Settlements provide certainty and finality in place of protracted litigation. Positional demands are made, and concessions are offered up, to bring legal disputes to a firm end. Preston v Cervus Equipment Corporation, 2024 ONCA 804 (CanLII) [Preston] underscores the importance of settling parties remaining alive to (1) all their entitlements throughout the negotiation process; and (2) the consequences of (inadvertently) giving up a lot in exchange for a little.
Preston Case Summary
In Preston, Mr. Preston, a former employee of Cervus Equipment Corporation ("Cervus"), was terminated without cause in 2018 after joining the company in 2014. Mr. Preston enrolled in Cervus' deferred share plan (the "Plan") upon hire. The Plan stated, in part, that his vested stock units would be automatically paid to him upon termination.
Contrary to the terms of the Plan, Mr. Preston was not paid the sum of his vested stock units, which totaled $75,949.81, when he was terminated. After his firing, Cervus put a severance package to Mr. Preston, which he rejected. He subsequently commenced a wrongful dismissal action against Cervus. The value of his vested stock units went unmentioned.
Cervus and Mr. Preston later settled the action. In doing so, Mr. Preston executed a release and indemnity ("Settlement Documents") in Cervus' favour. The day after he executed the Settlement Documents, Mr. Preston emailed Cervus and asked that his vested stock units be paid to him per the terms of the Plan. Cervus refused and argued that Mr. Preston released his claim to the vested stock units in the settlement.
Mr. Preston, in disagreement, commenced another action against Cervus for the sum of his vested stock units. Both moved for summary judgment. Mr. Preston was successful at the court of first instance, but the decision was subsequently overturned on appeal. In keeping with the wording of the Settlement Documents, the Ontario Court of Appeal held that Mr. Preston released all payments owed to him under the Plan in the Settlement Documents. The money he received from the settlement covered all his entitlements and concluded the parties' dispute.
Key Takeaways
For employees, Preston underscores the importance of ensuring all entitlements are appropriately accounted for before executing any settlement documents—even those that have been guaranteed (and not paid) by an employer upon termination. Conversely, for employers, Preston stresses the importance of drafting settlement documents that broadly and appropriately release employers from all claims an employee has (or may have) in connection with their employment.
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