A Final Release is Not a Final Release for Unjust Dismissal Claims

The Federal Court of Appeal recently affirmed that an employee who signs a final release is not barred from bringing an unjust dismissal complaint under the Canada Labour Code (the “Code”).

The provincial employment standards legislation does not apply to employees in certain federally regulated industries. Those working in a federally regulated sector, such as banking or air transportation, are governed by the rights and remedies provided for in the Code rather than the provincial employment standards legislation.  There are several differences between the Code and provincial employment standards legislation.

In Bank of Montreal v. Li, 2020 FCA 22, Ms. Yanping Li worked for the Bank of Montreal (“BMO”) for almost six years. Her employment was governed by the Code.  When Ms. Li was terminated, she was given the option of remaining on the payroll for 18 weeks or accepting a lump sum payment. Ms. Li accepted the lump sum payment and signed a settlement agreement releasing BMO from any and all claims arising out of the termination of her employment.

After signing the agreement, Ms. Li filed an unjust dismissal complaint pursuant to s. 240 of the Code which allows employees to bring a complaint of unjust dismissal. BMO objected to the adjudicator’s jurisdiction to deal with the matter based on the final release that Ms. Li had signed when she accepted the lump sum payment. The adjudicator dismissed BMO’s preliminary objection. BMO sought judicial review, which was dismissed by the Federal Court. BMO appealed to the Federal Court of Appeal.

The Federal Court of Appeal dismissed BMO’s appeal and upheld the lower court’s decision. The Court followed an earlier decision from the same court that held where an employee signs a release waiving their rights under the Code, the employee can still pursue a claim. The basis for this decision is the provision in the Code which says an employee’s rights under the Code may not be altered by “contract or arrangement.”

The Court acknowledged that settlement agreements are to be encouraged.  The Court also acknowledged that allowing an employee to pursue a claim after a release is signed deters employers from offering termination benefits in excess of the minimum(s) until after the 90-day limitation period to start a claim expires. Nonetheless, the Court held that such matters were policy decisions best left to the Parliament and that under the wording of the Code a settlement agreement and release cannot remove the employees’ rights under the Code to bring an unjust dismissal claim.

Justice de Montigny, writing for the unanimous court, noted that a final release is relevant to assessing the proper remedy in an unjust dismissal claim, and the adjudicator will take any release and settlement agreement into consideration in assessing remedy.

Employers should be aware that even with a signed release following termination, a federally regulated employee may be able to pursue an unjust dismissal claim under the Code. This decision and the wording of the Code alerts employers that they will not be able to claim the protection of a release to prevent an employee from bringing a claim under the Code.

This article was co-authored by Scott Marcinkow and articling student, Nicola Virk.

Want more useful updates on changes in legislation? Contact Scott Marcinkow at smarcinkow@harpergrey.com, Rose Keith, QC at rkeith@harpergrey.com, or anyone else from our team listed on the Authors page.