Published January 4, 2002
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Why this decision may interest you
In this case, an employer dismissed an employee. The employer and employee reached agreement on the terms of dismissal and the employee signed a full and final release. The employer believed that the release concluded the matter but instead, found that the employee was able to bring a human rights complaint afterward. The case offers insight into what measures can be taken to ensure that a release is binding.
Summary of facts
Pritchard was dismissed from her employment at Sears. She received legal advice regarding the release but her lawyer told her that he needed more time to consider the potential human rights claim which Pritchard may have had against Sears. In addition, she was advised by a government human rights official that the release would not be binding on her.
Pritchard decided to accept the employer's settlement proposal, was paid two weeks salary above her statutory minimum severance pay entitlement and signed the full and final release. The employer received the release and thought the matter was at an end.
Subsequently, Pritchard brought a complaint against the employer under the Ontario Human Rights Code alleging sexual discrimination and sexual harassment. She claimed her dismissal was a reprisal for pursuing an earlier sexual harassment complaint. The employer argued that the signed release precluded the harassment complaint. The Commission declined to accept Pritchard's complaint. The Commission has discretion to refuse to deal with a complaint where, among other circumstances, the complaint is trivial, frivolous, vexatious or made in bad faith.
In Pritchard's case, the Commission felt that since there was no evidence of duress in obtaining the release, pursuing a complaint against the employer after signing a final release was in bad faith. Pritchard went to court to seek judicial review of this decision by the Human Rights Commission.
Can a signed full and final release protect an employer from a subsequent human rights complaint brought by an ex-employee?
It was clear that the position taken by the Commission in rejecting the complaint was consistent with the Commission's Policy and Procedures Manual. The manual stated:
The presence of a full and final release executed by the complainant will virtually always be evidence of bad faith in bringing a human rights complaint. The only exception will be if there is evidence of duress in the signing of the release... It should be noted, however, that duress is a very high standard to be met as laid down by the courts. Duress does not include so-called economic duress... (p. 12).
In its decision, the Court found that the Commission improperly fettered its discretion by ignoring the context within which the release was signed and, in essence, took the position that any complaint brought after a release is signed amounted to an act of bad faith.
The Court noted that the term bad faith normally connotes "moral blameworthiness" or "conduct intending to mislead". The Court was satisfied that in such a situation if an employee accepted a sum of money in exchange for a release of all claims against an employer, including human rights claims, the employee would be acting in bad faith in subsequently turning around and filing a human rights complaint.
However, in other situations where there is no intent to mislead or no moral blameworthiness, the existence of a release would not necessarily indicate bad faith. The Court suggested that some examples where bad faith might not exist could include:
Because of the important statutory mandate of the Human Rights Commission to protect human rights, the Court decided that the Commission must consider both the context surrounding the signing of a release and all evidence relevant to a determination of bad faith, prior to rejecting a complaint. In particular, it must not rely solely on its Policy Manual and must undertake to assess the complainant's individual moral blameworthiness in pursuing the complaint". In this case there was no bad faith" and the complaint could proceed.
It is very common for employers to assume that a full and final release from an employee will preclude all further proceedings. At least with regard to subsequent human rights complaints, that view is in error. If, after reviewing all evidence and the context within which the release was signed, there is no element of bad faith or "moral blameworthiness" on the part of the employee signing the release, it appears that a post-termination human rights complaint may very well proceed. It remains to be seen if a reliable and predictable test can be formulated to determine an individual's moral blameworthiness!
Employers should consider taking the following measures when executing a release with a dismissed employee:
1. Ensure the release specifically refers to and waives subsequent human rights claims.
2. Inform the employee that the release is binding on the employee and specifically draw the employee's attention to the provision releasing all human rights claims.
3. Insist that the employee obtains independent legal advice and allow enough time prior to the deadline for signing the release to permit the employee to get independent legal advice and to have the release reviewed and evaluated fully.
4. Ensure adequate consideration is present to support the release. Consider making payments to the employee in addition to the minimums specified in Employment Standards Act. Draw the employee's attention to what component of the payment is a statutory minimum requirement and what component of the payment is extra.
5. Make it clear to the employee that the employee does not have to accept the severance package that is being offered.