Termination – Legal Release

[Kyle Charters]

#91404

Curious if we can have employees sign a release document when offering termination pay that only complies with the ESA, but does not exceed those minimum standards. Came across this in another chat and hadn’t heard it before. We are an Ontario employer. Any advice would be appreciated.

“If it’s the employer’s preference that terminated employees sign a release document (again quite standard), then the termination pay offered must exceed ESA requirements, as employers cannot require signed releases for simply meeting legally required payments.”

[Rick Tobin]

#91416

As a general rule, you should never ask an employee to sign a Release unless you are prepared to provide him/her with more money than the law, and his/her employment contract, actually require you to provide. This is because no court will enforce a Release, even though duly signed by the employee, if all that was paid to that employee, on termination, was the severance and termination pay owing to him pursuant to the Employment Standards Act and/or the contractual termination clause in his/her employment contract. As stated by the Ontario Superior Court in Yanez v. Canac Kitchens 2004 CanLII 48176, no signed release is legally enforceable if it provides the terminated employee with nothing more than the payments to which the law already entitles him/her.

In order to later persuade a court to enforce the signed Release, such as to prevent future claims by the employee, you generally must first persuade the court that you paid that employee a sum that exceeded what the Act and the contract required you to pay.

Accordingly, if you are not prepared to pay the employee anything more than what you are legally obliged to pay, there is no point in trying to get him/her to sign a Release. Without that additional money, the Release, although signed by the employee, is not worth the paper on which it is written!

(ii) Situations where a signed Release would probably be unnecessary
Even when you might be willing to provide the employee with an extra financial payment to ensure future enforceability of the Release, there are some situations where doing so will likely be a waste of your organization’s money, namely:

Where your employment contract with that employee contains no valid termination clause, and where you are therefore electing to provide the employee with continuation of his or her salary and benefits coverage for the entire period of applicable common law notice; and
Conversely, where the contract does contain a valid termination clause that your lawyers have assured you is absolutely certain to be upheld if challenged in court.
In both these situations, there is no risk of your organization being successfully sued for additional severance pay or pay-in-lieu of notice, and consequently, any signed waiver of the employee’s ability to sue the organization for that additional pay/severance would be unnecessary.

(iii) Situations where securing a Release may complicate the termination, or even increase the risk of further claims:
Asking an employee to sign a Release sometimes suggests that you think that your organization may be at risk of being ordered to pay significantly more money than what has been offered in the proposed severance package. To some employees, your request for a Release may imply that you are either not entirely confident in the fairness of that package, or alternatively that you have reason to believe that they may have a potentially successful claim against you on some other issue.

When an employee suspects this to be so, he or she will often insist on your paying significantly more than what has been offered, thereby making settlement far more difficult.

Alternatively, your request for a signed Release may encourage the employee to believe there is a valid claim arising from the manner in which he or she was treated, even though – in reality – no valid claim actually exists.

Depending on the employee, your insistence on a signed Release might actually dissuade them from accepting the settlement package that you have offered. In some circumstances, your insistence on a signed Release may even strengthen the employee’s belief in the legitimacy of a potential claim that would otherwise never have been advanced, thereby increasing the likelihood of litigation later being commenced against your organization.

HR Insider staff

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