When Will a Signed Release be Unenforceable?
Update by Erin Brandt, Cofounder
When dismissing an employee, it is standard practice within employment law to ask the employee to sign a release if they want to receive more severance than the BC Employment Standards Act requires. But after signing the release and getting paid, some employees may nevertheless seek additional compensation, asserting that the release they signed isn’t enforceable.
That’s what happened in Fyffe v University of British Columbia, 2024 BCHRT 88. On a preliminary application to dismiss a complaint, the BC Human Rights Tribunal evaluated the circumstances where a signed release may not be enforceable.
Background
Ms. Fyffe worked for UBC for less than 4 months at which point UBC determined that she was not suitable for the job she was hired for, and dismissed Ms. Fyffe with 1 week of pay in lieu of notice. Upon dismissal, UBC offered Ms. Fyffe an additional 3 weeks pay in exchange for signing a release. The release expressly stated that Ms. Fyffe would not commence or pursue a complaint under the BC Human Rights Code. Although Ms. Fyffe was offered one week to sign and return the release, she signed it immediately.
Ms. Fyffe later claimed that she was emotionally shocked, overwhelmed and confused during the termination meeting. She didn’t read or understand the release, and only signed it as a result of financial pressure to pay her September rent. She said she would not have signed it without first getting advice had she read it or understood it.
On the other hand, UBC’s representatives claimed they explained the termination letter and release to Ms. Fyffe, including that the release agreement would release UBC from any further claims, that Ms. Fyffe had one week to consider and sign the release, and that she was entitled to speak with AAPS (her bargaining unit) about the release.
After signing, Ms. Fyffe filed a human rights complaint against UBC alleging that UBC discriminated against her in employment based on race and colour when it terminated her employment. UBC then filed a preliminary application to dismiss Ms. Fyffe’s complaint on two grounds:
That it would not further the purposes of the Human Rights Code to allow Ms. Fyffe’s complaint to proceed where she had signed a full and final release; and
That Ms. Fyffe’s human rights complaint had no reasonable prospect of succeeding.
Decision
In deciding UBC’s application to dismiss Ms. Fyffe’s complaint, the Tribunal recognized that “there is a strong policy rationale for holding people to their agreements”:
When parties are able to resolve human rights disputes by way of a settlement agreement, considerable public and private resources may be saved. They may be able to resolve the complaint more expeditiously than would a formal hearing process. The parties may also be able to craft a resolution which more closely matches the needs and interests than would a decision of the Tribunal. Finally, the mediation process itself may be better for the parties’ relationship than a formal hearing (see also Nguyen v. Prince Rupert School District No. 52, 2004 BCHRT 20 at para. 15).
At the same time:
The fact that parties have entered into a settlement agreement respecting a human rights dispute does not deprive the Tribunal of jurisdiction to hear the dispute. Parties cannot contract out of their rights under the Code (see also Insurance Corporation of British Columbia v. Heerspink, [1982] 2 SCR 145 at 158; The Employee v. The Company and the Owner, 2017 BCHRT 266 at para. 27).
There are several factors the Tribunal considers it determining whether a settlement agreement runs contrary to the purposes of the Code:
The actual language of the release itself as to what is included, explicitly or implicitly.
Unconscionability, which exists where there is an inequality of bargaining power and a substantially unfair settlement. This does not, however, allow a tribunal to interfere with a settlement where it finds inadequacy of consideration.
Undue influence may arise where the complainant seeks to attack the sufficiency of consent. A plea of this nature will be made out where there has been an improper use by one party to a contract of any kind of coercion, oppression, abuse of power or authority, or compulsion in order to make the other party consent.
The existence or absence of independent legal advice may also be considered. However, if a party has received unreliable legal advice that may not affect the settlement.
The existence of duress (not mere stress or unhappiness) and sub-issues of timing, financial need, and the like, may also be factors.
The knowledge on the party executing the release as to their rights under the Act, and, possibly, the knowledge on the party receiving the release that a potential complaint under the Act is contemplated.
Other considerations may include lack of capacity, timing of the complaint, mutual mistake, forgery, fraud, etc.
(see also Thompson v. Providence Health Care, 2003 BCHRT 58 at para. 44)
The Tribunal ultimately concluded that there were too many conflicts in the evidence to determine on a preliminary application to dismiss the complaint what actually happened during the dismissal meeting, and the factors set out in Thompson could not be properly assessed. As such, the Tribunal declined to dismiss Ms. Fyffe’s complaint, leaving the issue of the enforceability of the release for the full hearing of the complaint.
Further, the Tribunal found that Ms. Fyffe took her allegations of race discrimination out of the realm and conjecture and speculation and declined to dismiss Ms. Fyffe’s complaint on the basis of having no reasonable prospect of succeeding.
Key Take Away for Employees
A release will usually protect an employer by taking away an employee’s right to seek additional compensation. Before signing a release, employees should seek legal advice to canvass all possible legal claims and entitlements to additional compensation to ensure the amount their employer is offering is fair. No one should sign a legal document without fully understanding the consequences of doing so.
Key Take Away for Employers
When offering a dismissed employee additional compensation in exchange for signing a release, employers should ensure that the release is properly drafted to capture all possible legal claims. Employers should bring two representatives to a dismissal meeting, ensure the employee understands they can take the release home to review it prior to signing, and take contemporaneous notes during the meeting. While giving the employee additional time to review the release may result in them not signing, skipping these steps to get a release signed immediately can impact the enforceability of the release later on.
