Article No. 6

RELEASE

An employer who dismisses an employee without cause is obliged to provide notice of termination or pay in lieu thereof. The failure to do so constitutes a wrongful dismissal. Minimum notice periods/payments for provincially regulated employers are set out in Ontario’s Employment Standards Act (the “Act”). For federally-regulated employers, statutory obligations upon termination are set out in the Canada Labour Code[1].  In addition to notice, employees with five years or more of service and who are either part of a mass termination or were employed by an employer with a payroll of $2.5 million or more, will be entitled to severance pay.

These payments are mandated by statute and must be made within seven days of termination or by the employee’s next pay date. These payments do not exhaust the rights of a dismissed employee under the common law or by operation of other statutes such as the Ontario Human Rights Code. Further remedies, however, may and often do require the commencement of a civil or court action for wrongful dismissal or a complaint to the Ontario Human Rights Commission if discrimination is at issue.

At termination, the employer may offer the employee a “termination package”.  The termination package, usually described in the letter of termination, sets out the payments, benefits or other offers such as a letter of reference the employer is prepared to provide upon termination. Termination packages are often made conditional upon the signing of a Release by the employee. The Release is a contract which spells out the payments and any other consideration to be provided by the employer in exchange for a release by the employee of any further legal claims, including for wrongful dismissal, he may have against the employer with respect to his employment and/or termination of employment. Put simply, if a wrongfully dismissed employee signs the Release, they are accepting the employer’s offer in full and final satisfaction of any claims they may have and will therefore not be able to pursue any further legal action against their former employer. 

The Release typically contains the type of jargon familiar to lawyers but not to most employees confronted with such document. Employees may be asked to sign on the spot or may be given time to consider the offer before executing the document. Given what is at stake, employees are always advised to refrain from signing a Release until they have obtained legal advice from an employment lawyer. The value of the offer is dependent upon a whole host of factors such the damages for wrongful dismissal the employee can obtain as well as any other remedies they can pursue. Few employees have the legal expertise to make a proper assessment on their own of the offer contained in a Release. Pressure to sign on the spot should immediately raise suspicions that the employer is seeking to have the employee agree to an unequal bargain and should be resisted at all costs.

No action is required by an employee and specifically, no forms must be signed in order to obtain Employment Standards notice or severance payments from an employer.  An employer therefore has no right to a Release in exchange for Employment Standards payments. Unfortunately, this will not stop some employers from making such payments conditional upon a Release in order to avoid or at least discourage legal action on the part of a terminated employee. There is therefore no benefit to an employee in signing a Release under these circumstances as the employer is obliged to make payment of Employment Standards entitlements even if the employee refuses to sign. It is important that one seek the counsel of an employment lawyer before entering into any agreement whether it be in the form of a Release or otherwise.

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[1] While the following discussion of termination packages applies to all terminated employees, employment standards referred to in the article are those set out in the Act.