At Zeilikman Law we are often confronted with the following situation: an employee has just been dismissed by their employer and as part of their termination they have been offered a severance package. However, the employer will only provide the severance package if the employee signs a release (the deadline is usually strict). A release is an agreement which will act to bar any future claim that an employee may have against the employer relating to their termination of employment.
So should the employee sign the release right then and there? Absolutely not. The employee should take the proposed severance package and any employment agreement they may have and seek the advice of an employment lawyer. The employment lawyer can assess whether or not what the employer is offering is fair. Many employees make the mistake and sign a release and then go to a lawyer only to discover that they could have gotten a much better deal from their employer than they received.
This issue is highlighted in the decision of Rubin v. Home Depot Canada Inc. (215 A.C.W.S. (3d) 651). In this case the plaintiff, Mr. Rubin, was a long time employee with Home Depot Canada Inc. After many years with the company, his employment was terminated without cause as a result of restructuring. Home Depot gave him a letter confirming his termination and offered him a severance package along with a release. Mr. Rubin signed those documents without getting legal advice. However, he soon learned that he was actually entitled to much more than what Home Depot had offered.
Normally the courts will hold the parties to their agreements. Therefore, a release will stand and the employee is out of luck. In this case Home Depot had knowingly taken advantage of Mr. Rubin who was an older and long-term employee such that the deal that was struck was grossly unfair to him. The court struck down the release, giving Mr. Rubin double the amount of severance than he was originally offered.
WE CAN TAKE THE FOLLOWING AWAY FROM THIS CASE:
- Generally, if you sign a release you are stuck with it. Most of the time courts will hold people to their agreements. Only in extreme cases where the employee was vulnerable, had been taken advantage of and given a severance package that was really unfair will the courts intervene.
- Do not succumb to an employer pressuring you to sign a release. An employer will often assert arbitrary deadlines on an employee. You should let your employer know that you need reasonable time to meet with a lawyer so that you can determine what is fair.
- Go to an employment lawyer to determine if the severance package is fair. An employment lawyer is a professional and can very quickly tell you whether or not what you are offered is in line with what the law says you should be getting.
- Do not be afraid to negotiate. Severance packages are not set in stone. Often one letter from a lawyer will cause the employer to offer more to the employee.
Two more things you should be aware of: First, there is no such thing in the law per se as a “two weeks’ notice” – this is the most common fallacy that we hear from a lot of people who walk through our doors. Second, do not think that compensation pursuant to the Employment Standards Act is necessarily all that you are going to get. In fact, a great deal of compensation arises out of principles set out in the common law.