Employees Who Sign Releases Can’t Have Their Cake and Eat It Too

November 9, 2016

In a recent decision, the Human Rights Tribunal of Ontario confirmed that employees who sign releases in exchange for a termination package may have difficulty invalidating the release if they wish to bring a claim against their former employer.

An employee with nearly 14 years’ service in human resources at an oil and gas industry manufacturing business was terminated as part of a staff reduction. She accepted the employer’s termination package offer of 12 months’ notice and signed a release agreeing that she would not bring any claim, including a human rights application, against the employer with respect to her employment or termination. Less than a year later, the employee brought a human rights application against her former employer claiming that she was terminated on the basis of age and disability.

When the employer brought a Request for Dismissal pursuant to the Ontario Human Rights Code on the basis of the executed release, the applicant argued that she had signed the release under economic duress and that the employer had made misrepresentations that induced her to sign the release. The employee testified that she was “a mess” after receiving the offer and that she was under significant financial pressure as university tuition payments were due for her daughters. She felt immense pressure to accept the package and sign the release by the given deadline, fearing that her pay would be interrupted or that she would be paid nothing if she refused to sign. She could not afford to consult a lawyer.

While finding that a contract, including a release, may be set aside if it is signed under duress, the Tribunal held that financial pressure is not enough to constitute duress, given that most employees face financial pressure when their employment is terminated. There was also little evidence of duress stemming from time pressure, as the employee returned the signed release four days before the stated deadline and did not ask for an extension.

The employee also argued that at the time her employment was terminated, the employer led her to believe that mass layoffs were about to occur, when in fact they did not occur for another eight months. The employee argued that but for this misrepresentation, she would have taken the position that the termination was for discriminatory reasons, on the basis of her age and health issues. The Tribunal noted that the employee was not on any medical accommodation and found that her termination was in fact part of an ongoing staff reduction and that no misrepresentations had been made.

Although deliberate attempts by the employer to mislead an employee or the presence of actual duress may be enough to set aside a release, employees should assume a release will be enforceable against them and seek legal advice before signing. For their part, employers should avoid misrepresentations as to the reason for termination, putting unreasonable time constraints or other pressure on employees to accept a termination package and sign a release, and provide plenty of opportunity for employees to seek legal advice. Employers should also be careful to provide specific information surrounding statutory entitlements that must be paid regardless of whether the employee chooses to accept a termination package.

Nicastro v. Tenaris Algoma Tubes Inc., 2016 HRTO 1128

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