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Can an offer to settle at time of dismissal be used against employers?

Recent court ruling confirms, in absence of unusual circumstances, offers to settle should not be admitted as evidence

By Stuart Rudner

In the course of many, if not most, dismissals, the employer will make an offer to resolve all outstanding issues in exchange for a full and final release.

If the dismissal is on a without cause basis, there will usually be an offer to address all notice, pay in lieu of notice and severance requirements. If the dismissal is for cause, it may be strategic to make an offer to settle in exchange for a release in order to avoid litigation.

However, I am often faced with client concerns that, if they make an offer, it will be used against them in the course of litigation and somehow weaken their position.

A recent decision of the Ontario Superior Court of Justice confirms that in the absence of unusual circumstances, offers to settle made at the time of dismissal cannot be referenced in a statement of claim and should not be admitted into evidence in the course of litigation.

In Jiwan v. Money Express, the employer dismissed Jiwan for cause, for a number of reasons which were set out in the dismissal letter. In the same letter, however, the employer wrote as follows: “Despite the foregoing, on a without prejudice basis and in satisfaction of all liabilities, statutory, at common law or otherwise, Money Express is prepared to continue your base salary for six weeks until June 28, 2011, in exchange for an executed copy of the attached full and final release.”

The parties were unable to reach an agreement, and Jiwan commenced litigation. In his statement of claim, he wrote that Money Express “offered to pay six weeks’ wages but without prejudice to its assertion of just cause.”

Counsel for the defendant brought a motion to strike out that paragraph as being improper.

The matter was heard by Master Short, who reviewed the relevant Rules of Civil Procedure and case law. In particular, Master Short referred to the policy of our courts of promoting voluntary settlement, and the principle that settlement discussions should be confidential and not referenced in the course of litigation. As Master Short set out, the conditions under which settlement discussions will be privileged are as follows:

•litigation must be in existence or within contemplation

•the communication must be made with the express or implied intention it would not be disclosed to the court in the event negotiations failed

•the purpose of the communication must be to attempt to effect a settlement.

One of the issues addressed was the fact that in this case, like most dismissals, the offer was made at the time of dismissal and presumably before the dismissed employee had even contemplated litigation. However, Master Short referenced the case of Gagne v. Smooth Rock Falls Hospital, in which the court wrote that “a threat of civil proceedings must be implicit or implied in nearly every negotiation in the event that negotiations fail.”

Ultimately, Master Short concluded the impugned paragraph of the statement of claim should be struck out, and that the offer to settle should not be referenced in the court proceedings.

As I have discussed previously, in situations where an employer believes it may have just cause for dismissal, it can often be strategic to take that position but also make an offer to settle all outstanding issues at the time of dismissal.

This allows the employer to put its position on the record at the outset and avoid any suggestion the allegation of just cause was “trumped up” in the face of impending litigation. However, it also allows the employer and the employee an opportunity to pursue settlement discussions and resolve the matter without litigation.

While some employers and counsel have a practice of preparing two separate letters — one setting out the cause for dismissal and the other setting out the offer — there is no need to do so and this case confirms there is nothing wrong with including both in the same letter. Since the dismissal letter itself will become part of the evidence in the litigation process, the portion that sets out the offer to settle can simply be redacted so it does not come before the judge or jury.

Employers should not be worried that making an offer in the course of a for cause dismissal will somehow weaken their case. If circumstances are such that it is advisable to make such an offer, an employer should do so with confidence that in the absence of unusual circumstances, the offer and any ensuing settlement discussions will be privileged and not used against them.


Stuart Rudner is a partner in the Labour & Employment Law Group of Miller Thomson LLP, a national law firm. He provides clients with strategic advice regarding all aspects of the employment relationship, and represents them before courts, mediators and tribunals. He is author of You’re Fired: Just Cause for Dismissal in Canada, published by Carswell. He can be reached at (905) 415-6767 or srudner@millerthomson.com. You can also follow him on Twitter @CanadianHRLaw and join his Canadian Employment Law Group on LinkedIn.

Stuart Rudner

Stuart Rudner, Employment Lawyer and MediatorStuart Rudner is the founder of Rudner Law (RudnerLaw.ca), a firm specializing in Employment Law and Mediation. He can be reached at stuart@rudnerlaw.ca, (416) 864-8500 or (905) 209-6999, and you can follow on Twitter @RudnerLaw.
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