Court Sets Out 4 Elements to Set Aside a Release:

In Manak v Worksafe BC ( 2018 BCSC 182 ) Justice Branch had a case where a manger sought to set aside a Release that she had signed upon being terminated with allegations of just cause. Had cause not existed, 18 months would have been proper notice. The settlement was for 4 months.

The Court said all four of these factors were necessary to overcome a Release:

1. A grossly unfair and improvident transaction; and

2. The victim’s lack of independent legal advice or other suitable advice; and

3. An 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 similar disability; and

4. The  other party’s knowingly taking advantage of this vulnerability.

In this case the Court found that the Release was valid because:

  1. Although 4 months was very low, one had to factor in the significant chance that just cause would be upheld, therefore it was not grossly unfair that a compromise was agreed to. In this case the judge actually  held that just cause had been proven.
  2. Although in fact she did not have independent legal advice, she had sufficient time to do so but chose not to, she did her own internet legal research and she lied to her employer and told them that she had received legal advice before signing the Release.
  3. She was a manager, not a “low level ” employee. She was aware of the dismissal process, she had time and access to legal research, she spoke to other managers about her situation and she was not under undue economic pressure as either way she was going to get her ” healthy” pension.
  4. She had adequate time to consider her options. She made her decision in less time than the employer required. She carefully thought through the consequences. She negotiated some modest improvement in the settlement. There was no evidence of pressure from the employer other than the 24 hours that she was given by the employer to accept or reject the offer.

Plaintiff Gets Bonus Over Notice Period Even Though Employer Cancelled Bonus Plan Months After Dismissal :

In Manastersky v RBC ( 2018 ONSC 966 Monahan J. ) had a 58 year old  Managing Director with over 12 years service. One half of the Plaintiff’s  compensation was a Carried Interest Plan ( CIP). The plan contained a provision which allowed RBC to terminate the plan in June 2014, which they did. The CIP also contained a provision which allowed immediate vesting of all outstanding CIP amounts upon termination without cause.

The Plaintiff was terminated without cause in February 2014 and paid out his CIP entitlement up to the date of termination.

In awarding the Plaintiff 18 months notice, the Judge awarded the lost CIP for the entire notice period, even though that period was almost a year longer than the time in which the CIP had been cancelled. He based the quantum on a historical average of past payouts.

The judge did so for 2 reasons:

1) The provision that allowed RBC to terminate the CIP in June of 2014 was not clear language that detracted from his common law entitlement to reasonable notice.

2) Had he not been terminated in February  and was still employed in June when the CIP was cancelled, if RBC not  replaced the lost CIP with an alternative plan, that would have been a constructive dismissal .

I certainly agree with point #2 but point #1 is somewhat troubling. If the purpose of the doctrine of reasonable notice is to put the Plaintiff into the same economic position that he would have if  had been permitted to work out his notice period, then he , along with everybody else who received the CIP and had it cancelled, would have taken a economic hit. Why should he do better because he was let go?

The flip side is what if halfway during the notice period the compensation went up because the Employer did very well. Should the Plaintiff’s damages not reflect this uptick or should he be limited to his historical earnings?

In Chann v RBC ( 2004 ONSC 66310) the Court looked at what actually happened over the notice period in determining what his bonus would have been had the Plaintiff been allowed to work out the notice period. As overall bonuses were down 15% over the relevant period, the Judge used the same factor is calculating the  damages over the notice period.

Sexual Harassment Not Covered by Release Covering Issues Arising From Employment :

In Watson v Salvation Army ( 2018 CarswellOnt 2916) Justice Gordon had a situation where the Plaintiff was suing her former manager for sexual harrassment after having previously settled with her former employer and signed a Release which said as follows:

“This release of claims shall include any claims against anyone or any organization in any way related to or connected with my employment or ending of my employment.”

The Judge found that this did not protect the former manager  even though these events occurred at work because ” sexual harassment, intimidation and other improper conduct are not connected to employment . This are clearly separate items ” 

How to avoid this outcome ?

The Judge said ” specific language to such claims would need to be added to the Release to bar the present claim”.

Does this mean that every employment release must mention sexual harassment, sexual assault etc ? What about racial discrimination, physical assault, or generalized harassment ? Are these also ” not  connected to employment “?

Does this mean that she could go back and again sue the Salvation Army for vicarious liability for the sexual harassment that she endured from her former boss?

I think the Judge got this wrong.

Of course sexual harassment is ” connected with employment” insofar as it exists in most cases because of the employment relationship, especially like in this case where it is the boss harassing an subordinate.

That is why making a sexual advance to a subordinate in the  workplace is qualitatively different than making a sexual overture to a stranger in a bar.

Sexual harassment is all about the power that derives from the inherent power imbalance in the workplace.

One gets the feeling that the Judge didn’t want the former manager to get the benefit of the very low settlement ( $10,000) negotiated between the Army and the Plaintiff. At the time of her settlement the manager was still in the Army’s employ. I am sure that the Army intended at that time that this settlement would cover all their employees, including the manager.

If the Plaintiff wanted to settle with her employer but not her harasser, she could have negotiated  a carve out in the Release. In my experience that would have resulted in no settlement.

Settlements and releases are essential to resolving employment disputes. The only thing that the employer is buying is peace. Allowing releases to be set aside for anything other than fraud or misreresentaion will have a negative effect on resolving future employment disputes.


Refusing to Accept Offer From Purchaser Not Failure to Mitigate :

In Dussault v Imperial Oil ( 2018 ONSC 1168) two long term plaintiffs were told that Imperial was selling   the division that they worked for to Mac’s and that Mac’s would make them a comporable  job offer. The Plaintiffs rejected the Mac’s offers.

The legal issue was whether this was a failure to mitigate, thereby reducing the Imperial severance obligations.

Justice Faveau said NO for the following reasons:

1) The Mac’s offers came before the actual termination from Imperial and were not restated after the actual termination.

2) Because Imperial demanded that before paying out severance the Plaintiffs had to sign a release, it was reasonable not to accept Mac’s offer as this would deny the Plaintiffs any ability to later sue Mac’s for any shortfall.

3) As Mac’s was not prepared to recognize their years of service with Imperial, it was reasonable for the Plaintiffs to reject the offer.

4) The Plaintiffs had to agree with Mac that they would not disclose their pay rate to other Mac employees as their pay rate was higher.  This would make the future work relationship ” potentially difficult’.

5) The higher salary was only guaranteed for 18 months, less than the 26 month notice period awarded by the Court.