Federally Regulated Employee Bypasses Release – Don’t Settle for 90 days!

In Bank of Montreal v. YanPing Li, the Federal Court of Appeal recently ruled that an employee who falls under the jurisdiction of the Canada Labour Code (the “Code”) may file an unjust dismissal complaint under section 240 of the Code, despite having reached a settlement with her former employer to pay her a lump sum payment in exchange for a signed release.

Ms. Li, worked for Bank of Montreal for almost six years. She was terminated from her employment on March 29, 2017, and was given the option of either remaining on the payroll for a period not exceeding 18 weeks or accepting a lump sum payment. She accepted the lump sum payment. She signed a settlement agreement and Release on May 27, 2017 which released the employer from any and all claims arising out of the termination of her employment. The wording from the release stated the following:

[T]he Employee hereby releases and forever discharges BMO, its subsidiaries, affiliates, and successors and each of their respective officers, directors, employees, and agents from any and all actions, causes of action, claims, demands and proceedings for whatever kind of damages, indemnity, costs, compensation, and any other remedy which Employee or Employee’s heirs, administrators or assigns had, may now have, or may have in the future arising out of Employee’s employment or the termination of that employment.

Despite this settlement, and presumed finality of the matter based on the language above, the employee filed the unjust dismissal complaint on September 27, 2017.

Under section 240, an employee is entitled to file a complaint under the Code if they have 12 months of employment and they are not a member of a collective agreement. The complaint must be filed within 90 days. The matter will then be adjudicated to determine whether or not the complaint is justified or not. If the adjudicator determines that the employee was unjustly dismissed, the adjudicator can then order that the person be reinstated, or alternatively, be paid compensation. This could obviously have a significant impact on an employer who has settled with an employee after terminating them without cause.

The Adjudicator concluded that she had jurisdiction, despite the settlement between the parties, to consider the unjust dismissal complaint. In taking jurisdiction, the adjudicator considered subsection 168(1) of the Code which effectively removed the adjudicator’s discretion if the complaint was made in a timely manner as required by the Code:

This Part and all regulations made under this Part apply notwithstanding any other law or any custom, contract or arrangement, but nothing in this Part shall be construed as affecting any rights or benefits of an employee under any law, custom, contract or arrangement that are more favourable to the employee than his rights or benefits under this Part.”

On judicial review to the Federal Court, the Federal Court upheld the decision. That decision was appealed further to the Federal Court of Appeal. The Federal Court of Appeal also rejected the Bank’s appeal. Specifically, it noted that subsection 168(1) of the Code states that Part III applies notwithstanding any contract to the contrary, unless the contract is more favorable to the employee than the rights granted to the employee under the regime.

Of note is that the employer made a compelling policy argument that allowing such a ruling would result in employers not trying to settle before the 90-day period in order to bring a complaint, as it would deprive employees of this settlement leverage. The Court disagreed, and stated that it was up to Parliament to legislate the changes needed. As of writing, leave to the Supreme Court of Canada was dismissed.

For employers who have employees that fall under the Code, this decision should be followed carefully as entering into a settlement in advance of the 90-day period could result in increased damages being awarded in front of an adjudicator if the 90-day period has not yet elapsed.