Employees are typically asked to sign a release agreement by their employer when they are terminated. While it depends on the specific language of the agreement, releases generally involve an employee giving up their rights to most employment or human rights claims after their employment ends. This type of agreement allows for some certainty for employers in knowing that they will not have the risk of future employment or human rights claims from an employee. However, from the perspective of an employee, they may feel that they are required to give up their rights to certain claims in order to receive a settlement payout or simply as a result of the power dynamic in an employer-employee relationship. 

In this post, we will discuss considerations for employees if they are asked to sign a release agreement at the end of their role. We will also discuss situations where a release agreement may be invalidated, including key principles that apply when determining if a release agreement is valid. In particular, we will discuss the role of duress when an employee is asked to sign a release and how it is often difficult to prove. This post will provide important considerations for employees when they are presented with a release agreement from their employer. 

What is a release agreement?

A release agreement is prepared by the employer for the employee to sign. In this document, it will typically describe the types of claims that an employee would be giving up after they sign the agreement. For example, after signing a release, the employee may no longer be able to make a claim for wrongful dismissal or any human rights claims against the employer. 

The purpose of a release agreement is to provide certainty to an employer that they will not have to address the future claims of a terminated employee. In most cases, the employee would be provided a severance package or benefit upon termination in exchange for signing the release. In some situations, the employment contract may also specify that the employee is required to sign the release upon their termination. 

Are employees required to sign a release agreement upon termination?

There is typically a power dynamic between the employee and employer where the employee may feel pressured to sign a release document in order to receive any severance offered or specified in their contract. It can be difficult for an employee to assert their rights when terminated. 

The employee’s employment contract may specify that they must sign a release agreement upon termination so it is important to review with a lawyer before signing a release.

Generally, if the employee is being asked to sign a release, the employer needs to provide some consideration, such as payment. For instance, the employer may require the employee to sign a release agreement or letter before paying out a severance package. The release should specify any payments or other considerations that would be provided to the employee so that they will give up further legal claims against the employer regarding employment or termination. 

The release agreement or letter does not permit the employer to avoid paying the minimum standards for termination under the Employment Standards Act. The employee is not required to sign a release in order to receive their minimum compensation under the Employment Standards Act. 

Employees may be pressured to sign the release on the spot, but they may not fully understand the rights and claims they are giving up. It is important for employees to be given time to obtain legal advice before signing the release, as it may significantly change their legal position. Given this power dynamic, the courts have recognized situations where a release agreement may be invalid, which involves signing under duress. 

When would a release agreement be invalid?

A release agreement would only be invalid in narrow circumstances involving duress, coercion, or fraud. There is a high bar to find that there was duress, fraud, or coercion. The courts have noted that stress is not the same as duress. While the court recognizes that settlement agreements between a terminated employee and their former employer can involve personal and economic stress on the employee’s part, this does not necessarily invalidate the signing of a release. 

A release would only be invalidated if it was entered into under duress or it arose due to undue influence. In particular, the employee must have entered into the agreement willingly, even if there is some degree of pressure to accept the agreement. If the degree of pressure was undue or improper, then it could invalidate a release signed by the employee. In other words, even if there was pressure to sign, it may not necessarily be enough to invalidate a release agreement. 

For pressure to rise to the level of duress, the employee’s consent must be removed, and certain factors can assist the court in determining duress. In particular, the court will look at whether or not the employee objected, whether the employee, at the time of signing, did not have any other option such as legal action, whether the employee had independent legal advice, and whether the employee took steps to avoid fulfilling the agreement terms after signing. 

Key Takeaways 

At termination, an employee may be asked to sign a release that prevents them from pursuing any further employment or human rights-related claims against the employer. They are often required to sign the release in order to receive their termination package. There is a very high bar to show that a release was signed under duress and, therefore is invalid. The courts have recognized that while there is unequal bargaining power between a terminated employee and their former employer, it may not necessarily invalidate a signed release, even if there is some degree of pressure for the employee to sign, including being asked to sign on the spot without consulting with an employment lawyer first. Therefore, it is important that an employee proactively seeks legal advice on a release agreement before signing. Otherwise, an employee may give up many or all of their claims against their former employer. 

Contact Haynes Law Firm in Toronto for Advice on Termination and Release Agreements

Employees may be asked to sign a release on future claims against their employer before they can receive their termination package. Our experienced employment law legal team at Haynes Law Firm in Toronto can assist you with issues that arise from termination. For employees, our goal is to ensure that they understand their rights and receive maximum compensation in their termination package. Haynes Law Firm also assists employers in avoiding liabilities that may arise from terminations that are not permitted by the legislation. We are dedicated to finding the best resolution for you.To book a consultation, please contact us online, or by phone at 416-593-2731.