In the recent decision of Rubin v. Home Depot Canada Inc., the Ontario Superior Court of Justice held
that a release signed by an employee at the time his employment was
terminated was unenforceable, as the employee did not have
sufficient time to review the release and seek advice.
Eric Rubin worked as a competitive shopper for Home Depot Inc.
(Home Depot) and its predecessor for almost 20 years. He was 63
years old. His employment was terminated by Home Depot during a
brief meeting at which he was handed a letter offering him 28
weeks' pay in lieu of notice in exchange for signing a release.
This offer included his minimum statutory notice and severance pay
entitlements under the Employment Standards Act, 2000, totaling 27.75
weeks, plus an additional one quarter weeks' pay. The offer did
provide for benefits continuation during the 8-week statutory
notice period; however, it was silent about certain benefits,
notably accidental death and dismemberment coverage. While the
letter contained language to the effect that Mr. Rubin would have a
week to review and sign the release, he signed it during the
meeting and accepted the 28 weeks' pay.
Shortly after his termination, Mr. Rubin retained counsel, who
sent a letter to Home Depot challenging the enforceability of the
release and asking to negotiate an appropriate severance
package. Home Depot refused, relying on the release, and Mr.
Rubin brought a motion for summary judgment, seeking to set aside
the release. Home Depot moved for dismissal, arguing that the
release was enforceable because Mr. Rubin had not been pressured
into making an immediate decision, had taken the time to read the
letter before signing and had asked about his options regarding
apportioning funds to his RRSP.
Superior Court Decision
Justice Lederer of the Ontario Superior Court found that, given
the circumstances in which it was signed, the release was
unenforceable. Justice Lederer applied the test for
unconscionability outlined in the Alberta Court of Appeal decision
Cain v. Clarica Life Insurance Companyand
later adopted by the Ontario Court of Appeal in Titus v. William F. Cooke Enterprises
Inc., to find that release was unenforceable.
This decision was based on the following factors:
The severance package offered was grossly unfair and "far
removed from what the community would accept" given the fact
that it was a without-cause termination and the fact that Mr. Rubin
was approaching the end of his working life.
Mr. Rubin lacked suitable advice regarding the offer. No
attempt had been made by the employer's representative to
explain or clarify the terms of the severance package (which,
according to the judge, were ambiguous and misleading) and Mr.
Rubin was not told that he could take a week to think about, or
obtain independent legal advice (though the letter provided a
deadline for acceptance that was a week later).
The inherent imbalance of bargaining power between Mr. Rubin
and his employer. The judge found that it was not relevant that Mr.
Rubin failed to act concerned or surprised at the meeting.
Home Depot knowingly took advantage of Mr. Rubin's
vulnerability by misleading him to believe his only option was to
sign the release, when in fact the release gave him barely more
than he was already entitled to by statute.
Based on Mr. Rubin's role and responsibilities, his years of
service, his age, and the difficulty he was likely to experience
finding alternative employment, the judge found that he was
entitled to 12 months' pay in lieu of notice.
This case is a reminder to employers that a release signed on
the spot by an employee at the time of termination may later be
challenged by the employee and be found to be unenforceable, based
on the inherent imbalance of bargaining power between an employee
and his or her employer at the time of termination and the lack of
opportunity to obtain legal advice. To ensure the reliability of a
release, employers should first and foremost not permit employees
to sign the release at the termination meeting. Employers should
inform employees that they must take the offer away to consider it
and obtain independent legal advice if they so choose.
Employers cannot rely on the fact that employees could
have taken more time to consider the offer; they must ensure that
employees do so.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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