We have all been faced with employees’ buyer’s remorse. They accept a severance package, sign a release, cash the severance check, and then claim that the release is unenforceable. Recently the Alberta Human Rights Commission considered this very issue in Marquardt v. Strathcona County.
After being presented with every argument in the book—unconscionablility, lack of consideration, duress, undue influence, financial need, lack of capacity, and unclear language—the single-member Tribunal of the Alberta Human Rights Commission concluded that the release was enforceable.
Background
The employee was employed as a bus driver with Strathcona County. In 2011, the employee was involved in two separate motor vehicle accidents, one of which occurred on her way to work. As a result of these accidents, she took two leaves of absence for medical reasons and eventually resumed work on August 22, 2011.
A few weeks after her return, on September 14, 2011, Strathcona County fired the employee. In doing so, Strathcona County provided her with a termination letter that included details of the severance offer and a release for her to sign. The employee accepted the severance offer and signed the release.
Unfortunately, that wasn’t the end of the story. A year later, the employee filed a human rights complaint with the Alberta Human Rights Commission claiming that she had been discriminated against by her former employer on the ground of mental disability.
Tribunal decision
At the eventual hearing, the employee argued that the release was not a valid or enforceable contract. The tribunal noted that the party challenging the validity of a release has the onus of proving it is enforceable. In this case, the employee did not meet that onus.
In evaluating the employee’s claims, the tribunal considered five criteria:
1. Unconscionability and consideration. Although the tribunal noted that the amount of severance paid to the employee was low, it was not so low as to be unconscionable.
In addition, the severance pay amounted to consideration given to the employee in exchange for the signing of the release. When the employee accepted the severance pay, the deal was done.
2. Duress, undue influence, and financial need. As happens in many cases, the employee claimed she signed the release out of duress, undue influence, and financial need. The tribunal did not buy her argument. It characterized the evidence as indicating that the employee was “unhappy” about her termination and felt “ill-treated.” There was no evidence that the employee signed the release because of any financial duress. And there was no evidence that Strathcona County coerced the employee into signing the release.
3. Timing of the termination. The tribunal considered whether Strathcona County knew of the employee’s mental health condition when it fired her. It concluded that Strathcona County was not aware of the employee’s mental health condition. Furthermore, there was no evidence that Strathcona County manipulated the timing of signing the release to the employee’s detriment.
4. The release itself. The tribunal concluded that the termination letter and release were clear and concise. Namely, the termination letter clearly set out:
(a) the reasons for the termination;
(b) the calculation of the severance amount;
(c) the requirement to sign the release;
(d) confirmation of documents to follow;
(e) a description of the benefit plan considerations; and
(f) that the employee could obtain independent legal advice before signing the release.
The release itself was similarly clear.
5. Lack of capacity. Finally, the employee argued that she did not have the mental capacity to sign the release. At the end of the day, however, she was unable to convince the tribunal that she lacked the capacity to understand and appreciate the terms of the release.
Takeaway for employers
In order for an employee to challenge the enforceability of a release, he or she must provide compelling evidence to put the validity of the release at issue. This decision illustrates that if a termination letter and release are drafted in clear, concise language, the implications of the release are fully explained to the employee, and the employer is able to document the process throughout, the release will generally be enforceable.
