Employment & Labour

Court weighs in on scope of release and settlement documentation

By Laura Williams

In a recent decision, the Superior Court of Justice weighed in on the scope of release and settlement documentation as it pertains to workplace sexual harassment and other types of misconduct that may affect employees. It is standard for most employers to have employees sign a full and final release when settling disputes that arise within the context of employment. However, as this decision indicates, a signed release is not always a complete guarantee that the employer will not face further liability.

In this case, an employee was employed as a manager of a store for a period of four months. The employee executed a memorandum of settlement and a full and final release in favour of the employer upon the cessation of her employment in August 2011 (the Release). The Release provided the following:

  • that [the employer] and [the employee] having regard to their respective rights, duties and obligations, have determined that they wish to resolve any and all claims, complaints, actions, disputes etc. between them arising out of the employment relationship or the termination of that employment; and
  • that [the employee] agreed to release any and all claims she had against [the employer], or anyone in any way associated with [the employer] which “arose out of or which in any way related to or connected with [her] employment or the ending of [her] employment.”

In August 2016, the employee brought an action against the employer and her former manager, seeking damages for the alleged sexual harassment that she had been subjected to by the former manager during her employment. The former manager and the employer denied the allegations and separately brought motions for summary judgment of the employee’s claim. Subsequent to bringing the motion, the employer and the employee settled the action as it pertained to them, leaving the former manager as the lone defendant.

Accordingly, the former manager proceeded with the motion for summary judgment against the employee, arguing that the claim was barred by the Release she had signed with the employer in August 2011. The court, therefore, had to consider the scope of the Release.

Scope of the Release

The court held that the terms of the Release were unambiguous: the Release was defined by the words “arise out of” and “connected to” my employment”. The court found that the Release could not be considered all inclusive, and only barred claims arising from and connected to the employment relationship.

Turning to the conduct itself, the court held that while many of the alleged events occurred at the place of employment, and perhaps because of the employment, sexual harassment, intimidation and other improper conduct are not connected to employment. These types of conduct are clearly separate matters. Accordingly, the court held that the alleged sexual harassment fell outside of the employment relationship, and language specific to such a claim would need to be added to the Release to bar the employee’s claim.

Implications

This case indicates that when considering the scope of a signed release, sexual harassment, intimidation, and other similar improper conduct are not considered to be matters “arising out of employment.” As such, employers cannot rely upon a contractual term releasing them from all matters “arising out of” or “connected to” their employment to avoid liability for such conduct.

The conclusion that the court made is somewhat surprising, as there seems to be an arguable case that the sexual harassment of a subordinate employee does, in fact, arise out of, and is connected to the employment setting. Accordingly, in a future decision where this issue arises, another court is not legally obligated to follow the decision in this case and therefore the law in this area may change going forward.

While the courts’ interpretation of release documentation may be subject to change, it is best practice for employers to avoid situations like that in this case. Employers should avoid using broad “catch-all” language in release and settlement documentation. As the court, in this case, implied, specific language contained in a full and final release where properly employed can be used to bar any future claims, including claims related to sexual harassment allegations. Therefore, employers would be well-advised to include specific language in their release documents that explicitly contemplates the specific potential claims that could be made in the circumstances.

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