When an employer terminates a person’s employment, the employer typically requests that the departing employee sign a “full and final release” upon receipt of all termination and severance monies owed due to the termination of employment. Such release generally states that, by accepting the payment from the employer, the terminated employee agrees that all matters between the parties have been fully resolved such that the employee relinquishes their right to pursue further compensation from the employer in any arena, be it through a court or other administrative proceedings, such as a complaint of discrimination before the human rights tribunal or a complaint concerning employment standards.

Once all parties have signed a release, it is generally understood that the matter is closed. However, there are instances in which an employee may seek to have the release revoked or declared otherwise invalid so that the employee is entitled to further remedies from the employer. This blog discusses how to seek revocation of a signed release.

Employee Terminated Upon Return From Disability Leave, Signs Release

The case of Manuel v Lafarge involved an employee hired by the employer in October 2014 as a quality control technician. During the ensuing months, the employee experienced repeated workplace bullying enacted by one particular coworker, who consistently called the employee names. The bullying culminated in an incident on June 12, 2015, when the employee, who had bent over to perform a work-related task, was grabbed around the waist from behind by the bully co-worker, who proceeded to grind himself against the employee to simulate intercourse. The event occurred in front of other coworkers and was repeated once more that same day. The employee reported the event to his superiors, who advised him to avoid and ignore his bully and to continue working, which the employee did.

After the incident of sexual harassment, the employee began to suffer from panic attacks and other manifestations of anxiety that eventually necessitated his hospitalization. The employee was diagnosed with a heart condition and also with anxiety and/or post-traumatic stress disorder, as a result of which he was placed on short-term disability with the employer. The employee returned to work on July 18, 2016; his employment was officially terminated three weeks later, on August 3, 2016.

At the time of his termination, the employee was presented with two options (salary continuance or lump sum payment) and advised that he had two weeks to select one of the packages and sign an accompanying release form. Importantly, “the release covered all claims, including damages that ostensibly flowed from the sexual harassment.” The employee could not attain legal advice in the ensuing two weeks due to lawyer unavailability, which resulted in him choosing just one option and signing the release without the benefit of legal advice. He did not seek to extend the deadline because he was unaware that he had the option to do so, and instead claimed that he signed because he was overwhelmed and, in his state of anxiety and depression, felt he did not have a choice but to accept the employer’s terms.

Employee Rethinks Decision to Sign Release, Files Lawsuit Claiming Release Unenforceable

Less than one year after the employment relationship between the parties ended, in June 2017, the employee filed a claim in which he sought damages for the sexual harassment he had experienced in the employer’s workplace. The employer sought to have the claim dismissed as barred by the release, which purportedly resolved all disputes between the parties, “including those described in the statement of claim.” 

The Legal Principles Applicable to Releases

If releases were regularly subject to revocation, then Canadians could never be assured that an issue had been finally resolved and they could consider a matter closed. Generally speaking, courts favour upholding releases because finality is one of the cornerstones of our legal system. This does not mean that a release will never be revoked, though, but rather that a release will only be revoked in very specific circumstances. 

As stated by the court in this case, “a settlement agreement will not be rescinded based on information that has come to light following the settlement that indicates that a party has entered into an improvident settlement” because “it is not enough to revisit a settlement decision based on the better vision of hindsight.” However, a release will be revoked if the person seeking to have the release invalidated can demonstrate misrepresentation, as “the interest in the finality of settlements will not ‘trump’ the need to rescind a settlement agreement in such cases.”

Other methods to overturn the validity of a release include proof of “fraud, misrepresentation, duress, undue influence, unconscionability, or mutual or unilateral mistake.” 

Application of the Legal Principles to the Facts of This Case

The employee asserted that the release should be considered invalid in his case on one of three grounds: either because he lacked the capacity to make an informed decision about his termination at the time it occurred, because he had been under duress at the time he made the decision to sign the release, or because the release itself was unconscionable.

In respect of the claimed lack of capacity, the court noted that the employee “filed a number of documents in support of his contention that the effects of PTSD were such that he lacked the capacity to sign the release. The reality is, however, that none of the evidence is admissible to support such a conclusion”. The employee’s case failed because of the lack of admissible evidence to support his contention.

Turning to the claim of duress, the court noted that “not all pressure, economic or otherwise, can constitute duress sufficient to carry these legal consequences.” For duress to be considered sufficient to invalidate a signed release, “it must be pressure that the law regards as illegitimate; and it must be applied to such a degree as to amount to ‘a coercion of the will’ of the party relying on the concept.”

 In this case, the employee provided no evidence to substantiate the claim that the employer applied illegitimate pressure to force him to sign an imprudent release. Rather, the court was satisfied that the employer merely “presented the plaintiff with options and gave him a chance to seek legal counsel to inform his decision,” which is typical of employee termination proceedings and does not equate to illegitimate, nefarious intent. Moreover, “there is this no evidence capable of suggesting that a lack of capacity contributed to an alleged ‘coercion of will.’” 

As for the assertion that the release was unconscionable and should fail on that ground, the court noted that a finding of unconscionability requires unequal bargaining power and an improvident bargain. Although it was very clear in this case that “there can be no doubt that the plaintiff suffered from unequal bargaining power relative to [the employer] at the time the release was signed,” given that the plaintiff had just returned from short-term disability leave and the employer is a large, profitable corporation, the plaintiff was unable to prove that he had entered into an improvident bargain. This is because the employee had been offered two months’ salary in exchange for signing the release, “which, as a two-year employee in a non-senior role, is not inherently inappropriate compensation upon termination.” The employee’s contention that he could have recovered significant damages as a result of the sexual harassment he had endured was rejected by the court because “the nexus between [the employee’s] alleged symptoms and the Incident is too remote to ground a claim for damages based upon the evidence filed.” Moreover, the incident had occurred more than a year before the employee’s termination, and he provided no evidence to substantiate that his medical conditions were attributable to the sexual harassment he had experienced in the workplace. 

Under these circumstances, the court ruled that the release was valid and enforceable and thus dismissed the employee’s claim.

Toronto Employment Lawyer Helping Clients With Their Termination Signed Release

If you were terminated from your employment, signed a release with respect to the same, and are now reconsidering your decision to do so, you need competent legal counsel to assist you in having the release declared invalid. Fortunately, the Haynes Law Firm is adept and experienced at releasing people from signed releases. Contact us today, either online or by telephone at (416) 593-2731, and we will be pleased to provide you with experienced legal advice and assistance in planning a strategy to extricate you from an improvident bargain.