. 2092). However, a party may unilaterally resiliate the contract of employment without prior notice, if for a serious reason (Art. 2094).

FACTS

The plaintiff Desfossés had been working for the employer, Comunika, a small advertising agency, since its founding in 1998, when her employment was terminated on February 2, 2007. At the agency, she was responsible for internal management and bookkeeping, a position of trust which she held without any real supervision. The defendant Provost, a co-owner of Comunika, having grown suspicious of the administration of petty cash, initiated an investigation which revealed serious irregularities perpetrated by Desfossés. Furthermore, certain commissions had allegedly been paid to her prematurely or several times for the same work performed for clients under her responsibility.

Mr. Provost summoned her on January 30, 2007 to inform her of the findings of his investigation and to notify her of the termination of her employment, in light of the fact that the bond of trust between the parties had been irremediably destroyed. He afforded her the possibility of remaining in her position for a few weeks, so that the management of the books could be maintained. The employee declined the offer. The parties agreed to ask the company’s accounting firm to prepare the employee’s final pay cheque, and took turns asking the accounting firm for advice with respect to the provisions of An Act respecting labour standards3 on notices of termination.

On February 2, the parties met and executed an agreement to settle the separation allowance to be paid to Ms. Desfossés, equal to four weeks of wages, as well as the payment of amounts owing for accrued leave, from which an amount of $7,500 was deducted, representing the amount estimated by Mr. Provost of commissions overpaid to the employee.  

Notwithstanding the agreement, the plaintiff sued the employer claiming an amount of more than $80,000 as termination pay in lieu of notice. The employer objected that an agreement was in force and, should the Court hold that no “transaction” had occurred, then the employer would claim an amount of $17,209.46, representing overpayment of monies to the employee. At issue in this case was the very existence of a “transaction” and the question of whether such “transaction”, if any, should bar the former employee from claiming compensation in lieu of a reasonable notice of termination.  

DECISION OF THE SUPERIOR COURT

Firstly, the Court was of the view that the agreement executed by the parties was a “transaction” within the meaning of the Civil Code of Québec. Indeed, the plaintiff had not discharged the burden of proving that she had not freely assumed the obligations contained therein. The fact that neither party was really aware of the rules applicable to notices of termination could not negate the existence of a “transaction”.

That being said, the Court did not consider that the transaction’s existence, in and of itself, was determinative of the issue of the sufficiency of the notice of termination, since Article 2092 C.C.Q. provides that an employee may not renounce his right to obtain compensation for any injury he suffers where insufficient notice of termination is given. Since this article is of public order and protective in nature, it is now well established that the party to whose benefit the provision enures may waive the protection which it affords him or her, as long as he or she does not do so in advance but rather only when the right provided for by this provision has arisen and may be exercised with full knowledge of the consequences. The validity of the “transaction”, therefore, rests on these two criteria.

Noting that the person whose employment is terminated is often in a position of vulnerability with respect to his or her employer, and that he or she can sometimes make decisions the consequences of which may not have been totally thought out, the Court considered that it was necessary to review the circumstances under which a person waives his or her notice of termination, in order to guarantee that it was done advisedly. Such was not the case in the matter at hand: the employee was in a state of shock and did not consult anyone, with the exception of representatives from the employer’s accounting firm. A different conclusion would probably obtain in cases where a person consulted a union advisor, a lawyer, or had taken some time to think things through; the same could be said if the agreement had been met with counteroffers, for instance. According to the Court, the “transaction” was relative in nature and did not constitute a complete bar to the plaintiff’s claim. The Court, therefore, addressed the employer’s argument to the effect that, in light of the fact that the employment had been terminated for a serious reason, no notice of termination was due to the employee.  

Emphasizing that, because of her responsibilities, the employee fit into a special category in respect of which expectations were very high, and based on evidence adduced by the employer as to the irregularities in the work performed by Ms. Desfossés, the Court considered that Comunika had a serious reason to terminate the contract of employment between it and the plaintiff. Accordingly, the employer was not required to provide the plaintiff with a notice of termination; the plaintiff’s claim was therefore dismissed. Moreover, since notice of termination was not required of Comunika, the “transaction” entered into had to be applied. Comunika’s counterclaim was dismissed, because full force and effect had to be given to the “transaction”.  

CONCLUSION

Had the employer not had a serious reason for dismissal releasing it from the notice requirement, the “transaction” would have been declared invalid. This case emphasizes the importance of setting out in “transactions” that the employee acknowledges having had sufficient time to review the nature, the terms, the conditions and the scope of the “transaction” and to seek, if necessary, legal advice from a lawyer of his or her choosing. It is also important to provide the employee, in actual fact, with a reasonable timeframe to do so. The length of time to be permitted for this purpose may vary depending on the type of position and the circumstances. A delay of five to seven days is generally reasonable.