You've terminated an employee's employment without cause
and offered a reasonable package. You've negotiated a
settlement, prepared the settlement documentation and paid out the
severance monies. You thought you dotted all your
"i"s and crossed all your "t"s but you forgot
one crucial part - the former employee never signed the Release you
prepared. Are you doomed? Not necessarily, according to
the Ontario Superior Court in Bland v. Canadian Farm Insurance
Services (PDF). So long as you can still demonstrate
the parties' agreement, the former employee may have no further
claims against you.
After 15 months of service, Mr. Bland's employment was
terminated without cause. Based on an exchange of emails with
Mr. Bland, the employer thought they had settled by agreeing to the
payment of six weeks' pay, $10,000 in commissions and benefits
continuation. The employer didn't provide Mr. Bland with
a Release and instead just paid the amounts and continued the
benefits in accordance with their agreement.
Nine months later, Mr. Bland sued for additional pay in lieu of
notice. He argued that there was no agreement, as evidenced
by the fact that he signed no Release. Indeed, he said he
expected to receive a Release to sign.
The Court's Ruling
The court decided that a reasonable observer would have
concluded, based on the email exchange between the parties, that
the employer would not have paid Mr. Bland the negotiated amounts
if Mr. Bland had not agreed to settle his claims against it.
As such, the court concluded that the parties reached a settlement
agreement. Because the employer paid the agreed-to amounts,
Mr. Bland was entitled to nothing further.
Significance for Employers
Although we don't recommend taking a chance like this, it is
good to know that courts may look behind the final paperwork to
determine whether the parties had an agreement. This
emphasizes the importance of all your communications with former
employers. Well thought-out and carefully drafted
communications can only assist you at the end of the day.
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