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Release No Bar to Wrongful Dismissal Claim

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A recent decision of the Ontario Supreme Court, Rubin v. Home Depot Canada Inc., 2012 ONSC 3053, has some potentially dangerous implications for employers and the agreements they make with their employees.

The plaintiff, a competitive shopper, was employed by Home Depot for 19.75 years and was 63 years old when his position was eliminated. At the termination meeting, Home Depot presented him with an offer of 28 weeks’ pay in lieu of notice that it said was to “exceed our obligations under the Employment Standards Act” in exchange for a release. It did; but only by .25 of a week’s pay. The plaintiff accepted the offer and signed the release before leaving the termination meeting, although the letter indicated that he had one week to review.

Shortly after signing the release, the plaintiff realized that he’d made a mistake and he attempted to negotiate a better severance package. Home Depot refused and relied upon the release.

The Court found the release to be unconscionable and set it aside. In doing so, it reasoned that it actually did not matter how much more than the statutory requirements the offer represented, “but, whether in the circumstances, it is so unreasonable as to be grossly unfair”. According to the Court, this determination comes from assessing the situation as a whole. In the Court’s assessment, the notice period was “grossly inadequate” and “sufficiently divergent from community standards that it ought to be set aside”. In particular the Court held as follows: “The idea that, in the modern day, a twenty-year employee, moving to the end of his expected working life, who is fired without cause, for reasons reflected in an internal re-organization of the company, would receive only six months’ notice, is far removed from what the community would accept.” The Court also faulted Home Depot for being misleading in suggesting that he would not be paid at all if he didn’t sign the release and in taking advantage of the plaintiff’s vulnerability and the power imbalance in its favour. The Court thus set aside the release and set the reasonable notice period at 12 months’ salary and benefits.

The Court’s willingness to intervene, not because the termination letter was misleading, but because it determined the agreement was grossly unfair, is of concern. It creates unpredictability if employers are not able to rely on compromise agreements reached with their employees because the employee may simply be able to renege without consequences.