The Ontario Superior Court of Justice recently released a
decision in which email negotiations regarding the terms of a
termination agreement constituted confirmation of a settlement
agreement. The court said that an objective observer would find
that the parties had reached a settlement agreement and that the
Claimant's demand for a formal release and offer was not
reasonable. This barred the employee from bringing an action for
wrongful dismissal and further damages.
CFI terminated Bland "without cause" after 15
months' service, due to performance issues. Nine months after
accepting (and benefitting from) a termination package, Bland
launched this suit. He denied having arrived at a settlement
package with CFI and sought damages.
In its defence, CFI argued that Bland had negotiated, agreed to,
and received a termination package in lieu of notice and, as such,
no further damages could be claimed. The package provided by CFI
gave Bland six weeks' pay in lieu of notice of termination and
commission owing in the amount of $10,000. CFI also extended
Bland's health benefits and allowed him to operate from an
office space leased by CFI for a number of months following the
CFI testified (and Bland did not dispute) that Bland and the
employer initially discussed the termination package at the time of
termination and then through a series of emails. The discussions
involved the amounts payable for outstanding commissions, benefits
and payment in lieu of notice. CFI outlined the proposed terms to
confirm that they matched discussions between the parties; Bland
replied and stated "all is agreed".
CFI argued that Bland's emails and his statement that
"all is agreed" constituted a settlement agreement
between the parties. CFI also stated that "the fact that Bland
received and kept the termination package is 'powerful
confirmation of an agreement'". The package, CFI argued,
was fair. Bland argued that he expected to get a release and a
formal offer from CFI.
The main issue before the Ontario Superior Court was whether the
parties had negotiated a settlement agreement for Bland's
termination package. The court said that the perspective of an
"objective observer" must be used to determine whether a
settlement agreement exists.
In applying this perspective, the court found it unreasonable
for Bland to expect a formal offer. The email exchange constituted
negotiations and a reasonable observer would conclude that CFI
would not have agreed to such a well-rounded termination package if
Bland had not also agreed to settle his claim for wrongful
dismissal against them.
The court, therefore, found that a settlement agreement had been
reached and dismissed the wrongful dismissal action.
What this means for you
Every effort should be made to get settlement agreements and
releases formalized in writing. However, this decision provides
some wiggle room for employers where there is evidence to show that
an agreement was reached in a "non-traditional" way.
Courts will decide whether an objective observer would conclude
that an agreement was reached, even though there may not be a
formalized agreement and release in place.
This decision is in keeping with a number of previous cases from
Canadian courts which have held that an informed employee can
negotiate severance compensation and that the employee's signed
release may be enforceable against any wrongful termination claims.
We now see a non-traditional release being enforced as a result of
Employers should be careful to save all email correspondence and
document any negotiations they have with employees when discussing
the terms of a severance of the employment relationship. Employers
should always try to get clear, documented confirmation that the
employee has agreed to fairly negotiated terms, and that any
potential claims for wrongful dismissal will be precluded through
acceptance of the termination package.
If an employee brings a wrongful dismissal suit after the
employer has taken these precautions, the employer will be in a
good position to have the action dismissed.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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