Canada: References, Reasons And Releases

After termination, these three words beginning with the letter "R" can raise serious issues for both the former employer and the departed employee. This article addresses some of the issues involved with writing references, reasons and releases from a management perspective.

Providing Written References

Traditionally, the law has not required an employer to provide an employee with a reference. In 2008, the Ontario Court of Appeal in Titus v. William F.Cooke recognized that an employer is under no obligation to provide a letter of reference. While courts before 2008 had held that "bad faith" damages might be attracted when an employer withheld a reference, the court of appeal in Titus noted that the Supreme Court of Canada in Keays said damages cannot be automatically awarded without proof of actual damages:

... if the employee can prove that the manner of dismissal caused mental distress that was in the contemplation of the parties, those damages will be awarded not through an arbitrary extension of the notice period, but through an award that reflects the actual damages. ...

(emphasis added)

Where does the law stand now? Failing to provide a reference may still result in additional damages, but former employees would be required to prove that the failure to give a reference resulted in actual damages.

From time to time we are reminded of claims in the United States and Great Britain that arise out of the law in those jurisdictions (e.g., negligent referencing or defamation). Fear of those types of claims coming to Canada should prompt employers to act cautiously when dealing with references.

Top three tips for giving written references

  • If you have a reference "policy" – follow it.
  • Given recent privacy developments in the common law, get consent from the former employee to provide a reference to a future employer.
  • If you give a reference – make sure it is limited to information about the employment relationship only, that it is true, accurate and fair and not motivated by ill-will or malice and always act in good faith.

Providing Reasons for Termination

More on this issue is covered in The Termination Meeting: A time and a place for everything in this edition. The following looks at the implications for providing reasons for termination in a termination letter. In addition to common law decisions, employers in Atlantic Canada should be aware of employment standards obligations when it comes to providing reasons for dismissal. For example, Section 30(2) of the New Brunswick Employment Standards Act says:

30(2) Where an employer dismisses an employee for cause he shall do so in writing, setting out the reasons for such action, and, subject to section 31, unless this section is complied with no dismissal without notice is valid notwithstanding that cause for such action exists.

While the law is distinct in New Brunswick, courts outside of New Brunswick have held that an employer who dismisses an employee on a "without cause" basis will not necessarily be prevented from later raising cause, especially where the employer's original position may have been due to concerns for the employee's feelings. In those cases, the issue is whether or not the employer's conduct amounts to condonation. Intention is an essential element of condonation.

In late 2003, the Ontario Court of Appeal (Giancola) considered whether a letter citing "restructuring" as the reason for termination prevented an employer from later alleging performance. The driving facts behind the termination were actually that an employee went on a five-week vacation, after providing his employer with one hour's notice. The court said that the employer was not necessarily precluded from eventually asserting cause, particularly where the employer's initial position was taken out of concern for the employee's feelings.

In New Brunswick, the Court of Appeal (Spielo) determined that cause can only be later alleged if it is truly: "After Acquired Cause".

Top three tips for written reasons for termination

Conduct giving rise to just cause termination for a conflict of interest include:

  • Know what is expected from applicable employment standards legislation.
  • Limit the information only to what is necessary – if you cannot prove it, don't say it.
  • Breaking up is hard to do. Providing reasons to avoid hurting an employee's feelings may just escalate litigation. Be honest.

Releases

An enforceable release ensures that all disputes are resolved and no further claims, complaints or legal action can be taken against an employer. However, the enforceability of a release can always be challenged on the basis of unconscionability when the following four elements are satisfied:

  1. A grossly unfair and improvident transaction.
  2. The signer's lack of independent legal advice or other suitable advice.
  3. Overwhelming imbalance in bargaining power caused by the victim's ignorance of business, illiteracy, ignorance of the language of the bargain or disability.
  4. Other parties knowingly taking advantage of this vulnerability.

Setting aside a signed release is rare in Canada. One recently set aside involved a terminated employee who signed the release at the termination meeting without getting any legal advice. That decision is discussed in our section The Termination Meeting: A time and a place for everything.

Top three tips for drafting a release

  • Cover everything. Identify potential actions or complaints relating to the termination of employment. Safeguard the terms of the settlement being disclosed to third parties or slanderous or defamatory comments about the employer.
  • Consideration. A release signed in exchange for the minimum amount an employee is entitled to under employment standards legislation is not good consideration. The employer must give something more than a statutory entitlement to satisfy the consideration requirement.
  • Independent legal advice. Be clear that you are giving the individual an opportunity to get independent legal advice to review the settlement and release.

What this means to you

There is no duty on an employer to provide a reference letter to an employee on termination, but there is authority for the proposition that an employer's failure to provide a reference letter or an adequate reference letter, may result in increased damages owed to a wrongfully dismissed employees if the employee is able to establish actual harm.

As a general rule, when providing reasons for a termination, know what is expected from applicable employment standards legislation and limit the information you provide to only what is necessary. In all cases, be honest and don't stray from what you can prove. Providing reasons simply to avoid hurting an employee's feelings is a slippery slope to litigation.

When it comes to getting a signed release make sure you cover everything you need to cover in the release and give the employee time to get independent legal advice.

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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Alison Strachan
 
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