Can Terminated Employees "Sign Their Legal Rights Away"?

The British Columbia Human Rights Tribunal (BCHRT) recently considered the effect of a release executed by a terminated employee who, after signing the release, pursued a human rights complaint against his former employer.

In 2005, Scott Seltzer was recruited by a friend employed at Allmar International ("Allmar"), a wholesale distributor of construction materials and products, to set up a new division. Mr. Seltzer was very successful in his new position. In 2007, his last full year of employment with Allmar, he obtained over $1.8 million in sales and received a Top Salesman Award.

In February 2008, Mr. Seltzer suffered a heart attack on the job. While he was recovering at home and receiving disability benefits, he suffered a second heart attack. Mr. Seltzer was medically cleared to return to work in February, 2009, at which time he began an eight-week graduated return-to-work program. Three days after resuming full-time work in March 2009, Mr. Seltzer was handed a termination letter. He understood that he was being terminated because he had no work or sales. Allmar, however, testified that Mr. Seltzer was terminated because there were no sales to be had in the market as a result of the economic situation.

In addition to the statutory pay he was owed under the British Columbia Employment Standards Act, and payment of the commissions he had earned, Mr. Seltzer was offered "gratuitous pay under Common Law." Importantly, Mr. Seltzer understood that in order to receive the gratuitous payment (but not the statutory pay or payment of his earned commissions), he had to sign a Release and acknowledgement form. Mr. Seltzer signed the Release and received the gratuitous payment.

By signing the Release, Mr. Seltzer agreed in part, that:

(…) I further represent and confirm that the Company has complied with the British Columbia Human Rights Code in respect of my employment and/or the termination of my employment. If I should hereafter make any claim or demand or commence or threaten to commence any action, claim, complaint or other proceeding against the Company, I agree that this document may be raised as a complete defence and bar to any such proceeding (our emphasis).

In spite of the fact that Mr. Seltzer had executed the Release, which expressly prevented him from bringing a human rights complaint against Allmar, Mr. Seltzer did just that. He alleged that by terminating his employment shortly after his return from medical leave, Allmar had discriminated against him on the basis of physical disability.

Before considering the question of discrimination, the BCHRT first considered whether the Release prevented Mr. Seltzer from bringing a human rights complaint. In other words, did the signed Release really provide "a complete defence and bar to any such proceeding"?

In deciding that it did, the Tribunal analyzed seven factors set forth in an Ontario case, including: (1) the language of the release; (2) inequality of bargaining power, coupled with an unfair settlement; (3) undue influence; (4) independent legal advice; (5) duress; (6) the employee’s knowledge about his or her rights under the human rights legislation; and (7) other considerations, including capacity, timing and mutual mistake.

The BCHRT found that the Release executed by Mr. Seltzer was clearly worded, that Mr. Seltzer had negotiated the terms of his gratuitous payment with Allmar (thereby negating an argument that there was an inequality of bargaining power between Allmar and Mr. Seltzer), and that there was an absence of any consideration that would have compromised the Release’s validity. Accordingly, the BCHRT upheld the Release, and Mr. Seltzer’s human rights complaint was dismissed.

Mr. Seltzer had testified that before signing the Release he phoned the Employment Standards Branch, who told him that "in British Columbia, a worker could not sign their legal rights away." However, this decision makes it clear that a worker who freely enters into settlements aimed at restricting legal rights may be held to the consequences of that choice.

This case is similar to Chow v. Mobil Oil Canada, in which the Alberta Human Rights Panel sought the opinion of the Court of Queen’s Bench as to whether the Alberta Human Rights, Citizenship and Multiculturalism Commission has jurisdiction to determine a complaint where a release has been executed, and to determine whether the release is valid and enforceable. Chow, who was terminated while pregnant, brought a human rights complaint against her former employer notwithstanding her execution of a release that barred all claims related to the termination of her employment. The court found that the existence of a valid release will operate to bar a complainant’s right to proceed with a human rights complaint, but that the Commission has jurisdiction to determine the validity of a release. Chow’s complaint was ultimately dismissed on the merits, as her former employer, Mobil Oil Canada, took the position that it did not wish to rely upon the release to prevent the Commission’s jurisdiction to review the complaint.

Tips for Employers

Employers need to be aware of the factors that human rights tribunals consider when deciding whether to uphold the terms of a release against an employee who, after signing, files a human rights complaint. To increase the likelihood that a release will operate to bar an employee from bringing such a complaint, employers should ensure that:

  • the release is drafted in clear and simple language so that the employee understands what is being signed, and why;
  • the release includes all relevant information so that the employee is fully aware of what rights he/she is giving up by accepting its terms;
  • the amount of the settlement is fair in the circumstances so as to nullify any potential argument that there was an inequality of bargaining power between the employer and employee;
  • the employee freely consents to signing the release so as to prevent the employee from claiming that he/she was unduly influenced or coerced by the employer;
  • the employee is given opportunity to seek independent legal advice (the employee should be given at least seven days to consider the terms of the release);
  • the employee must not be in a state of duress while signing the release (note, though, that to be stressed or unhappy as an employee whose employment was just terminated is to be expected, and does not amount to duress); and
  • the employee is aware that he/she might have recourse under human rights legislation at the time of signing the release, so as to prevent the employee from subsequently arguing he/she was unaware of those rights.

For additional information, see Seltzer v. Allmar International and others (No. 2), 2010 BCHRT 197 and Chow v. Mobil Oil Canada, 1999 ABQB 1026.