In Stribling v Starbucks Coffee Canada Inc. [Stribling], the Ontario Superior Court of Justice (“ONSC”) confirmed that an employee’s email acceptance of a voluntary mutual separation offer created a binding agreement, despite his later refusal to sign and execute a formal release.

Background

Following performance concerns, in part due to a disability, the employer placed the employee on an involuntary medical leave. Several months later, the employer provided a letter to the employee setting out two options for him moving forward:

1. return to work on specific conditions, including providing updated medical documentation and being placed on a performance improvement plan upon his return; or
2. accept a voluntary mutual separation package, providing eight weeks’ pay in exchange for signing a full and final release.

Following consultation with his legal counsel, the employee ultimately emailed the employer confirming that he had decided to accept the mutual separation offer, “including the details and the compensation” and that he would sign the release once he received it.

Shortly after, the employer sent the employee a formal release to be signed and executed, as well as a termination letter that mistakenly referenced the termination of his employment for cause, contrary to the offer he had already accepted, which indicated that the termination would be without cause. After the employee pointed out the mistake and the employer provided the correct termination letter, the employee did not execute the full and final release and instead initiated a wrongful dismissal claim.

The Court’s Decision

The employee advanced several arguments for why the apparent agreement was not enforceable, despite having indicated his acceptance in his email to the employer. The employee argued:

• he did not sign the settlement and release documentation, meaning there was no valid acceptance of the mutual separation offer;
• the employer repudiated the agreement by stating that his employment was terminated for cause;
• he did not receive any payment or consideration pursuant to the terms of the alleged agreement; and
• if there was acceptance, he accepted the terms under duress and coercion.

The ONSC dismissed the action and ordered the employee to execute the release. The Court noted that the employer’s letter set out detailed terms of separation, and the employee accepted those terms in a clear and unambiguous email. The fact that the details of the release were communicated after the agreement did not invalidate the agreement, given the essential terms of the agreement were settled.

Notably, the Court distinguished that this was not a case where there was an “agreement to agree”, where an agreement to settle was conditional on agreement to the detailed terms of settlement. Rather, the Court found that an offer that set out the details of a proposed agreement was made by the employer, and accepted by the employee. The essential terms had already been settled, and the release was simply a document the employee was contractually required to sign.

The Court also found that the mistaken reference to a “for cause” termination in the initial termination letter did not amount to repudiation. The employer corrected the error promptly and the Court emphasized that the fact that it could be described as an error is because it signaled a deviation from the terms of the agreement, rather than an intention to abandon it.

On the argument that the employee accepted the terms under duress, the Court found no evidence that the employer had applied illegitimate pressure for the employee to sign. The employee was given extensions to the deadline to respond to the mutual separation offer to allow him time to consult with counsel, and he provided no evidence to support that he was having financial difficulties as he claimed. The Court determined that the employee simply decided he had a better option once he secured a loan to bring an action against the employer.

The Court concluded that an agreement had been reached regarding the employee’s departure from his employment with the employer, and the employee was required to execute the full and final release.

Takeaways for Employers

1. A settlement agreement does not require a signed release to be enforceable: Stribling indicates that where clear settlement terms are presented and an employee accepts those terms, even if a formal release is not signed yet, the courts are willing to enforce the agreement where there are no key terms that have yet to been agreed upon.
2. Administrative errors do not automatically undermine a settlement agreement: As indicated in Stribling, mistakes, such as issuing the wrong termination letter do not automatically void a settlement if they are corrected promptly and in a manner consistent with the parties’ original understanding. While employers should avoid making such errors in the settlement process, courts will not treat a promptly corrected error as a repudiation of the agreement.
3. Provide flexibility for an employee to seek legal counsel: The Court in Stribling highlighted that the employer offered extensions so the employee could consult legal counsel. Providing employees with flexibility to obtain legal advice helps demonstrate they understand the terms of settlement and reduces the likelihood of an employee raising a successful claim that they signed the agreement under duress.

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

This information is not intended as legal advice.