Terminating Employees: Best Practice to Avoid an Unenforceable Release

October 27, 2016 | M. Ashley Mitchell

As employment lawyers, we frequently advise clients on best practices for carrying out termination meetings with employees. Often, if an employee is terminated, the employer will offer the employee a severance package in exchange for the employee signing a release. One key piece of advice we provide to clients in these circumstances is to always give a dismissed employee sufficient time to review and consider the severance package and release before requiring them to return the signed documents.

The recent Supreme Court of British Columbia decision in Saliken v. Alpine Aerotech Limited Partnership, 2016 BCSC 832 is a cautionary tale for employers of the risk of requiring an employee to sign a release at a termination meeting without giving the employee sufficient time to fully consider the document.

In this case, a 54-year-old helicopter mechanic who had been employed for about 15 months was terminated, allegedly for cause. At the employee’s termination meeting, which came as a complete surprise to him, the employee was presented with two letters advising he was being dismissed for cause and offering to waive re-payment of a training bond if he agreed to sign a release in favour of the employer. During the 15-minute termination meeting, the employee was pressured to sign the release.  Although he reviewed and signed the release during the meeting, at no time did the employer explain the document to him or offer him an opportunity to obtain independent legal advice.

The employee subsequently sued the employer for wrongful dismissal. The Court found that the employer did not have just cause to terminate the employee in the circumstances and thus the employee was entitled to reasonable notice at common law.

The Court also held that the release signed by the employee at the termination meeting was not binding on the employee. The Court reasoned that the stress of being fired and asked to review and sign the termination documents in a tense environment made it impossible for the employee to think clearly. It also noted that the employee did not have the necessary level of sophistication to understand the consequences of the release nor had it been explained to him that he would be waiving his legal rights by signing the release. The Court considered these and other factors in concluding that the employer had knowingly taken advantage of the plaintiff’s vulnerability in the circumstances and, as a result of this “substantial unfairness”, it would be unconscionable to hold the employee to the signed termination documents. Accordingly, the signed release was found not to be binding on the employee.

In the end, the employee was awarded damages amounting to six months’ pay in lieu of notice based on his age, length of service with the employer and the availability of similar employment.

Lessons for Employers

This case serves as a reminder to employers of the importance of giving dismissed employees opportunity to review and consider severance offers and releases before they are required sign these termination documents. We typically recommend that employers provide employees with at least 7 to 10 days to review any offers or releases, which allows them time to fully consider the offer and obtain professional advice on the documents, if needed.  By taking this approach, employers can reduce the risk that their releases may be found to be unenforceable.

Disclaimer

This publication is provided as an information service and may include items reported from other sources. We do not warrant its accuracy. This information is not meant as legal opinion or advice.

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