In some circumstances when an employee is terminated, employers offer termination packages containing gratuitous offers that exceed the entitlements provided by minimum standards legislation and/or the employment contract. Often, these offers are conditional on the former employee executing a full and final release, where the release serves as written evidence of the full and final satisfaction of all matters relating to the employee’s employment. For employers, one of the primary purposes of a release is to prevent the former employee from pursuing legal action against the employer.
In Townsend v. John Deere Financial Inc., 2019 HRTO 1471, subsequent to signing a release, the former employee filed an application alleging that the employer discriminated against her on the basis of disability and reprisal, contrary to the Human Rights Code, R.S.O. 1990, c. H. 19 (the “Code”). In turn, the employer requested that the application be dismissed because the Applicant signed a full and final release in respect of the same issues. The Respondent maintained that allowing the application to proceed would be an abuse of process.
The Applicant commenced employment with the Respondent on April 23, 2018. On November 6, 2018, the Respondent’s Human Resources Division Manager, met with the Applicant to advise her of the termination of her employment on a without cause basis. At the termination meeting, the Human Resources Division Manager read through the termination letter and release (collectively, the “Release”) with the Applicant. The Applicant was provided with an opportunity to ask questions, and did so. The Applicant was also provided with an opportunity to take the Release home to review with a lawyer or other advisor before signing it. Despite being provided with more than two weeks to return the signed Release, the Applicant returned the signed Release the next day. The Release had not been witnessed and the Applicant confirmed in writing that the Human Resources Division Manager could witness the Release.
The Applicant signed both portions of the Release in exchange for a monetary payment. The termination letter contained a clause whereby the Applicant acknowledged reading, understanding and voluntarily accepting the terms as set out in full and final satisfaction of all claims that may arise as a result of the termination of her employment.
The Release also contained a clause whereby the Applicant released and forever discharged John Deere Financial Inc. from all actions whatsoever arising out of a list of factors and potential claims. Among the items listed was “any claim under… the Ontario Human Rights Code…”.
The Applicant further declared the following:
I HEREBY DECLARE that…I have had the opportunity to receive or have received legal advice with regard to this Release. I have read this Release, I understand all of its terms and conditions and I am executing it with full knowledge of its significance. I hereby voluntarily accept these terms for the purpose of making full and final compromise, adjustment and settlement of all claims as aforesaid….
Subsequently, the Applicant filed an application alleging that the Respondent discriminated against her contrary to the Code. The Respondent maintained that the Release barred the Applicant from proceeding with her application. While the Applicant did not dispute the Release, she maintained that the Release should not preclude her from proceeding with the application because:
(i) she could not afford a lawyer at the time she signed the Release;
(ii) she read the Release, but did not “conclude that [she] was not allowed to make a complaint with the HRTO”;
(iii) she was “still adjusting to coming back to work” after her stress leave;
(iv) she signed the Release without “fully understanding [her] legal obligations”;
(vi) she “couldn’t understand everything” and “all the repercussions” because of her “mental illness”; and
(vii) she “wanted to get things over with because of [her] situation.”
The Human Rights Tribunal of Ontario (the “Tribunal”) ultimately dismissed the application. The Tribunal acknowledged that while the Code did not explicitly bar applications where an Applicant executed a release in favour of a Respondent, the Tribunal has discretion to find that allowing an application to proceed in such a circumstance amounts to an abuse of process. Here, the Tribunal was not prepared to set aside the Release and held that it would be an abuse of process to allow the application to continue in the Tribunal’s process.
Responding to the Applicant’s allegations, the Tribunal stated that the Applicant did not establish that, because of her mental health issues, she was incapable of or otherwise prevented from understanding the clear terms of the Release. The Tribunal further stated that the Applicant’s alleged inability to retain a lawyer did not affect the fact that she freely signed the Release. Specifically, she acknowledged that she had been provided with a full opportunity to seek legal or other advice before signing it.
In addition, the Applicant did not provide any evidence about her financial circumstances, or her efforts in seeking legal advice on the Release. Instead, the Applicant reviewed the Release, signed it and returned it the following day. She did so without any apparent attempt to obtain advice, including legal advice, before returning it. As a result, the Tribunal did not find that the Applicant’s alleged inability to afford a lawyer prevented her from fully understanding and freely signing a clear and comprehensive Release.
Takeaway for Employers
For employers, this decision confirms the HRTO’s recognition that a signed release functions to protect employers from a former employee pursuing legal action. In order to be afforded these protections, employers want to ensure that:
- consideration is provided for the release;
- employee are informed of their right to seek legal advice; and
- ample opportunity is provided to the employee to consider the terms of the release.