October 20, 2021

Please Release Me – When Do Employment Releases Offer Protection

When an employee is let go without cause, they are typically offered a severance package. Employers should always turn to the employment contract (if one exists) to determine what pay in lieu of notice should be provided, and any amounts offered can never go below the amounts guaranteed in employment standards legislation. Oftentimes though, an employer will offer the departing employee an amount even above and beyond whatever is guaranteed in their employment contract.

This is, of course, strategic. That extra amount is known in law as ‘consideration,’ and it comes at a price for the employee. In consideration for any additional payment, employers insist that the employee signs off on a ‘full and final release.’ This is essentially a contract that the now-former employee signs confirming that they will not take any legal action against the employer now, or at any time in the future. While releases may vary, they also require that any settlement will be kept confidential by the employee, and that the employer will be absolved of any legal liability.

Naturally employees may choose not to sign a release, and can proceed through to litigation if they desire. However, with 98% of cases settling before trial, these employment releases are relatively standard fare. Should an employee choose to attempt litigation after signing a release, an employer can use the release to bar the litigation. In one recent case, the Ontario Superior Court reviewed when those releases apply, and how they can protect employers.

Releases In Action: Bayes v. RBC

In  Bayes v. RBC, 2021 ONSC 6836, Thomas Bayes began working as a senior manager in RBC’s investigation department in 2008. In 2014 and 2015 he was a whistleblower in two workplace harassment complaints, and 2 years later in 2017 he was diagnosed with cancer. Mr. Bayes took a brief medical leave that summer due to workplace stress, and was informed ahead of his return to work that his employment would be terminated as soon as he arrived back in the office.

Mr. Bayes’ employment was terminated as expected, and he was presented with two options. One option was a full year of income protection, with a claw back if he found new work within that time. The other option was a lump sum payment of 75% of his annual salary in exchange for his signing a full and final release. RBC recommended that Mr. Bayes seek legal advice in order to review his options. He then spoke with an employee relations advisor at the bank and expressed concerns over the requirement that he look for work, since his health issues would prevent him from doing so. The advisor recommended that he could appeal a denial from his disability insurer, which would then pause his income protection. In any event, Mr. Bayes asked for an extension until after his next specialist appointment, and was granted a two-week grace period before signing.

Following his appointment, Mr. Bayes asked for a further 5-week extension to review his options, which RBC denied. He then elected to take the lump sum option, and signed the release without protest. Then, just over a year later, Mr. Bayes filed a claim against RBC for the harassment that he had received during his employment.

When Are Full And Final Releases Invalid?

The Court first assessed whether Mr. Bayes might have been coerced into signing the release, and determined that he was not. He had several options available to him at the time, such as not signing the release at all, commencing litigation at that time, or proceeding as the bank recommended and seeking disability coverage. He chose none of those options, and simply signed the release when he was denied a second extension.

Mr. Bayes also did not seek proper legal advice. While he was “strongly encouraged” by RBC to do so, he instead spoke with a mediator while they were golfing together, instead of opting for a proper legal consultation. He also made no protest about signing the release – even saying in one later email that he was “happy to go ahead with the retirement option.” This was simply not a case of coercion, where Mr. Bayes was forced to sign anything ‘on the spot’ that he did not have a chance to thoroughly review.

The Court also reviewed the relationship between the parties. While RBC is a multinational bank, Mr. Bayes was not an unsophisticated employee. He had spent decades working an illustrious career within law enforcement and the legal sector, including past workplace investigations and harassment. While he claimed that he was not in the right state of mind to sign anything, the release was a one-page straightforward document, and he was provided with ample time to review. The Court found that RBC had treated him compassionately throughout the process, and he was offered opportunities both for legal advice and even for counselling. In short, RBC levelled the playing field and the Court barred the litigation from proceeding given the parties’ settlement. 

The Upshot

This case is a reminder for employers about the importance of having a carefully crafted full and final release, and the importance of an employee agreeing to sign a release.

Releases must be written strategically in order to cover any and all potential scenarios. In an ideal scenario, these releases act as a sort of ‘fire blanket’ that immediately smothers out potential claims. Getting a signed release may mean paying out a larger severance package than desired, but the payment can be worthwhile. This is especially true when litigation would be significantly more expensive, and is unlikely to yield a favourable result.

In this scenario, the employer likely won the Court’s favour by acting in good faith. Their conduct throughout the negotiations, as well as the way in which they handled Mr. Bayes’ health issues indicated that Mr. Bayes was not pressured into signing the release. Acting in good faith, encouraging employees to seek legal advice, and providing them ample time to consider a severance package are all beneficial in cases such as these.

To help ensure your next employment termination goes smoothly, make sure that your full and final release properly protects your business. Contact us today to set up a consultation.