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When is a Release effective?

Posted by wjadmin — filed in Business Law

A decision out of Ontario has received a lot of press this week: Rubin v. Home Depot Canada Inc., but it does not seem to change the law much in my opinion.  Having said that a clarification and/or restatement of the law is never a bad thing.  Also, it is good when such cases get press because both employers and employees get informed.

A long term employee nearing retirement age was fired without warning.  Home Depot offered him more than the statutory minimum but not nearly what he would get for common law damages for wrongful dismissal.  He was asked to sign the release right away.  Shortly after signing, the employee realised he made a big mistake.

Anytime that someone accepts money for the settlement of a legal dispute they will be asked to sign a release.  This is standard operating procedure.  In employment law, however, releases often get challenged.  The reason is because terminations tend to be very emotionally charged experiences.  The decision to terminate can be a long time in the making, but the employees are not usually part of that process .  Employees are often surprised and shocked when they find out.  Since their employment affects their ability to pay their rent, buy food and live their life, it can be a traumatic experience.  If an employee is asked to sign a release at the same time as being terminated then they may not be thinking clearly.  The release can be challenged.

Employers can be a bit too quick to ask for a release from their employees.  Perhaps they want the matter all tied up quickly with no loose ends.  Perhaps they are also ill informed about the law or stressed themselves about the termination process.  Many small employers do not have human resource departments or a lawyer on speed dial.  They find firing an employee very stressful (although not as stressful as the one being fired).  I am not sure this would apply to Home Depot, however.  Large corporations with professional human resource advisers and their own lawyers should really know better.

The Court looked at the following factors to determine if the release was unconscionable:

  1. what is grossly unfair
  2. was there legal advice
  3. overwhelming imbalance of bargaining power
  4. other party knowingly taking advantage of this vulnerability.

The Court overturned the release and awarded a generous 12 months severance package, in addition to the 28 weeks already paid by the employer.

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