Release of claims

What is a release of claims?

Upon termination, many employees are asked to sign what is called a full and final release to formally end the employment relationship. Included in this release will often be a release of claims.

A release of claims is a written record of an employee’s agreement to relinquish their right to make any future claims against their employer for grievances (such as discrimination) they may have related to their time of employment.

A signed release may be used by an employer as a defence for any future claims an employee may attempt to bring against them following the end of the employment relationship. Should a former employee breach the terms of their release, they may be required to repay their settlement funds minus their minimum entitlements

What does a release of claims cover?

A release of claims will cover any claim an employee might otherwise bring under the Employment Standards Act, the Pay Equity Act or the Ontario Human Rights Code. However, recent decisions regarding claims regarding sexual harassment in the workplace have demonstrated that employers may still find themselves on the hook for employees’ grievances even if they have signed a full and final release.

Why would a terminated employee want to sign a release of claims?

Given the limitations signing a release puts on a terminated employee, why would anyone want to sign one? Do terminated employees have to sign a release of claims?

Regardless of whether or not a terminated employee agrees to a release, they are entitled to their minimum statutory entitlements under the Employment Standards Act (ESA) as well as common law.

While a terminated employee is under no obligation to sign a release of claims, it is often in their interest to do so. Signing a release of claims is often necessary in order to receive a settlement package.

A release of claims must offer fair consideration

When presenting a terminated employee with a release of claims to sign, an employer must give their former employee fair consideration for doing so. This means they must offer the terminated employee more than their statutory ESA and common law entitlements in exchange for signing the release.

Simply offering a terminated employee their minimum notice entitlements does not count as consideration. Consideration is something of value to the employee, such as the continuation of benefits, a reference letter, or a lump sum payment.

What to do before signing a release of claims

If you have been recently terminated from your job, you are likely feeling quite stressed. At this time, the prospect of a settlement package to top off your statutory notice entitlements will likely will feel very tempting – especially if you are not parting on the best of terms. However, you will likely have to sign a release of claims in order to get it. So what should you do?

First of all, do not immediately sign the release.

Once given a release, you must also be given reasonable time to review it. Demanding a terminated employee sign a release on the spot should raise immediate suspicion.

A release can be negotiable. Therefore, you should seek legal advice before signing one. An employment lawyer can properly assess the release’s offer and limitations. They can explain it to you in plain language and let you know if any claims that you would be signing away could ultimately bring you more money or benefits than the settlement package you are signing.

The employment law team at KCY at LAW can review your release and release of claims and help you decide on the best course of action.

Call us at 905-639-0999 or click here to book your consultation.

Fixed Term Contracts that are Permanent in Nature

While most employees are in permanent positions, the past decade has seen a growing number of employers using fixed-term contracts to cover their worker needs.

A fixed term contract can be a practical way to cover a leave of absence or hire someone with specialized knowledge to lead a specific project. When used correctly, fixed term contracts can reduce an employer’s labour costs as well as severance obligations. Because the contract is of a fixed duration, the employee essentially knows the date their employment will be terminated at the time they sign the contract and additional notice is therefore unnecessary.

While fixed-term contracts may seem like a great way to cut costs by avoiding severance obligations, they can also lead to unexpected liability if not implemented appropriately.

Employers repeatedly offering workers fixed term contracts instead of permanent positions is becoming a growing problem and the courts have taken notice.

A number of rulings have established that if an employer gives an employee one fixed-term contract after another, the contract may be deemed permanent and the employee therefore entitled to all the notice and all the other entitlements that comes with a permanent position.

Cecol v. Ontario Gymnastic Federation

The case of Ceccol v. Ontario Gymnastic Federation was a precedent-setting case that made clear that courts would consider the true nature of an employment relationship when examining cases involving successive fixed-term contracts.

Ceccol worked continuously for the Ontario Gymnastics Federation for 15 years. The last 10 years of this employment relationship had been in the form of successive one-year contracts. Then, in May of 1997, Ceccol was given notice that her employment would end on June 30th and was offered three months’ salary if she signed a release.

