In many employment disputes, a signed release is an important tool which can be used to resolve the matter without resorting to a lengthy and expensive court process. A release is a legal contract in which one party (usually the employer) will agree to pay the other party (the employee) a specific sum of money in exchange for a binding promise by the employee not to bring legal action against them later.
However, it is important for both parties to fully understand the consequences of signing a release before doing so. This issue was at the forefront of a recent decision from the Alberta Human Rights Commission in Caponero v Kaizen Auto Group Ltd.
In that case, Mr. Caponero had brought a complaint against Kaizen alleging discrimination based on physical disability due to a stroke he suffered in July 2019. Mr. Caponero was laid off by Kaizen at the onset of the COVID-19 pandemic in March 2020 and his employment was permanently terminated in August 2020.
In addition to his statutory minimum notice, Kaizen offered Mr. Caponero an additional 8 weeks’ severance pay in exchange for a signed release from any future claims related to his employment with Kaizen. The release specifically precluded any existing or future complaint to the Human Rights Commission. It is important to note Mr. Caponero had already filed a complaint with the Human Rights Commission at this time.
At the termination meeting, Mr. Caponero fully reviewed the release and he decided to accept the offer. Although Kaizen advised him to seek legal advice and take a few days to consider the offer before signing, Mr. Caponero declined and decided to sign the release on the spot.
The validity of the signed release was the central issue before the Human Rights Commission. Mr. Caponero disputed the validity of the release, arguing it should be set aside due to unconscionability, undue influence, economic duress, ambiguity, and because it was contrary to the Employment Standards Code (ESC). The crux of his argument was that, due to his earlier stroke, he was cognitively impaired at the time he signed the release. Therefore, he did not fully understand what he was agreeing to.
The Commission disagreed and upheld the validity of the Release. Based on the entirety of the evidence, the Chair concluded that the employee was “not experiencing symptoms and impairments of such a nature or extent that would support a finding that the Release should be invalidated.” The evidence before the Chair indicated that Mr. Caponero read the terms of the release and understood what they meant. The Chair also rejected Mr. Caponero’s argument that Kaizen should have refused to let him sign the release before consulting with his lawyer. The fact that he was twice offered and encouraged to seek legal advice was sufficient.
The release also did not violate the ESC because it clearly outlined that Mr. Caponero would receive his statutory minimum entitlement regardless of whether he signed. Only the additional severance amount was conditional on signing the release. There was also nothing ambiguous or unclear about the settlement terms.
As the validity of the release was upheld, Mr. Caponero’s complaint to the Human Rights Commission was dismissed.
This decision offers several important lessons for both employees and employers.
In all circumstances, employees should seek independent legal advice and ensure they fully understand the terms of a release before they sign. Once a release has been signed, it is very difficult to overturn unless there are exceptional circumstances.
From the employer’s perspective, ensuring a legally enforceable release involves both procedural and substantive considerations.
For procedure, the employee should always be advised to seek legal advice and they should be given at least 5 business days to consider the offer. Whenever possible, employers should refrain from accepting an employee’s signature on the spot, for the sole purpose of avoiding a situation where the employee later claims they did not fully understand the terms.
However, as the above decision shows, a release will not necessarily be overturned if the individual turns down an express offer to seek independent advice, and the evidence indicates they read and understood what they agreed to.
As for substance, first and foremost a release must not violate the ESC (which means an employer cannot require an employee to sign a release in exchange for their minimum notice required under legislation). A release should also clearly state the amount being offered.
Although not raised as an issue in this case, a release should also not be overbroad; it should be drafted to apply only to the subject matter and time period at issue. A release that is unnecessarily overbroad may be at risk of being unenforceable. Releases, while an effective tool for preventing litigation, can create more problems if not executed properly. If you are involved in an employment dispute and you need advice on how to conclusively settle the matter with a signed release, our Calgary and Strathmore experienced employment lawyers are here to help. Please contact our office today.