Full and Final Release Upon Dismissal: Explained

In the world of employment, parting ways with your employer can be a challenging and uncertain process. Whether you have been laid off, terminated, or have resigned, you might find yourself being asked to sign a full and final release agreement. But what does this document mean for your future? Is it in your best interest to sign it as is, negotiate its terms, or consult with an employment lawyer?

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

In this article, we will review the basics of full and final release agreements upon dismissal, providing you with the insights you need to make informed decisions about your employment rights.

Employees should exercise caution as signing a release can prevent them from pursuing additional damages through a court or tribunal if they ever wish to do so in the future.

What Is a Full and Final Release (in Employment Law)

A Full and Final Release in employment law is a legal document that an employee signs when their employment is terminated, essentially releasing their employer from any future claims or legal action related to their employment or termination. This document is a crucial part of severance agreements and is often used to ensure that both the employer and employee have resolved all potential disputes, claims, or grievances arising from the employment relationship. Once an employee signs a Full and Final Release, they typically forfeit their right to take legal action or seek further compensation from the employer in connection with their employment or termination. It is essential for employees to fully understand the implications of signing such a release before doing so.

Employers and Valid Releases

On the employer’s side, it is crucial to ensure that the release they are seeking from an employee is legally sound. To achieve this, employers should consider providing something of value to the employee as part of the release agreement. They must also allow the employee a reasonable period to review the settlement documents and offer them an opportunity to seek independent legal counsel.

Employers should refrain from any misrepresentations during this process. It is important to note that exerting undue pressure on an employee to sign the release can raise red flags and potentially render the release ineffective.

To minimize potential legal risks, employers are advised to have their legal counsel review both the release and the termination offer before presenting it to the employee. This thorough review helps ensure that the offer is fair and appropriate, reducing the likelihood of a wrongful dismissal claim, and that the release is legally valid and enforceable.

Why You Need Legal Guidance Before Signing a Release

While it might appear simple to glance at the notice period or payment in a termination package and make a decision on the spot, there are inherent risks in doing so without the guidance of a legal professional.

Even if the termination package seems fair on the surface, there could be hidden factors or additional entitlements that the employee is not aware of. Seeking the assistance of a legal professional to review the termination package and associated release increases the chances of the employee receiving their rightful entitlements under the law, any contracts, or common legal practices.

It is important to note that it is exceptionally rare for a court or tribunal to invalidate a signed release. This means that, even if you later discover other issues, the release you signed might still apply. That is why it is essential to ensure the terms are right before putting your signature on 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 the 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.

Contact Achkar Law

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 employment lawyers can help.

Contact us at 1 (800) 771-7882, or email [email protected], and we would be happy to assist.

Related Reading

• Lawyer Consultation in Ontario: What To Expect
• Termination of Employment: What Happens to Your Bonus?
• Termination Without Cause (Ontario): Exploring the Implications