Releases may be considered a formality, but mistakes can lead to regrets for employers
We all know the standard process: There is a dismissal or a potential dispute, which may or may not involve the threat or commencement of litigation. At some point, the matter is resolved; it might be as simple as the employee’s acceptance of the severance offer, or it might be after extensive litigation. However, the resolution will include execution of a Full and Final Release.
So, when can an employee commence a legal action against their former employer even though they signed a release? The answer is that it will depend on the wording of the release and the nature of the legal action. This is why, although many look at releases as “boilerplate”, it is critical that they be drafted properly. Otherwise, the release you obtained may be worthless, despite the money you paid to get it.
The best current example of this type of scenario is the 2018 decision in Watson v. The Governing Council of the Salvation Army of Canada.
In that case, Emma Watson had settled her wrongful dismissal claim back in 2011. As part of the settlement, she received $10,000 and signed a mutual agreement which included the following:
“The employer and employee, having regard to their respective rights, duties and obligations, have determined that they wish to resolve any and all claims, complaints, actions, disputes etc. between them arising out of the employment relationship or the termination of that employment.”
Subsequently, things got interesting. In 2015, the Salvation Army received a complaint from another employee, alleging that they had been sexually harassed by David Court, also an employee. An investigation ensued which led to other victims being uncovered, including Emma Watson. That led her to sue both the Salvation Army and David Court individually for damages arising out of the sexual harassment she endured at the hands of Court.
The Salvation Army reached a settlement with Watson, leaving only Court as a defendant. He brought a motion to have the claim dismissed, relying on the release that Watson had signed back in 2011.
As a result, the court had to determine whether Court could rely on the release to bar Watson’s claim. In so doing, the court considered the specific language in the release and concluded that as follows:
“ I conclude the release cannot be considered all inclusive, including the claims herein, as the scope was the employment relationship. 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 employment. They are clearly separate matters.
“ The Salvation Army, quite properly, acknowledges that sexual misconduct does not arise from the employment relationship. Here, the settlement was negotiated by the human resources manager. Cases involving sexual misconduct are handled by the director of employee relations. The settlement pertains to severance only. As the alleged conduct falls outside of the employment relationship, specific language to such claims would need to be added to the release to bar the present claim.”
As a result, the claim was permitted to proceed.
So what does this mean with respect to the enforceability of releases signed in relation to a termination? In the vast majority of cases, they will preclude subsequent wrongful dismissal claims, as well as claims relating to other matters such as unpaid overtime. However, employers need to be particularly careful to be sure that the release will prevent other types of claims, like harassment.
As the Watson case demonstrates, a harassment or sexual harassment claim may be allowed to proceed unless the wording of the release is broad enough to capture such conduct. It is not enough to simply say that it covers all matters that “relate to” the employment relationship.
Similarly, issues sometimes arise regarding human rights claims. The prevailing wisdom is that a generic release in the context of an alleged wrongful dismissal will not preclude a human rights claim. In order to do so, the release must explicitly reference the fact that it is in relation to any potential human rights claims as well.
The bottom line is that releases tend to be glossed over as a formality, but employers can end up regretting their failure to take the time to ensure that a release is strategically drafted.