Common employment law mistakes made by employers: #7: Failing to provide an employee the time and information needed weigh options when being dismissed

Employers generally want to promptly resolve all issues with an outgoing employee in order to avoid litigation. To achieve this, an employer must provide the employee with sufficient time and information to make an informed decision.  Apparent resolutions may not be legally binding if the employer fails to provide an employee with the time and information necessary to make an informed decision. This was most evident in the recent decision of the Ontario Superior Court of Justice in Rubin v. Home Depot Canada Inc

In that case, the employer dismissed an employee who had nearly 20 years’ of service.  The dismissal was on a without cause basis, which means a reasonable amount of notice or compensation was owed to the employee by the employer.  The employer offered the employee 28 weeks’ of pay in lieu of notice in exchange for a release agreement that prohibited the employee from claiming damages from the employer as a result of his dismissal.  The employer’s termination letter, however, did not disclose that the Employment Standards Act, 2000 required the employer to pay the employee virtually all of the compensation offered to the employee for the release agreement.  In reality, the employer was giving the employee very little in exchange for the release agreement.

The employer allowed the employee to sign off on the release agreement immediately, despite the fact that the termination letter provided the employee with one week to make his decision. The employee sought legal advice after signing the release agreement and realized that he had agreed to accept far less than what he was entitled to under the law.  As a result, the employee started a legal proceeding against his former employer to set aside the release agreement and to recover the unpaid compensation.

In court, the judge found that the release agreement was unenforceable given the circumstances under which it was obtained by the employer.  In particular, the judge relied on the following: The employer’s offer was grossly unfair given the employee’s age and significant length of service.  The employee lacked advice and no attempt was made by the employer to explain or clarify the terms of the package offered.  The employer knowingly took advantage of the employee’s vulnerability by misleading him to believe that his only option was to sign the release agreement, when, in fact, the employer was offering very little to sign that agreement. The judge went on to award the employee nearly two times the amount of compensation that the employer had provided to him.

This case should remind employers that resolutions may not be binding, if they are achieved by not providing the employee with the full picture or enough time to make an informed decision.  Resist the urge to immediately resolve issues with an outgoing employee and, instead, give the employee sufficient time and information to make the informed decision before entering into a release agreement with that employee.    For employees, even though the employee was successful, this case should serve to remind you that you should never merely accept the information provided to you by your employer at the time of dismissal.  Instead, seek advice from an experienced employment law lawyer and have the offer reviewed before you sign a release agreement.

J.P. Zubec