Caponero v Kaizen Auto Group Ltd., 2021 AHRC 197 (Dec 13, 2021) is a new Alberta Human Rights Tribunal decision where an employee who had signed a release which was arguably problematic was nevertheless prevented from bringing a human rights discrimination complaint against his former employer.
This case is interesting because it involved the adjudicator considering competing policy arguments from the point of view of the employer and of the employee in analyzing whether the problematic release was enforceable, and because it deals with some interesting technical points of law.
Facts
The most pertinent facts in this case related to my summary and analysis are as follows:
- The complainant employee had a stroke in 2019. The nature of his initial and continuing impairments were in dispute in the case
- The employee was on short term disability for a time and then returned to work
- Some time after return, the employee was issued a temporary lay-off due to COVID
- After spending about 5 months on lay-off, his employment was terminated in person
- He was provided a termination letter containing a statement that he would receive his statutory termination pay, and was being offered an additional amount as severance if he signed a release. He was provided a release which just referred to a single amount he would receive, which was the total of the statutory termination pay + the additional severance offered in the termination letter
- The employee did not remember if he received the termination letter, however, the employer’s witness testified that he did, and that testimony was accepted as uncontradicted
- The employee signed the release
- The employee had filed a human rights complaint prior to termination of employment. He had allegations of discrimination on the basis of physical disability
- The question in this hearing was whether the release prevented him from proceeding with his discrimination complaint.
Analysis / Conclusion
One of the complainant employee’s main arguments was that the release should not prevent him from proceeding with his human rights complaint, because the sum of money referred to in the release included the amount he was entitled to automatically under the Employment Standards Code, and an employee cannot be asked to sign a release (which gives the employer something of value) to receive something the employee already has an absolute statutory right to. The argument is essentially that this arrangement violates the minimum statutory protection afforded to employees. This is the argument my summary and analysis focuses on.
The termination letter indicated that the employee was going to receive $3,253.71, which was the 5 weeks he was entitled to under the Employment Standards Code. The termination letter goes on to offer an additional $5,205.93 in exchange for a release.
The wording of the first line of the release was as follows: “IN CONSIDERATION of payment to me by [the Employer] in the amount of $8,459.64, I, [Employee], … release [the Employer]”.
The release does not refer to the termination letter, and the release itself does not appear to be ambiguous. There is a decent argument that the termination letter should have been considered irrelevant to the interpretation of the release, but the tribunal chose to consider it in this case.
The AHRT summarized the competing policy considerations at play in this case as follows:
[28] […] the competing equitable principles are, on the one hand, finality — that legal disputes once resolved or disposed of should be considered at an end – and, on the other, that settlements that are not freely entered into should not be enforced. This approach properly frames the important and well-established equitable principles at play. It also avoids the incongruity of an over-reliance on pure contract law, in a context of human rights, where parties cannot contract out of their rights or responsibilities. It also avoids overly technical and misplaced reliance on principles like the parole evidence rule, severability and whole of the agreement, where the real question is, did the parties intend to settle their legal dispute, and would it therefore be an abuse of process to permit one of the parties to resile from that agreement and continue the litigation? Or, has the party seeking to resile from the agreement been able to establish some fundamental unfairness, such that equity demands interfering with the settlement?
The AHRT summarized the complainant’s argument about why the release violated the Employment Standards Code, and went on to reject that argument:
[32] The complainant argues that the Release is invalid as being contrary to the Employment Standards Code. The argument appears to be based on the fact that the amount identified in the Release ($8459.64) is inclusive of both the complainant’s statutory entitlement and the additional payment provided for in the “without prejudice” offer. The complainant argues that the effect of this was to force the complainant to sign a Release in order to receive the amounts he was entitled to under the Code. I cannot agree. […]
[…]
[35] The complainant referred to the case of Wood v Fred Deeley Imports Ltd., in which a release was found to be void because it provided that the employee would waive certain statutory rights in order to access a settlement offer. That case is clearly distinguishable. There is nothing in the offer made to the complainant, or indeed in the Release, that requires that he waive any statutory entitlements, or that he is agreeing to do so. The fact the Release combined the dollar amount of his statutory entitlement (which was set out in the termination letter) and the additional settlement offer (which was set out in the “without prejudice” offer letter), does not mean the complainant was required to waive any rights. The information the complainant was provided at the meeting made clear that he was entitled to receive the amounts he was due pursuant to the Employment Standards Code, regardless of whether he chose to accept the additional severance offer, and whether or not he signed the Release. The Release does not state that he was waiving any rights under the Code. He has provided nothing, beyond bald assertions, that the amounts he was offered, and received in respect of Employment Standards entitlement, were incorrect or deficient. As a result, this argument must fail.
My Take
In my view, the main reason the complainant’s argument on the Code had potential technical validity was that the release failed to distinguish between the statutory termination pay and the extra severance. The termination letter did make that distinction, but the release arguably stood as a contract on its own. Here is why the failure to distinguish between the Code and extra-severance potentially could have undermined the release: if a release says, essentially “we will give you $15 if you agree never to sue us”, but the employee is already indisputably and absolutely owed $10 under the Code, then at least in part, the employee is being required to give something up (all rights to sue) in order to receive something they already have an absolute legal right to under the Code. Anything providing the employee with less than the minimum protection of the Code is void.
The complainant may have had a stronger position on the point if the complainant could have stated confidently that he did not receive the termination letter in the termination meeting. If that were accepted to be the case, the termination letter likely would not have been considered as evidence of intention and the release would have been easier to attack. There would still be challenges in that scenario, but it would have been a stronger case. The unfortunate irony in this case is that the complainant’s inability to remember one way or the other may have been as a result of his disability.
The employer could have improved the likely enforceability of the release by having the release explicitly incorporate the termination letter, perhaps as follows: “In consideration of the payment(s) outlined in the letter to me of [DATE]”. If that had been done, it would have been harder to argue that the release could be voided by the Code, because the intention to pay the employee the Code amounts even if he did not sign the release would be an explicit part of the written agreement.
I have some reservations about the analysis on the Code argument in this case, because I think the argument deserved more technical credit than it was given here. However, I am not overly surprised by the outcome because the total amount the employee received exceeded the minimum requirements under the Code. While it is clearly important to protect the unequal bargaining position and knowledge of employees, it is also important to protect the finality that a release offers an employer who has paid out a severance.
A published copy of Caponero v Kaizen Auto Group Ltd., 2021 AHRC 197 can be found at the following link: https://www.canlii.org/en/ab/abhrc/doc/2021/2021ahrc197/2021ahrc197.html
