When a Release is Not a Release

Written on behalf of Peter McSherry

The general view is that once a case is settled, the release provided by each party to the other is a final and conclusive settlement of all claims and no further claims made by made by either party.

This view is, however, not correct.

Recent Case

This question was reviewed by a modern decision.[1] The facts were particularly unattractive which likely propelled the final result to be so.

The Facts

The employer had been aware of vague reports of wrongdoing which had resulted in the employee’s termination. A settlement was reached, which included a sizeable severance of upwards of $700,000 and mutual general releases. One year later, evidence was given to the employer which showed the employee had been engaged in fraudulent conduct of a scale much larger than had been initially suggested. The total sum of the fraud exceeded $1 million.

The court did find on the evidence that the employee had engaged in this wrongful conduct. The employee, however, argued that the release given by the employer barred all future claims against him.[2]

To this question of the release, the court made two findings against the employee to set aside the severance agreement and the release to allow the claim against him.

The first argument was that the protestations of innocence by the employee were good enough to be materially false representations. In addition, as the employee held a senior position, he had a duty to disclose to the employer the extent of his true misconduct before entering into the settlement agreement.

The real theme of this case may well be “crime does not pay”. This decision is an unusual case as normally the company has a very tough argument to get around the release, particularly where it had some prior suspicion of wrongdoing. The court’s sympathies were clearly directed to correcting the wrongdoing of the employee, perhaps naturally enough.

To make an unattractive case even uglier, the employee had transferred assets to others in an apparent attempt to shield these properties, all of which were set aside.

Get Advice and Know Your Rights

This case is a tragedy without doubt. Advance legal advice may well have been to walk away and make no severance claim for fear of promoting such an employer investigation. Prudent advice is not always to “sue the ….”. Occasionally it may be the exact opposite.  Get advice. Use our clinical insight. Know your rights. 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

[1] York U v Markicevic initial decision; Court of Appeal confirming trial decision

[2] This is the usual wording of a general release