Saturday, 22 June 2013

Do You Have to Sign a Release to Get a Severance Package?

(c) istock/Sohel_Parvez_Haque

Do you have to sign a release to get a severance package in Ontario? For most employees who find themselves suddenly unemployed, a severance package is often accompanied by a "Full and Final Release Agreement." The employee is often told that, in order to receive the severance package he or she will have to sign the Full and Final Release.

Releases often contain language that essentially says that in consideration of the receipt of the amount offered the employee agrees to waive all claims for wrongful dismissal damages, Human Rights damages, claims for vacation pay and other statutory entitlements, and, less frequently, claims to the Workplace Safety and Insurance Board.

Is an employee legally obligated to sign such a document in order to receive his or her severance package? The answer is "no, but."

Why the Answer is "No"

The answer to the question "is an employee legally obligated to sign a full and final release in order to receive his or her severance package?" is "no" because under Ontario law unless an employer has “just cause” to fire an employee, the dismissed employee must be provided with notice of dismissal or a payment in lieu of notice. Note that the only reason that an employer may refuse to provide the employee with reasonable notice of dismissal, frequently called a "severance package," is because the employer had just cause for dismissal. (Technically probationary employees subject to a legally binding agreement are also not owed notice of dismissal, but those cases are rare. For more on that topic, see here: Employers Can Terminate Probationary Employees Without Cause.)

Therefore, given the legal obligation to provide an employee with reasonable notice of dismissal or a payment in lieu thereof, an employer cannot make the signing of a Full and Final Release a condition for the receipt of any severance package.

Similarly, an employer cannot force an employee to sign a confidentiality agreement, non-disparagement agreement, non-competition agreement or any other agreement in consideration of the receipt of a severance package.

Why the Answer is "No, But..."

The real answer to the question "is an employee legally obligated to sign a full and final release in order to receive his or her severance package?" is "no, but."

In order to receive a "settlement" of one's case, as compared to a "judgment," almost invariably the settling party, which in wrongful dismissal cases is the dismissed employee, must sign a full and final release document.

A "settlement" is a negotiated agreement between two parties. It is not ordered by the court, and is not a matter of public record. Settlements are often reached based on compromises. Both sides typically give something up in order to get something else.

In employment cases, employers typically give up more severance money in order to secure the timely resolution of a case; employees typically forfeit the receipt of a portion of their severance money in order to secure the same thing, the timely resolution of the case.

Employers have an interest in keeping the amount of money that they have paid an employee for severance confidential. Employers typically do not want active employees to know how much they paid a dismissed employee for fear that the active may insist on a similar package in the future on the basis of precedent. As such, employers typically insist on a confidentiality clause.

Employers also have an interest in finality, and the real purpose of a "release" document is to attempt to ensure that the settlement finally and formally ends the disputes between the two sides.

Therefore, once agreement is reached on the terms of the settlement, typically the only way to receive the settlement is to sign a full and final release.

What if You do Not Want to Sign a Release or Confidentiality Agreement?

For one reason or another some people do not wish to sign releases or confidentiality agreements. For example, where an employer has publicly taken the position that it had "just cause" to fire an employee, the employee may insist that either the employer publicly retract that position or the employee may refuse to confidentially settle the case. Or, where the employee takes the position that he or she was fired for an improper purpose, such as discrimination, the employee may wish for the result of the case to be made public.

If you wish for the outcome of the case to be made public, then you will either have to get the settling party to agree that you can make the terms of the settlement public (which is highly unlikely) or you will have to go to court, or some other public forum such as the Human Rights Tribunal, and win a "judgment."

Judgments are public documents. CanLII is a free legal resource that publishes thousands of Canadian judgments each year. Once a decision is made by a judge, anyone can legally report and repeat what the judge said, subject to copyright protections, etc. More to the point, once a judgment is issued, the employee can tell other people how much severance they received and why.

Should You Take the Settlement or Wait for a Judgment?

That is a question only you can answer, usually on the advice of a trusted employment lawyer. If you are an Ontario worker and you find yourself suddenly unemployed, and your employer has made you an offer to settle your wrongful dismissal case in consideration of you signing a full and final release, and you want to know what you should do, the professional, experienced, and cost-effective employment lawyers at Ottawa's Kelly Santini LLP would be happy to be of service to you by reviewing your severance package and providing you with an opinion on its reasonableness.

Contact Me

To reach the author of this blog, Sean Bawden, email sbawden@kellysantini.com or call 613.238.6321 x260.

Sean P. Bawden is a partner with Kelly Santini LLP, located in Ottawa, Ontario, Canada. He practices in the areas of employment law and civil litigation. He has also taught Trial Advocacy for Paralegals and Small Claims Court Practice at Algonquin College in Ottawa.

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As always, everyone’s situation is different. The above is not intended to be legal advice for any particular situation. It is always prudent to seek professional legal advice before making any decisions with respect to your own case.

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