Settlement Agreements

Written on behalf of Peter McSherry

Should you and other parties involved in a civil case come to a mutually agreeable settlement, you will be required to sign certain documents to prove the settlement. Below, we will review the different documents likely to be involved, and what you should know about each one.

Minutes of Settlement

The most obvious of these documents is known as the “Minutes of Settlement”. This document sets out the terms of the settlement, such as the amount of money being paid for damages and/or legal costs. Often in an employment matter, this agreement may describe the payment as “severance” or “aggravated damages”, where applicable. The minutes will also likely say that tax will be deducted or not deducted on the sums being paid. They may also state when the payment will be made. Aggravated damages are not generally taxable.

Sometimes the minutes will also include a statement describing what the employer will say as a reference to any company making such an enquiry about the former employee involved in the claim. If there is a real dispute about this issue, the employer may agree to give a “tombstone” letter of reference, which states the date of hire, date of termination, positions held and a statement that says it is our policy not to give qualitative references.

General Release

The minutes will always state that you as the plaintiff employee will need to sign a general release in favour of the company, its officers and directors. This release will require you to give up the case you brought or threatened to bring as well as any other claim of any nature which you may have available to you at this time.

Sometimes the release is attached to the minutes. Sometimes the minutes say that the plaintiff will be required to sign a release in “the usual form”, which will generally include the terms mentioned above.

If you did not settle the case and took the case to trial, there will be no need then to sign a release.

Non-Disclosure Agreement (NDA)

Non-disclosure terms have been in the news lately, often in well-known sexual harassment cases. The complainant will generally be required to sign an agreement preventing them from stating anything about the allegations of the case or the terms of the settlement. In an effort to increase transparency, some locations have begun to pass laws against the enforceability of these clauses.

The reality is that these clauses have been common for years. Typically, at the very least, the employer will want the settlement terms kept confidential. If the case is personal in nature, such as a sexual harassment claim, often the NDA also requires the plaintiff to agree to say nothing about the allegations which led to the settlement.

The NDA may contain a term which requires the plaintiff to repay all or sum of the settlement sum where there is a breach of this term. It may alternatively state that the NDA clause is a “fundamental” term of the agreement, which basically will lead to the same result.

No matter what the NDA may say, there is nothing which prevents the plaintiff from testifying under summons to witness in court. If for example, the alleged offender in a sexual harassment case is charged criminally, the NDA is not a bar to the alleged victim from giving evidence in court.

If you are asked to sign an NDA, consider any exceptions you may require, such as speaking to a psychologist or similar professional, or your spouse. Remember that the NDA applies only to future conduct, not past. Before signing such an agreement, it would be advisable to seek advice from an experienced employment lawyer.

Non-Compete Terms

Non-compete terms in a settlement agreement are rare but they do come up occasionally. The law with respect to these terms in general employment law holds that these clauses are automatically unenforceable and that the employer must show some form of exception to make them valid. These principles do not apply to settlement agreements. You should presume that these clauses are binding, once agreed to.

Take Away for Employees

These closing documents are very important. Remember that no such documents are required should you proceed to court and win your case. Before signing or agreeing to any terms of a settlement, speak with your lawyer for advice.

Get Advice and Know Your Rights

Stay up to date and understand your legal rights. Get advice. Contact the offices of Guelph employment lawyer Peter McSherry. We can guide you through the issues, help you understand your rights, and defend your position. Contact us online or by phone at 519-821-5465 to schedule a consultation