The Canada Labour Code applies to employees working in companies which are governed by federal law, as opposed to provincial law. This includes industries such as public broadcasting, railroads, trucking companies which cross provincial borders, banks, federal government employees and public harbours, to name the most evident.
The legislation, among other things, gives every federally regulated employee the right of arbitration when they are dismissed for cause, and in some cases when they are dismissed absent of any allegations of cause.
The arbitration process can lead to an award for lost income to the date of the hearing as well as reinstatement and, in certain situations, an award of aggravated damages for injured feelings where the termination was the result of seriously unfair conduct.
The Release Issue
Many of these arbitration decisions have held that it is illegal for the employer to require the employee to sign a release waiving their rights under the Canada Labour Code as a term of a settlement offered at the time of termination. Notably, this was the case in the 1998 Court of Appeal decision National Bank of Canada v. Canada (Minister of Labour). In that decision, the ONCA upheld the arbitrator's decision that the employee was entitled to bring a complaint notwithstanding the fact that they had signed a release, stating:
Section 168 protects the right of an employee to complain of an unjust dismissal even if that employee has signed a contract by which his or her employment is terminated. Indeed, it is not difficult to envisage a situation where an employee could, after having signed such a contract, realize that the termination of his or her employment is not the result of a legitimate business restructuration as he or she was led to believe, but is instead a coloured or disguised attempt at wrongfully dismissing her or him. This shows the wisdom of the Code in protecting an employee's access to the remedies against unjust dismissal notwithstanding the signature of a termination contract between the parties.
This issue was revisited recently by the Federal Court in Bank of Montreal v. Li. In this case, the employee was presented with and accepted a severance offer. She signed a release by which she gave up all rights to file an “unjust dismissal” complaint under the Canada Labour Code. After she signed the release document and was paid the settlement sum, she proceeded to do what the release document specifically prohibited and she succeeded in court on her right to pursue her remedy.
The Right Way
It is possible for an employer to settle such a case before proceeding to arbitration, but it requires that the employee file the complaint and then proceed to a mediation settlement with the Department of Labour, which is indeed a cumbersome procedure.
Employees’ Take Away
As has been stated many times before, the words in a contract may not be determinative of your rights. This remedy, in particular, may be quite powerful and supersede any contract in which you expressly agree not to pursue this option. It is always advisable to seek the opinion of a skilled employment lawyer before signing any release or other termination documents. However, even if you have, you may still have the option to seek further remedies.
Get Advice and Know Your Rights
This is an important issue to understand both sides. For advice on this and similar issues and, indeed, any employment issue, contact Elyse Mallins of Devry Smith Frank LLP. We regularly advise employees and employers on legal workplace issues.