Signing a Release Upon Dismissal – Don’t Do It

So, you’ve settled your matter. What now?

If you were the party bringing forward a claim, complaint, or application, you will be asked to sign a release. A release is a written document acknowledging you are agreeing to resolve your matter against the other party, and will be releasing from the legal dispute and any related matters.

A release is commonly provided to an employee upon dismissal. In addition to any termination package, the employer will likely take the opportunity to present a release for the employee to sign to ensure all loose ends are tied up, and there are no unwanted surprises. Signing a release at this stage will indicate the employee has no unresolved matters with the employer, and the termination package was satisfactory.

However, employees should be wary. Signing a release will be used to stop the employee from seeking any damages at a court of tribunal should the employee want further damages down the road.

Signing a Release Without a Lawyer

While on the surface it may seem straightforward to look at the notice period or payment offered and decide whether you agree with the terms, there are risks when you do it without the help of a legal professional.

Even if the termination package seems reasonable to the dismissed employee, at times there are additional damages that the employee simply has no knowledge of, and for which they are entitled.

Having a legal professional review a termination package and the associated release increases the likelihood that the dismissed employee will be receiving what they deserve and are entitled to under statute, contract, and/or the common law.

It is extremely rare that a signed release is set aside by a court or tribunal. Even if you go after another party, that party might be captured under the release you signed. This is why is it important to get the terms right before you sign anything.  

Setting Aside A Signed Release

One instance where a signed release could be set aside is if it constitutes an unconscionable contract. An unconscionable contract is one-sided, and involves an overt difference in bargaining power, as well as exploitation of the other party’s ignorance. Unconscionability focuses on the substantive unfairness of agreement due to this inequitable relationship.

In Rubin v Home Depot Canada Inc, 2012 ONSC 3053, the Ontario Superior Court of Justice held the signed contract was unconscionable due to the suggestion that the employee would only receive his entitlements if he signed—essentially, the employee believed he had no option but to sign. The offer made had only been slightly above the minimums under the Employment Standards Act, 2000, minimums to which the employee was already entitled. In this case, the employee signed immediately due to the employer’s exploitation of his ignorance.

The courts affirmed the following four-part test to determine whether a contract is unconscionable:

  • A grossly unfair and improvident transaction;
  • Victim’s lack of independent legal advice or other suitable advice; and
  • Overwhelming imbalance in bargaining power caused by victim’s ignorance of business, illiteracy, ignorance of the language of the bargain, blindness, deafness, illness, senility, or other disability; and
  • The other party knowingly taking advantage of this vulnerability.

Employees can also be vulnerable to duress, where an employer threatens the employee in some manner to sign. The employee must also believe they had no choice but to sign. Employees must be careful though, financial duress (signing based on the thought that “I need the money”) will not be enough to set aside a release.

Similarly, although an employer’s misrepresentations about the offer and release will be considered, not all misrepresentations will be sufficient to set aside a release.

Importantly, just like with any agreement, there must be consideration for the release to be valid.

A legal professional will be able to tell you what is fair and will able to spot tactics to watch out for before you sign a release. If you have already signed but feel the circumstances and terms were unfair, a legal professional can help you assess whether your release can be set aside.

Employers and Releases

Employers, on the other hand, will want to make sure their release is valid. They should provide a benefit to the employee for consideration, a reasonable timeframe for the employee to review the settlement documents, and an opportunity for the employee to seek independent legal advice. The employer should also avoid making any misrepresentations. The more pressure the employer uses to force an employee to sign, the more likely the release may be set aside.

Employers should have a lawyer review the release and termination offer before it is provided to the employee. This will help ensure the offer is appropriate (to avoid a wrongful dismissal claim), and the release is valid and enforceable.

Contact Us for Help

If you are employer needing assistance with a termination or settlement package and release, or an employee seeking to clarify your rights, our team of lawyers can help. Contact us at 1 (800) 771-7882, or email [email protected], and we would be happy to assist.

If you are a small or medium-sized company looking for full-service support, visit our CLO program page for our strategic solutions.

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Disclaimer: This blog is not intended to serve as, or should be construed as legal advice, and is only to provide general information. It is in no way particular to your case and should not be relied on in any way. No portion or use of this blog will establish a lawyer-client relationship with the author or any related party. Should you require legal advice for your particular situation, fill out the contact form, call 1-(800)771-7882, or email [email protected].

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