If you’ve ever been dismissed, you may have experienced something like this: your manager calls you into a meeting and delivers the bad news. He or she presents you with a termination letter that says something about severance pay. Attached to the termination letter is a Release for you to sign. The manager tells you to take some time to return the signed papers, and then you’ll get your severance pay. Or, you may be instructed to sign on the spot.
Any lawyer will tell you – don’t sign that Release!
The purpose of a Release is to keep the employer safe from future lawsuits. In signing the Release, you’re giving up your right to any more severance pay than what’s being offered at the point of dismissal. In our experience, most employees are entitled to more – those who sign a Release without first knowing their contractual rights are shortchanging themselves.
What are your rights?
That depends on the sort of employment contract you have.
Termination notice can be divided into three sorts: Employment Standards Act minimum notice (also called the “statutory minimum”); contractual notice; and reasonable notice.
1. Employment Standards Act notice
Every employee who is dismissed without cause is entitled to Employment Standards Act notice, as a lawful minimum. The employer must pay this in any event – no Release required. If you sign a Release to obtain the statutory minimum notice, you won’t be able to obtain anything more, even if you were entitled to it. Here’s a hint: if there’s no express term in the employment contract limiting notice to the statutory minimum, you are entitled to more. And even if there is, you might still be entitled to more!
Where the employer refuses to pay any severance pay at all until the employee signs a Release, courts have awarded aggravated damages. That’s an employer taking advantage of a financially vulnerable employee, and extracting their Release in exchange for something they’re lawfully entitled to have. It is more correct for the employer to automatically pay the statutory minimum, and then come to some agreement and obtain a Release for amounts more than that minimum – unless the employment contract says otherwise.
2. Contractual notice
Where there is a written employment contract, there may be some kind of contractual notice. This could be anything more than the statutory minimum, for example, an agreement that the employer would give two weeks of severance pay for each year the employee had worked. The employee is entitled to this contractual amount. What’s more, the contract may no longer be effective, or it may never have been effective. In that case, you may be entitled to more.
Contractual notice is an amount the employer agreed to pay back at the beginning of the employment. Unless the employment contract specifically provides that the employee must sign a Release in order to obtain contractual notice, no Release is required to obtain this kind of notice. An employer who withholds payment of contractual notice until signature of a Release is conducting itself improperly.
3. Reasonable notice
Where there is no written contract, or where the contract is somehow ineffective, a term of reasonable notice is implied into the contract. An employment lawyer can help you figure out whether you are entitled to reasonable notice, and if so, how much you’re entitled to have. Reasonable notice favours the employee, more than Employment Standards Act notice and usually more than contractual notice.
It may be appropriate for the employee to sign a Release to obtain reasonable notice, but only once the correct amount of notice has been determined. In our experience, the amount of severance pay initially offered in that termination meeting is not the correct amount.
So before you sign that Release, talk with an employment lawyer and find out what you’re really signing away. Odds are good you’re giving something up.