Ceccol declined and sued for wrongful dismissal. At trial, the judge ruled in her favour, deciding that she had a reasonable expectation to be treated as a permanent employee despite having only a fixed-term contract. Ceccol’s employer appealed but the Court of Appeal held that Ceccol had been a permanent employee and as such was entitled to common law notice for her 15 years of service.

Thanks to the precedent set by Ceccol, courts are now generally weary of employers trying to evade common law obligations by using fixed-term contracts.

Takeaway for Employers

Employers should note that repeatedly offering an employee fixed-term contracts will not necessarily exempt you from providing statutory and common law notice should you decide to terminate this employee.

If an employee is given consecutive fixed-term contracts by the same employer over a number of years, Ontario courts are likely to rule in the employee’s favour regarding their entitlement to severance pay in the event of termination.

The overall character of the employment will be the main factor in determining whether or not a fixed-term contract is actually permanent in nature.

When the experienced reality of an employment relationship is akin to that of indefinite duration, then successive fixed-term contracts can be taken as a permanent contract. There is no hard and fast rule for the number of years a contract must last or be renewed to be considered a permanent contract. Each case will be assessed on its own terms.

Fixed term contracts can be good for some, limited, situations. But most often, a well-crafted, enforceable termination clause can do the job to minimize your severance obligations without putting you at risk.

KCY at LAW Can Help

Hiring a respected employment lawyer is the best way to ensure your employment contracts are legally enforceable while still minimizing your obligations when terminating an employee.

Call us at 905-639-0999 or click here to book your consultation.

How is employment status determined in Ontario?

The status of a worker as an employee or independent contractor is determined by more than just what is written in a contract.

According to the Canada Revenue Agency, “the facts of the working relationship as a whole decide the employment status.”

In order to determine if a worker is providing services as an individual for their own business or as an employee, the Canada Revenue Agency looks at two main factors to determine the intent of the working relationship between the person working and the person paying:

  1. the objective facts of the contract agreement
  2. the subjective nature of the working relationship

Employment status is therefore a function of both form and substance.

The objective facts of the contract

In order to determine if a worker is an employee or an independent contractor, courts will look at the subjective facts by first examining the language of the contractor agreement. Next, they will determine if both parties understood and agreed to the independent contractor arrangement. Finally, they will look at the actual nature of the working relationship through such documentation as invoices and income tax filings.

The subjective nature of the working relationship

The main subjective factors in determining the nature of a working relationship relate to the worker’s level of control or independence, their opportunity for profit or loss and their responsibility for tools and equipment.

The worker’s degree of control or independence. According to the ESA, you are most likely an employee if your payer decides such things as your work, pay, schedule and location. In an employer-employee relationship, the working dynamic is one of subordination in which the payer exerts control over the worker in terms of what jobs they will do and how. By contrast, an independent contract does not have anyone directly overseeing their activities and can choose to accept or refuse work from the payer as well as hire and terminate subcontractors.

The worker’s opportunity for profit or loss. In the case of an employer-employee relationship, the worker will likely be paid a wage, salary or commission and will not have the opportunity to directly profit from the specific work that they do. An independent contractor on the other hand, will hold the financial risk of the work in terms of operating costs, investment and liability.

Responsibility for tools and equipment. Who owns, provides, repairs, maintains, controls and replaces the tools and equipment necessary to do the work? If it is the payer, then the worker is likely an employee. If it’s the worker, then they are likely an independent contractor.

Why employment status matters

Employment status affects many things including EI benefit entitlements, pension and income tax. Employers are responsible for deducting Canada Pension Plan contributions, EI premiums and income tax. Employees are entitled to such Employment Standards Act provisions as minimum wage, overtime and vacation pay, as well as public holidays.

It is an offence to misclassify an employee as an independent contractor. While Bill 148 put the onus on employers to prove someone is an independent contractor should an allegation of employee misclassification be brought forward, Bill 47 (Dec. 2018) now puts the onus on the worker to prove misclassification.

KCY at LAW Can Help

Sometimes, it can be difficult to properly determine your employment status. If you believe you have been misclassified as an employee or independent contractor, you should contact an employment lawyer immediately to ensure that you are receiving your due rights, entitlements and opportunities.

Call us at 905-639-0999 or click here to book your consultation.