Settlements reached by email may be binding agreements
Exclusive to Canadian HR Reporter from Rudner Law.
Suppose your company reaches a separation agreement with an employee. The terms are clear. The employee confirms acceptance by email and agrees to sign a full and final release. You send over the formal paperwork.
Then, before signing the release, the employee changes their mind and sues for wrongful dismissal.
Is there a binding agreement?
The recent decision in Stribling v. Starbucks Coffee Canada Inc. provides important guidance for HR professionals. The Ontario Superior Court confirmed that once essential terms are agreed to, even by email, a binding settlement can exist before formal documentation is signed.
Background on email agreement
Derek Stribling was a store manager with Starbucks Coffee Canada. Following performance concerns and a period of leave, Starbucks presented him with two options: return to work under certain conditions or accept a voluntary mutual separation.
The separation offer was detailed. It included:
- an end date
- a lump sum payment equal to eight weeks’ pay
- a without-cause Record of Employment
- non-disparagement and confidentiality obligations
- a requirement that Stribling sign a full and final release before receiving payment
Stribling requested deadline extensions to consult counsel, which Starbucks granted. On Sept. 1, 2023, he emailed Starbucks confirming that he accepted the offer, including the details and compensation, and that he would sign the release once received.
Starbucks sent the release, but Stribling did not sign it. Instead, he commenced a wrongful dismissal action. Starbucks brought a motion for summary judgment to enforce the settlement.
Email acceptance was enough
The court had little difficulty concluding that there was a binding agreement.
Settlement agreements are governed by ordinary contract principles. If there is an offer, acceptance, and consideration, and the essential terms are clear, a contract exists.
Here:
- the offer was detailed and contained all the essential terms of the settlement
- he communicated clear acceptance by email.
- he expressly committed to signing the release.
The fact that further documentation was contemplated did not make the agreement incomplete. The court reaffirmed a well-established principle: even if a release still needs to be drafted and signed, a settlement can be enforceable if the essential terms have already been agreed upon.
Generally, a contract is formed when the parties reach an agreement on the essential terms, not when a formal document is signed. A signature on a written document is strong evidence of an agreement, but if the emails show a clear meeting of the minds and an intention to be bound, the absence of a signed document will not prevent the agreement from being enforceable.
For HR professionals, this is critical. Once an employee clearly accepts settlement terms, even by email, the deal may already be binding.
A release is often a condition of payment, but it is not necessarily a condition of contract formation.
Refusing to sign release was breach, not escape
Stribling argued that because he never signed the release, there was no meeting of the minds. The court disagreed.
He had already agreed to sign the release. His later refusal did not undo the agreement; it was a breach of the agreement. The court dismissed his wrongful dismissal action and required him to execute the release.
Mistake not repudiation
An interesting issue arose after acceptance. Starbucks initially sent documentation incorrectly stating that Stribling was being dismissed for cause, despite the agreement specifying a without-cause separation. Stribling argued that this amounted to repudiation of the settlement.
Repudiation occurs when one party demonstrates an intention not to be bound by the agreement. The court found that this was simply an administrative error. Once Stribling pointed it out, Starbucks corrected it promptly.
The court emphasized that repudiation requires more than a mistake. If Starbucks had insisted on the for-cause characterization, that may have been different. Instead, correcting the error reinforced its intention to honour the agreed terms.
For HR teams, the takeaway is straightforward. Errors in settlement paperwork can create risk, but prompt correction can prevent those errors from escalating.
No payment did not invalidate agreement
Another argument was that Starbucks never paid the eight weeks’ compensation, so there was no consideration. The court rejected this as well.
The offer clearly stated that payment was conditional upon signing the release. Stribling did not sign. Starbucks remained ready and willing to pay in accordance with the agreement.
Failure to perform a contractual obligation because the other party has not met a condition does not invalidate the contract, it reflects compliance with its terms.
Practical lessons for HR
This decision reinforces several practical points:
- Clear, detailed written offers matter.
- Email acceptance can create a binding contract.
- A release is typically a condition of payment, not of contract formation.
- Administrative mistakes should be corrected immediately.
- If an employee attempts to walk away after accepting, courts may enforce the deal.
Most importantly, once essential terms are agreed upon, the settlement is not merely in principle. It may already be legally binding.
If your company needs advice on making a settlement offer to an employee or enforcing a settlement that was already agreed to, it is best to consult an employment lawyer.
Alex Minkin is an associate lawyer at Rudner Law in Toronto. He can be reached at (416) 864-8500 or [email protected].
