When dismissing an employee, obtaining a full and final release can be an effective strategy to protect employers from future demands or claims. However, the recent decision from the Ontario Superior Court of Justice (“ONSC”) in Manuel v Lafarge et al. [Lafarge] illustrates the importance of caution when requiring employees to sign releases, particularly where mental health concerns may be involved.

Facts

The employee alleged that during his employment, he was subjected to sexual harassment by a fellow employee, causing him to suffer from panic attacks and post-traumatic stress disorder (“PTSD”). He subsequently went on medical leave, and shortly after his return, his employment was terminated as part of a corporate reorganization.

During the termination meeting, the employer offered the employee a non-negotiable termination package, which would be revoked if he did not sign the release within two weeks. This release purportedly covered all potential claims, including any damages related to the alleged harassment.

Unable to obtain legal advice within that period, the employee ultimately signed the release several weeks later without obtaining any legal advice. After signing, he retained legal counsel and issued a claim, seeking damages for the alleged harassment he suffered during his employment. In response, the employer brought a summary judgment motion, arguing that the employee’s claims should be dismissed as they had entered into a binding settlement agreement and the release clearly covered all claims, including those related to the alleged harassment.

The employee sought to have the release declared invalid for two principal reasons: he lacked capacity when he signed it and signed it under duress. He claimed that his PTSD from the sexual harassment impaired his capacity to sign the release, and that he felt “illegitimate pressure” to do so.

The Decision

The ONSC dismissed the employee’s claim, finding that he failed to provide sufficient medical evidence to substantiate his PTSD diagnosis and demonstrate that he lacked capacity to sign the release. The Court noted that prior to the termination of his employment, the employee had not provided the employer with any medical information indicating a mental illness or that he did not understand the terms of the release. His ability to choose between salary continuation and a lump sum payout further demonstrated that he had the capacity to understand his options.

With respect to the claim of duress, the ONSC held that the employer did not exert any illegitimate pressure on the employee. The employer presented the employee with payment options and provided him the opportunity to seek legal advice. The employee failed to produce any evidence substantiating his claim that he was coerced into signing the release due to economic duress. Based on the evidence presented, the ONSC ruled that the release was enforceable and granted the employer’s motion to dismiss the claim.

Takeaways for Employers

The enforceability of a release often depends on the specific facts of each case, as highlighted by the recent decision in Lafarge and exemplified by Fyffe v University of British Columbia [Fyffe]. In Lafarge, the ONSC upheld the release despite the employee’s claims of mental incapacity and duress, whereas in Fyffe, the British Columbia Human Rights Tribunal allowed a dismissed employee’s discrimination claim to proceed despite her signing a release during her termination meeting. The Tribunal found that the employee had signed the release while experiencing shock and confusion, without sufficient time to fully understand its terms. These contrasting outcomes emphasize the need for employers to handle releases with caution during termination processes.

These decisions provide valuable guidance for employers on how to implement enforceable releases:

1. Allow Time for Review: Employers should provide employees with sufficient time to review the terms of a release and seek legal advice. A rushed or pressured signing process can result in employees raising claims of duress, which may potentially invalidate the release.
2. Use Clear Language: Employers should ensure that the language of the release is clear and comprehensive. The release should explicitly cover any potential claims that the employee might bring, including those related to harassment or other workplace issues.
3. Consider Mental Health: Employers should be mindful of an employee’s mental health, particularly if the employee has exhibited signs of mental illness. In such cases, it may be prudent to obtain medical information confirming the employee’s capacity to sign a legal document before requesting that the employee sign a release.

This blog is provided as an information service and summary of workplace legal issues.

This information is not intended as legal advice.