A deal or not? Lack of release not necessarily trouble for employer

December 30, 2012 - by: Karen Sargeant 0 COMMENTS

By Karen Sargeant

You’ve terminated an employee’s employment without cause and offered a reasonable package. You’ve negotiated a settlement, prepared the settlement documentation, and paid out the severance. You thought you dotted all your i’s and crossed all your t’s, but you forgot one crucial part – the former employee never signed the release you prepared.

Are you doomed? Not necessarily, according to the Ontario Superior Court in Bland v. Canadian Farm Insurance Services. So long as you can demonstrate the parties’ agreement, the former employee may have no further claims against you.

Settlement

After 15 months of service, Alan Bland’s employment was terminated without cause. Based on an exchange of e-mails with him, the employer thought it had settled by agreeing to the payment of six weeks’ pay, $10,000 in commissions, and benefits continuation. The employer didn’t provide him with a release and instead just paid the amounts and continued the benefits in accordance with their agreement.

Nine months later, Bland sued for additional pay in lieu of notice. He argued that there was no agreement, as evidenced by the fact that he signed no release. Indeed, he said he expected to receive a release to sign.

Court’s ruling

The court decided that a reasonable observer would have concluded, based on the e-mail exchange between the parties, that the employer wouldn’t have paid Bland the negotiated amounts if he hadn’t agreed to settle his claims against it. As such, the court concluded that the parties reached a settlement agreement. Because the employer paid the agreed-to amounts, Bland was entitled to nothing further.

Significance for employers

Although we don’t recommend taking a chance like this, it’s good to know that courts may look behind the final paperwork to determine whether the parties had an agreement. This emphasizes the importance of all your communications with former employees. Well thought out and carefully drafted communications can only assist you at the end of the day.

About Karen Sargeant:
Karen Sargeant is a partner in the Toronto office of Fasken Martineau. She regularly advises and represents private and sector employers in all labour, employment law and human rights issues. Karen regularly appears before arbitrators, the courts and human rights tribunals on behalf of such employers. She writes articles and conducts many presentations for employers - on all aspects of labour, employment, human rights and privacy law.
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