A recent case from the Ontario Superior Court of Justice, Watson v. Governing Council of the Salvation Army of Canada, will significantly alter the way settlements and releases ought to be structured involving employees who have experienced sexual harassment in the workplace.
The employee worked for the Salvation Army as a manager from April 2011 to August 2011. In exchange for a severance payment in the amount of $10,000, she signed a Memorandum of Settlement and Release, which provided for the full and final settlement of all claims arising out of her employment. The agreement also included a typical clause whereby the employee agreed to “…release any and all claims I have or may have against The Salvation Army, past, present or future, known or unknown, which arise out of or which are in any way related to or connected with my employment or the ending of my employment.” It also provided that a release of any claims against anyone or any organization in any way connected with the employer which arose out of or in any way were related to her employment or the ending of her employment. Finally, the agreement confirmed that the employee had the opportunity to obtain legal advice and that she fully understood the agreement.
Several years later, in 2015, Ms. Watson made a complaint of sexual harassment during her employment against her supervisor at the time. Other employees had also complained. The matter was investigated by a third party and ultimately, the employer terminated the employment of the supervisor. Despite the Memorandum of Settlement and Release, and receipt of a $10,000 payment from the employer, the employee elected to commence a claim on August 16, 2016 seeking damages for negligence, intentional infliction of emotional harm and breach of fiduciary duty from the employer.
The employer brought a motion to have the matter dismissed on the basis of the Memorandum of Settlement and Release. After reviewing the release, Gordon J. determined that the release did not include a claim for sexual harassment, regardless of the phrase “which arise out of or which are in any way connected to my employment”. Sexual harassment, intimidation and other improper conduct were not connected to employment, according the Court. The Court concluded that the settlement pertained to severance only, and that specific language addressing sexual harassment was necessary in the Release to properly bar the employee’s claims.
The decision raises concerns about the finality and certainty of settlement payments made by employers in exchange for a full and final release. While it will not be onerous for employers to add specific reference to “sexual harassment” into its releases, it is concerning that the Court appears to have ignored the principles of finality and certainty. There does not appear to be any allegation in this case that the employee was forced to accept the settlement payment or that she did not understand the nature of the settlement. To the contrary, it confirms that she had the opportunity to seek legal advice about it and that she understood its terms. However, in light of this decision, employers should take care to address issues of sexual harassment specifically in releases to ensure that certainty and finality is achieved by settlements that are reached with former employees.