In a recent decision of the Ontario Superior Court of Justice, the Court held that a Release that had been signed by an employee upon termination to “accept” a severance package only “offering” the minimal entitlements on termination as required under the Employment Standards Act, should be struck and deemed unenforceable, and that the employee could still initiate a claim for wrongful termination under the common law, in addition to receiving Employment Standards Act entitlements.
In Rubin v. Home Depot of Canada Inc., 2012 ONSC 3053 (SCJ), the plaintiff was terminated without cause after 19 years of service to Home Depot. In the termination letter provided to the plaintiff, he was advised that he was being “offered” 28 weeks’ pay in lieu of notice, which Home Depot claimed “exceeded their obligations under the Employment Standards Act”, and that Home Depot required the execution of a Release extinguishing any claim for further damages for wrongful termination. In reality, the offer only exceeded the minimal entitlements that a terminated employee was entitled to receive under the Employment Standards Act by 2 days, though the plaintiff was led to believe that if he did not sign the Release provided by Home Depot he would not receive any payment whatsoever upon termination. The plaintiff executed the Release, without consulting with a lawyer, and was paid the 28 week’s pay in lieu of notice pursuant to the termination letter. It should be noted that an employee is entitled to the minimum payments upon termination under the Employment Standards Act regardless of whether a Release is signed.
Shortly thereafter, the plaintiff learned that due to his length of service at Home Depot, he was not only entitled to 19 weeks of pay in lieu of notice pursuant to the Employment Standards Act, but could also be entitled to damages under the common law which could increase the pay in lieu of notice up to about 19 to 20 months. The plaintiff commenced an Action as against Home Depot claiming damages representing the 20 months that he could have been entitled to receive under the common law, despite the execution of the Release.
On a motion for Summary Judgment, the plaintiff sought to set aside the Release on the basis that Home Depot had suggested to the plaintiff that he was being “offered” more than he would otherwise be entitled to receive, and that acceptance of the offer was predicated on the plaintiff executing the Release. The plaintiff was unaware that he was entitled to almost the full amount being offered by Home Depot pursuant to the Employment Standards Act regardless of the execution of the Release. Justice Lederer held that the implication was that if Rubin (the plaintiff) did not sign the release he would not be paid anything in lieu of notice, which was “at best, misleading” to the plaintiff.
Justice Lederer went further to state that Home Depot’s approach, taken as a whole, was designed to take advantage of the plaintiff’s vulnerability, in the expectation that he would sign the Release. The Court held that the plaintiff had not agreed to anything by signing the Release, but rather that he simply accepted what he was misled to think was his only option on termination. Justice Lederer held that the Release was unconscionable.
Citing the Court of Appeal of Ontario in Titus v. William F. Cooke Enterprises Inc., 2007 ONCA 573 (Ont. C.A.) and the Court of Appeal of Alberta in Cain v. Clarica Life Insurance Co. (2005), 263 D.L.R. (4th) 368 (Alta. C.A.) Justice Lederer identified four elements necessary to determine whether a contract was unconscionable:
- A grossly unfair and improvident transaction;
- The victim’s lack of independent legal advice or other suitable evidence;
- Overwhelming imbalance in bargaining power caused by the victim’s ignorance of business, illiteracy, ignorance of the language of the bargain, blindness, deafness, illness, senility or other disability; and,
- The Other party knowingly taking advantage of this vulnerability.
Using this framework, Justice Lederer held that an employee with almost 20 years’ service to an organization only receiving six months’ pay in lieu of notice would be “far removed from what the community would accept” as fair. Justice Lederer also took note that the plaintiff did not have the benefit of independent legal advice before executing the Release, citing the Supreme Court of Canada decision, Machtinger v. HOJ Industries Ltd.,  1 S.C.R. 986 (S.C.C.):
…the fact that many individual employees may be unaware of their statutory and common law rights in the employment context is of fundamental importance. As B. Etherington suggests in ‘The Enforcement of Harsh Termination Provisions in Personal Employment Contracts: The Rebirth of Freedom of Contract in Ontario’ (1990), 35 McGill L.J. 459, at p. 468, ‘the majority of unorganized employees would not even expect reasonable notice prior to dismissal and many would be surprised to learn they’re not employed at the employer's discretion.
Justice Lederer held that if the plaintiff had obtained legal advice, it would have been doubtless that it would have been explained to him that he would be receiving only what he was otherwise entitled to receive under the Employment Standards Act and Home Depot was taking advantage of the situation by suggesting that the plaintiff would only receive the payment in lieu of notice being offered if the Release was signed.
In regard to the imbalance of bargaining power, Justice Lederer held that the imbalance was profound, particularly by the way in which the representatives of Home Depot dealt with the situation, including providing a letter to an employee being terminated which was “at best, ambiguous and misleading,” demonstrated the inequality between the positions of the plaintiff and Home Depot.
As the termination letter provided to the plaintiff was designed to suggest that the only option available to the plaintiff was to accept the minimum statutory requirements, it was demonstrative of Home Depot knowingly taking advantage of the situation and taking advantage of the plaintiff’s vulnerability on termination.
Accordingly, Justice Lederer set aside the Release and held that the plaintiff was entitled to reasonable notice on termination set at 12 months’ pay in lieu of notice plus costs.
The loss of a job is emotionally devastating for most people. But if you've just been dismissed from your employment, for any reason, in many cases you have more rights than you think. Like the employer in this case, many employers only offer dismissed employees payment in lieu of notice in accordance with the Employment Standards Act in Ontario. While your employer's initial offer of severance may technically comply with the Employment Standards Act, the Employment Standards Act provides only the bare minimum your employer must pay you on dismissal. Your right to severance pay, termination pay, pay in lieu of notice or in some cases damages, under common law may be much higher than what is set out in the Employment Standards Act.
To properly protect your rights in employment, however, you need competent legal counsel well versed in the ever-changing nuances of employment law. The lawyers at Blumberg Segal LLP have handled hundreds of wrongful dismissal cases and can help you achieve the best possible resolution of your wrongful dismissal case in a cost-effective manner.