Settlement agreement invalidates claim for overtime pay

The Ontario Labour Relations Board has dismissed a worker’s claim for unpaid overtime pay because he signed a legitimate settlement agreement upon dismissal from his former employer.

The worker joined Cash 4 You Corporation, a money-lending company based in Cambridge, Ont., as its chief operating officer (COO) in September 2019. According to the worker, the company’s CEO directed him to perform hiring activities, informational seminars for employees, analytics, data processing and reporting activities, training of district managers, store visitations and reviews, and developing data models.

The CEO told him that some of these responsibilities involved continuous performance, so it was expected that he would work more than 44 hours per week.

The worker was eventually assigned to monitor district managers, but they mostly operated independently. In addition, the worker’s core functions as COO - such as marketing, finance, and business analytics - were not placed under his control and were instead supervised by the CEO.

On May 8, 2023, Cash 4 You terminated the worker’s employment and provided his outstanding wages, vacation pay, and termination pay. The termination letter also offered the worker an additional five weeks’ salary – nearly $28,000 less statutory deductions paid as salary continuance – on a “without prejudice basis” if the worker signed a full and final release as part of a settlement agreement.

The severance payment was contingent on the worker agreeing to not disclose the terms of the agreement or the circumstances surrounding his termination except to his immediate family, legal or financial advisors, or as required by law. Cash 4 You recommended that the worker seek legal advice before signing and to return the signed release by May 15. If he didn’t sign the release, the offer would expire on that date and the company would pay the worker only the statutory termination payment.

Settlement agreement offered additional severance pay

The release letter stated that in consideration of the additional payment of five weeks’ salary, the worker would “forever remise, release and forever discharge” the company from “all liability, claims, demands, actions or causes of actions of every nature and kind whether at law, in equity or under any statute” that were existing up to the date of his hiring, employment, and termination by Cash 4 You, including discrimination under human rights legislation. The waiver part of the agreement stated that the worker would not make any claim or complaint “pertaining to employment standards, occupational health and safety and/or human rights, relating to my employment with the company.”

The waiver also stipulated that the worker agreed to discontinue and withdraw any pending actions or complaints, and executing the release deemed any actions “withdrawn, settled or abandoned.”

After some email exchanges with the worker, the CEO agreed to increase the additional payment to seven weeks’ salary if the worker signed the agreement. On May 15, the worker signed the settlement agreement and emailed the CEO saying that he “firmly relied on the understanding that all parties involved have duly fulfilled their obligations in accordance with the applicable statutory minimums and regulations.” However, he said that he reserved his rights under “relevant legislation and statutory minimums.”

The CEO replied that the worker’s reservation of his statutory rights wasn’t acceptable for the release and said that if the worker had specific concerns about his statutory entitlements, the company wanted to address them immediately. The worker responded by saying that he signed the release “under the firm understanding that all parties have addressed statutory minimum requirements.”

In possession of the signed release, the company paid the worker the seven weeks’ additional pay under the settlement agreement.

Claim for overtime pay

However, on May 18, the worker emailed the CEO to advise that he had filed an employment standards claim for overtime pay.  The worker claimed more than half of his job duties and his restrictive reporting lines were more of a “personal contributor” than a managerial role. He argued that more than half of his actual duties and responsibilities were non-managerial and he wasn’t provided with a written policy on “disconnect from work” or electronic monitoring.

The worker claimed more than $160,000 in overtime pay.

An employment standards officer refused to issue an order to pay to the company, finding that the settlement agreement included a release of all claims, including those under the Ontario Employment Standards Act, 2000 (ESA). The settlement was binding on both the worker and the company and barred the worker’s claim for overtime pay, said the officer.

The worker applied to the Ontario Labour Relations Board for a review of the officer’s decision, arguing that he signed the settlement agreement with the express reservation of his right to persue claims under the ESA. He also maintained that such agreements can’t contract out of ESA minimums, as that would make them unenforceable.

The Director of Employment Standards also submitted that s. 112 of the ESA, which deems any complaint filed the by employee to be withdrawn in the event of a settlement achieved without fraud or coercion, only applies to settlements entered into after a complaint is filed, not before. Applying it to settlements before a complaint is filed could create an illegality if the settlement contracts out of the ESA and the employee isn’t permitted to file a complaint, said the Director.

Cash 4 You countered that the worker had settled all claims at the time of the settlement agreement and it wasn’t contracting out of any statutory rights.

Clear settlement terms

The board noted that in 2014, the Supreme Court of Canada ruled that using any extrinsic evidence, such as the correspondence between the worker and the CEO before the settlement agreement was signed, shouldn’t be used to alter clear and unambiguous contractual terms. In this case, it was clear that there was no intention of the parties to exclude ESA claims from the release, said the board.

The board also noted that the worker sought to exclude or reserve ESA claims from the terms of the release, but the company rejected that proposal. The CEO invited the worker to specifically identify any minimum standards claims for the company to directly address, but the worker didn’t do so. Instead, the worker stated that he signed the release “understanding that all parties have addressed statutory minimum requirements.”

The board found there was no suggestion of duress or coercion, and there are strong policy reasons for encouraging settlement by reinforcement legitimate settlements between employers and employees.

The board also disagreed with the Director’s argument on the applicability of s. 112 of the ESA. Such an interpretation would mean that “parties could never effectively and finally settle a disputed entitlement under the act prior to the filing of a claim with the ministry,” and there was no language limiting its application to settlements reached after the commencement of a claim, the board said.

The board determined that the settlement agreement and release were binding and the worker could not file an employment standards claim for overtime. The worker’s application was dismissed. See James Hurst v. Cash 4 You Corp. o/a Cash 4 You, 2024 CanLII 42179.