Canada: Is Your Former Employee's Release Enforceable?

In Dumitrache v. Glenlyon-Norfolk School Society, 2019 BCHRT 68 (“Dumitrache”), the British Columbia Human Rights Tribunal dismissed a complaint because the complainant had signed a release of claims, which included a term that he would not commence any human rights complaint against his former employer. This case is a good reminder for employers to ensure that releases explicitly release the employer from any claims under human rights legislation, and that employees are given adequate time to consider the terms of a release and get legal advice on its implications.  

Background

When Glenlyon-Norfolk School Society (“GNS”) terminated Mr. Dumitrache’s employment, it offered him a gratuitous payment of $7,000, which was conditional on him executing a release of claims against GNS (the “Release”). GNS gave Mr. Dumitrache two weeks to consider the offer. The Release included the following term:

I acknowledge that I have not been subjected to any form of discrimination, and warrant that I have not commenced any complaint and undertake not to commence any complaint under the Human Rights Code.

Mr. Dumitrache asked GNS if he could have additional time to consider the offer because he had difficulty understanding the Release. GNS gave Mr. Dumitrache the time requested.  Soon after, Mr. Dumitrache sent GNS a letter in which he said that he had obtained legal advice and that his age was one of the reasons he was fired. He asked to negotiate the terms of his dismissal.  Around a week later, GNS offered Mr. Dumitrache $8,900, conditional on him signing the Release. GNS told Mr. Dumitrache that he could have an extra day to review the Release if he required it. Mr. Dumitrache signed the Release four days later. Five months later, Mr. Dumitrache filed a human rights complaint alleging that GNS had discriminated against him based on his age, contrary to the B.C. Human Rights Code (the “Code”). 

The Tribunal’s Decision

GNS applied to dismiss the complaint on the basis that the parties had reached a settlement in which Mr. Dumitrache had explicitly agreed not to file a human rights complaint against GNS. To determine whether or not Mr. Dumitrache’s complaint should proceed in the face of the Release, the Tribunal considered several factors including: (1) whether he understood the significance of the release; (2) the language of the release; (3) what GNS had provided as consideration for the release; (4) whether he had no choice but to accept the offer because of financial need; (5) whether the inequality in bargaining power led to a substantially unfair settlement; (6) whether GNS engaged in coercive or oppressive behaviour; (7) whether he was given the opportunity to obtain legal advice; (8) whether he understood his rights under the Code; and (9) evidence of lack of capacity, mistake, forgery or fraud.

Mr. Dumitrache argued that despite telling GNS that he had sought legal advice, he had not actually done so. The Tribunal confirmed that what is important is whether an employee has been given the opportunity to seek independent legal advice, not whether they have actually exercised their right to obtain that advice. The other factors also favoured enforcing the Release. There was no evidence that the power imbalance had led to an unfair settlement. Mr. Dumitrache, a 3.5 year employee, had received a severance package equivalent to around three months’ salary. There was also no evidence that he lacked capacity to sign the Release, or that he signed it mistakenly or under fraudulent pretenses. Overall, his conduct showed that he understood his rights under the Code, as well as the significance of signing the Release. The Tribunal dismissed Mr. Dumitrache’s complaint.

Lessons for Employers

This case highlights the importance of being flexible and reasonable with respect to deadlines in negotiating severance packages, particularly when dealing with unsophisticated or vulnerable employees who may not understand their legal rights or the ramifications of executing a release. Taking an inflexible and rushed approach will increase the likelihood of the Release being found unconscionable or unenforceable.  

We are frequently asked how much time to give an employee to consider a severance package and release. In Dumitrache, around one month passed between the first offer and the signing of the Release. The Tribunal remarked that since the initial offer and deadline took place over the holidays, it may have reached a different conclusion about the effect of the Release had GNS refused to extend the deadline. The appropriate deadline will depend on a number of factors, including the sophistication of the employee and the complexity of the severance package and release. Generally, we recommend that employers give employees at least one week to review an offer and seek independent legal advice regarding its terms. Requests by employees for extensions should not be refused unreasonably. While the inclination is often to get a release signed as soon as possible, as is evident from Dumitrache, patience can pay off in the long run.

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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