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When does a signed release from an employee hold up? Lessons from a recent human rights claim

In Kamal v TRACTEL Swing Stage Limited, 2023 HRTO 1388, the Ontario Human Rights Tribunal dismissed an employee’s human rights application because the employee had signed a release after a wrongful dismissal settlement with the employer.

The applicant, Nikhat Kamal, had been employed by the corporate respondent, TACTEL Swing Stage Limited for around three and a half years — from September 2014 to March 2018. Upon termination, Kamal signed a full and final release in exchange for an additional four weeks of pay on top of her employment standards entitlements.

The release expressly released the employer from claims brought by the applicant under the Human Rights Code.

About four months after signing it, Kamal filed an application with the tribunal alleging discrimination with respect to employment on the basis of sex, including an allegation that the employer had engaged in sexual harassment.

The employer requested that the application be dismissed, taking the position that filing the application after signing a release was an abuse of process.

Kamal argued that the release was “unfair” because it was unclear and the employer should have done more to ensure it was understood by Kamal that she was relinquishing her rights to a human rights application. Kamal testified that:

• she did not understand the release – only understanding that it needed to be signed to get the termination pay;
• she signed the release before leaving the office; and
• she did not review the contents with anyone.

Kamal also argued that there was no consideration (something of value, such as payment, in exchange for signing a contract) for the release.

The tribunal’s decision

When determining whether there was an abuse of process, the tribunal followed the approach used in Perricone v Fabco Plastics Wholesale, 2010 HRTO 1655, which stated at paragraph 39: “When two parties contract to settle legal matters between them, the principle of finality demands that the contract be given effect and prevents parties from litigating settled matters, unless there are compelling reasons to set the contract aside altogether.”

As such, the tribunal assessed whether there were compelling reasons to set the Release aside and determined that there were no compelling reasons to do so.

First, the tribunal confirmed the additional four weeks of pay was consideration for signing the release.

Next, the tribunal disagreed with the applicant’s assertion that the respondents should have done more to make sure she understood the release. The respondents had presented the termination package, including the release, in a meeting with the applicant and had specifically advised the applicant not to sign the documents right away, to take them home, and to consider seeking legal advice – which the applicant chose not to do.

The tribunal further noted that the release, using a plain language reading, expressly stated that by signing the document the applicant agreed that they had read it and had “adequate opportunity to obtain such legal or other advice.”

The tribunal also found that the release was not signed under economic duress. While the applicant may have experienced pressure and stress in anticipation of the financial consequences of losing her job, that is a typical experience for an employee in such a situation and is insufficient to establish economic duress on its own. The applicant needed to, and failed to, show evidence of something more, such as illegitimate pressure to sign the release.

Finally, the applicant had also failed to provide evidence that she was of unsound mind at the time of signing the release.

As such, the tribunal determined that the applicant had not established a compelling reason to set the release aside and therefore dismissed the application.

Lessons for employers

This decision demonstrates the importance of having a properly drafted release that expressly releases the company (and its officers, directors, etc.) from claims under all legislation, including the Human Rights Code. While a Release may not stop an employee from making an application to the tribunal, it has the ability to prevent that application from becoming an extensive (and expensive) legal proceeding.

This decision also hints at potential situations where a signed release may be put aside and an application may be permitted to proceed. For example, if an employer unduly pressures an employee to sign documents right away, or if the employee can demonstrate that they were not of sound mind at the time of signing, the release may be set aside due to the conditions under which it was signed.

In general, it is good practice for employers to explicitly inform employees that they are able to seek legal advice prior to signing termination documents (such as a Release) and to provide them with sufficient time to do so.

John Hyde is the managing partner at Hyde HR Law in Toronto. He advises management on all aspects of employment and labour law, including representation before administrative tribunals, collective agreement negotiation, arbitrations, wrongful dismissal defence and human rights.