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Employment-related release does not cover sexual harassment: Ontario court

Recent decision makes clear there are circumstances in which a general release of employment-related claims will not insulate an employer from liability
Employment law
The recent decision in Watson v The Governing Council of the Salvation Army of Canada makes it clear there are circumstances in which a general release of employment-related claims will not insulate an employer from liability. Google Street View

By Stuart Rudner and Brittany Taylor

At the end of the employment relationship, an employer will often offer a separation package to an employee in exchange for a signed full and final release. The release is valuable to the employer as it provides certainty that any and all issues relating to the employment relationship have been resolved. Ideally, the release will provide the employer with a shield against any future complaints that the employee may try to raise.

But will a release act as a complete bar against any future claims the employee may have in all circumstances? The recent decision in Watson v The Governing Council of the Salvation Army of Canada makes it clear there are circumstances in which a general release of employment-related claims will not insulate an employer from liability.

Background

In Watson, Emma Watson had been an employee of David Court at the Salvation Army for a short period of time in 2011. At the time that her employment ceased, she signed a full and final release in favour of her employer in exchange for a lump sum payment. In the full and final release, Watson agreed to release the employer from:

“any and all claims... past, present or future, known or unknown, which arise out of or which are in any way related to or connected with my employment or the ending of my employment”.

In 2015, the employer conducted an investigation following a written sexual harassment complaint against its then national director of operations for its National Recycling Operations Division, Court. In the course of the investigation, the employer received eight different complaints of sexual harassment perpetrated by Court from both former and current employees, including Watson. The employer later dismissed Court for cause.

Following the investigation, Watson commenced an action against her former employer, and  Court, seeking damages for negligence, intentional infliction of emotional harm and breach of fiduciary duty, related to her allegations of sexual harassment by Court.

Motion for summary judgment

Both the employer and Court brought motions seeking the dismissal of Watson’s claim, but the employer and Watson were able to reach a resolution prior to the motion. As a result, only  Court’s motion for summary judgment remained to be argued. Court’s motion was based on the following grounds:

  1. Watson had executed a full and final release in 2011.
  2. The Ontario Human Rights Tribunal had exclusive jurisdiction to address complaints of sexual harassment.
  3. The evidence did not support the claims.

Turning first to the issue of the signed release, the court noted that the scope of the release was clearly limited to issues arising out of the employment relationship. In that regard, the court noted that:

“while many of the alleged events occurred at the place of employment and, perhaps, because of the employment, sexual harassment, intimidation and other improper conduct are not connected to the employment.”

In other words, the court clearly found that such matters are “separate” issues that were not covered by the scope of the release.

Court’s second and third arguments also failed. As Watson had framed her claim for damages as intentional infliction of emotional harm, a common law tort (as opposed to a claim for sexual harassment under the Human Rights Code), the court had jurisdiction. Finally, Watson had presented detailed accounts of multiple events which clearly indicated to the court that there was evidence to support her claim, although it would have been “premature” to assess same.

It rejected Court’s claim that Watson’s failure to report the alleged misconduct prior to her dismissal was somehow indicative of a lack of evidence, noting that “victims of sexual misconduct and harassment often do not report such events.”

Takeaways for employers and employees

This case is an important reminder for employers that not all releases are created equal. A general release that does not expressly contemplate issues of harassment, discrimination, intimidation or other improper workplace behaviour that does not “arise from the employment relationship” will not protect an employer from complaints that may be raised by an employee in the future relating to these issues.

However, employers can take steps to insulate themselves against complaints of this nature by ensuring that there is specific language within the release relating to any such potential claims. In particular, we recommend that employers who wish to ensure that any potential human rights complaints are covered within the scope of the release include a clear statement that the parties have discussed any such potential claims and agree that there are none. The release should also ask the employee to confirm that they will not be filing any such complaints.

Employees who have signed a release in favour of a former employer should be aware that it may not cover matters that do not arise in the course of the employment relationship, including issues relating to harassment and discrimination. As a result, such employees may still have a right of action against their employer in these circumstances.  

Brittany A. Taylor is an associate at Rudner Law in Toronto.

© Copyright Canadian HR Reporter, Thomson Reuters Canada Limited. All rights reserved.

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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