Challenging a Signed Release | Ontario Employment Lawyer

Releases are essentially a contract whereby the parties agree that, in exchange for a certain sum of money, the employee agrees that all employment-related matters between the parties have been resolved such that the employee may not initiate any legal proceeding, in any forum, in respect of their employment with that employer. This means that an employee cannot bring an employment standards claim, a human rights claim or any court proceeding with respect to their employment.

The signing of a release typically constitutes the end of all matters between the parties. However, occasions do arise wherein the terminated employee later seeks to hold the employer accountable for some employment-related misdeed but is prevented from doing so due to the existence of a signed release. In order to hold their employer accountable, such employees must first find a way to get out of the release they signed.

One day before the corporation signed the settlement documents, the employee emailed the corporation to ask that his vested stock units be paid out in accordance with the terms of the deferred shared plan. The corporation neglected to reply to that email for several months, until October of 2018, at which point the corporation declined to pay the value of the stock units to the employee on the basis that the employee had released his claim to them. This engendered another legal action wherein the employee sought damages for the value of the vested stock units.

The corporation took the position that the employee had released his claim to the vested stock units when he signed the release associated with the settlement of the wrongful termination action.

How Courts Assess the Validity of Signed Release

In assessing applications regarding the applicability or validity of a signed release, the courts are bound to interpret the release in accordance with the rules applicable to contractual interpretation. The court’s goal is to determine the mutual objectives and surrounding circumstances at the time the release was signed.

Where there is a discrepancy between the language used in the contract and the parties’ behaviour, the court must rely upon the language used in the contract itself rather than its interpretation of surrounding circumstances to determine the parties’ intentions.

Motions Court Judge Determines Employee is Entitled to Payment of Value of Shares

The Superior Court judge who initially heard this motion determined that the vested stock options had not been released pursuant to the settlement documents. The reasoning for this was that any other interpretation would render the settlement itself nonsensical. Meaning that the employee would have voluntarily given up his right to approximately $76,000.

The motion judge also determined that the settlement documents had to be read in the context of the deferred share plan, which provided for automatic redemption of vested units upon termination of the employee’s employment, and that the language in the settlement documents that referenced stock options and shares should be read as “stock or share awards which have either not been awarded or not been redeemed and which were still subject to the terms of the Plan”.

Appellate Court Overturns Decision, Rules Employee Not Entitled to Value of Shares

Although the appellate court was satisfied that the motion judge had applied the correct laws, it disagreed that the appropriate conclusion had been reached. In particular, the appellate court found that the motion judge had allowed his interpretation of the circumstances surrounding the negotiation and signing of the settlement documents to overwhelm the actual language used in those documents.

The court found that the motion judge had effectively rewritten the contract between the parties. As such, the appellate court determined that the statement that the release of stock units applied only to those stocks that had not been awarded or redeemed, was incorrect. Had the parties intended this result, they could have drafted the settlement documents to reflect the same; however, they had elected not to do so.

Moreover, the motion judge had exceeded his authority when he interpreted the minutes of settlement in such a manner as to consider the economic benefit conferred upon the employee by the agreement. Such a consideration is only afforded to litigants who are disabled, which the employee in this case is not. As such, it was irrelevant whether the settlement made sense in terms of the benefit it conferred upon the employee, and the court should not have considered the fact that the agreement reflected only nominal benefit to him.

Ultimately, the appellate court was satisfied that the settlement documents, as written, dictated that the employee, by signing the release, relinquished his right to the nearly $76,000 in stock units vested and due in accordance with the termination of his contract. The release was intended to represent full and final resolution of all employment-related matters between the parties. Therefore, the court found that the employee was now unentitled to seek recovery of the $76,000 in value of unrealized stock units.

Contact the Law Office of Peter McSherry for Assistance With Getting Out of Your Signed Release