How to make a signed release stick

“In 2023, there are still a surprising number of employers who forget one or more of those four points.”

So says Alan Riddell, a partner at Soloway Wright in Ottawa, in discussing best practices when it comes to signed releases.

The use of such documents was once again in the spotlight with a recent Ontario Human Rights Tribunal decision, where the employer was the victor.

Discrimination complaint after dismissal

The case involved an engineering coding specialist and administrative assistant who worked for a company that sells suspended platforms. She was there from September 2014 until March 2018 when her employment was terminated; the termination provided for payment of final wages, accrued vacation and three-weeks’ notice pay.

Roughly four months later, the woman filed an application of discrimination with the Ontario Human Rights Tribunal (OHRT) with respect to employment because of sex, including sexual harassment.

It was decided that a preliminary hearing be held to determine if the application should be dismissed since she had signed a “Final account and release letter.” And in a Sept. 12, 2023 ruling, the tribunal dismissed the application, citing the release which “discharges the respondents from all liabilities related to the applicant’s employment.”

While the facts are pretty sympathetic to the employee, it appears this person didn't really review the release, says Leslie Dizgun, co-chair of the business litigation group at Brauti Thorning in Toronto.

“I don't think she, necessarily, was offered a substantial settlement based on her years of service… but the tribunal sort of put the cap on: ‘We're not really going to take a close look at these settlements of a wrongful dismissal.’”

Encourage employees to seek legal advice

For employers, the ruling highlights four key areas they should focus on in handling a signed release, says Riddell. And the first is the importance of recommending the departing person seek legal advice.

At the preliminary hearing in August 2023, the employer said a director expressly told the employee that she should not sign the release in the meeting, and instead take it home for review to ensure it was understood, and to seek legal advice if desired.

“Despite the respondents’ efforts, both in person and in writing, to ensure that the applicant’s rights and interested were safeguarded, the applicant, who presented as articulate and not unsophisticated at the hearing, chose to sign the release without obtaining legal or other advice,” said adjudicator Lavinia Inbar in the decision.

The person has to be offered the opportunity to seek legal advice, says Dizgun: “A failure to do that, it’s going to be a problem.”

Whether or not the employee does, in fact, go and seek legal advice “is completely irrelevant,” says Riddell.

“But what is absolutely crucial is that the employer be able to establish that it's encouraged the employee to seek legal advice.”

It can do so by various means, such as verbally at the termination meeting or in the termination letter which encloses the release, he says.

“Better still, it can include a sentence in the release in which the employee acknowledges when signing that he or she was encouraged to seek legal advice.”

Allow ‘meaningful opportunity’ to seek advice

But it’s not enough to encourage such an action, says Riddell – employers should also allow a “meaningful opportunity” for the person to seek that advice.

“[That] means giving him or her at least one or two business days, at a very minimum, to do so, because, of course, no employee can go and get independent legal advice within an hour or two,” he says.

“What would be the fatal, I think, would be to terminate somebody at 9 am in the morning, and go and say, ‘We're really encouraging you to go and get legal, independent legal advice on this. And by the way… our offer expires at 5pm this afternoon.’… If you're a smart employer… you’re going to give the employee three to five clear business days before the deadline expires on the offer.”

It’s key that the person have a few days to review the release, says Dizgun.

“The situation where an employee is terminated, on the spot, is handed a termination letter and release, where they’re offered, like in this case, more than the minimum Employment Standards, and they sign it on the spot, really, that's bad for the employer.”

Provide consideration for signing of release

Another key consideration with signed releases? Consideration, meaning the employee is given more than the minimum entitlements in exchange for signing.

In this case, the employee was paid an additional four weeks’ pay. And while she said there was no consideration because she was “entitled” to the four weeks’ pay, the tribunal disagreed:

“Based on some unfortunate wording in the termination/cover letter, the applicant seemed to be under the impression that they were ‘entitled’ to this additional sum. However, pursuant to the ESA, they were not. It was open to the applicant to seek legal advice whereupon they may have been advised to seek a larger payout under the common law.”

It’s an item a lot of employers forget, says Riddell.

The consideration must be a financial benefit over and above the amount of money that is already legally owed to the employee, he says.

“For the signed release to be valid, it has to be shown by the employer that in exchange for signing that release, the employee was promised and given some financial benefits over and above the statutory termination pay and/or severance pay to which he or she was entitled pursuant to the Employment Standards Act.

“And also, over and above the contractual amounts that are owing to the employee upon termination pursuant to the termination clause in the contract.”

Do not apply ‘illegitimate pressure’ for signed release

Finally, there’s the concern about people being pressured to sign a release. In this decision, the employee said she was not in a “sound state of mind because of the environment at Tractel” when she signed shortly after the termination meeting.

She also said the employer should have taken care that she understood the release, and that there was no power imbalance.

But the tribunal did not “find any evidence of illegitimate pressure having been applied to the applicant.”

It's important that an employer not be seen to be exerting duress on the employee to sign, says Riddell, which could be, for example, a threat to not pay anything if they don’t sign the release.

“That’s an extreme example, and that would be coercion… That would be highly inappropriate.”

A settlement can be set aside if someone can establish coercion, says Dizgun, and employers could also get into trouble if the employee agreed to the settlement “based on some misrepresentation of the employer,” he says.

But releases these days are pretty standard, and there’s usually a non-disparagement provision and a confidentiality provision, says Dizgun, “all of which used to be more negotiated but now are considered relatively standard.”

While the employer could make it overly complex, “no doubt that would encourage the employee to go see a lawyer anyway,” he says.

“There's a healthy balance between relatively clear and plain language and protecting yourself. That would be the better practice.”

And in the end, the tribunal concluded there was no “compelling reason” not to give effect to the release.

“The applicant freely entered into a full and final release with the corporate respondent in respect of claims under the Code. They presented no basis to relieve themselves from that agreement.”