The decision of the Federal Court of Appeal in Bank of Montréal v Yanping (Kate) Li, 2020 FCA 22, provides an interesting take on the settlement of a dismissal under the jurisdiction of the Canada Labour Code (the “Code”) prior to a complaint of unjust dismissal being filed that federally regulated employers should be wary of.
The employee (“Ms. Li”) worked for the Bank of Montréal (“BMO”) for almost six years when she was dismissed. The parties attempted to settle the amounts to be paid to Ms. Li further to her dismissal, referred to in common parlance as severance. The parties settled on a lump sum payment of 18 weeks’ wages in exchange for Ms. Li signing a settlement agreement releasing BMO from any and all claims arising out of the termination of her employment. Despite the settlement being paid and the signed agreements, Ms. Li filed an unjust dismissal complaint under section 240 of the Code.
In a preliminary decision, BMO objected to the jurisdiction of the adjudicator appointed under the Code due to the settlement and release. This preliminary objection was rejected by the adjudicator. BMO appealed the preliminary decision of the adjudicator to the Federal Court of Appeal.
The Court found that section 168(1) of the Code prohibited the parties from contracting out of an ability to claim for unjust dismissal. BMO had argued that section 168(1) should not apply to this situation due to conflating prospective and retrospective waivers of statutory rights. BMO advocated for an interpretation of section 168(1) which would not allow waiver of prospective rights but would allow the waiver of retrospective rights, essentially arguing that once the right had been accrued then it could be waived. This argument was rejected by the Court.
BMO also argued that there were policy reasons to support their interpretation. BMO took the position that if the interpretation of the legislation did not allow an individual to waive their right to file an unjust dismissal complaint by signing a release, there would be no reason for an employer to offer more severance than the statutory minimum set out in the Code until the expiry of the limitation period for filing an unjust dismissal complaint (90 days following dismissal). The Court dismissed this argument as well, stating that the Court’s job is not to alter the language of the legislation but only to enforce it.
Ultimately, BMO was unsuccessful and the appeal was dismissed.
The key point of this case is that a settlement agreement entered into prior to the filing of an unjust dismissal complaint does not prevent an employee from subsequently filing a complaint. The Court did direct that any amounts that have been paid to the employee pursuant to any settlement should be considered by the adjudicator in any award of damages that may stem from the complaint.
Interestingly, the Court did not consider what should happen to a settlement agreement entered into following the filing of the unjust dismissal complaint. Reasonably, these settlements should be enforceable and the complaint should not be able to continue. One option here could be to obtain a consent order from the adjudicator of the complaint in order to ensure closure.
Federally regulated employers may want to consider their approach to settling dismissals following this decision. It may, depending on the facts of the individual situation, be preferable to pay only the statutory minimum to the dismissed employee and then deal with the unjust dismissal complaint rather than settle and provide a greater payment upfront and still potentially also have to face an unjust dismissal complaint. Employers may prefer this route as employees may not be aware of their rights to file an unjust dismissal complaint or may simply prefer to not do so.
There may be creative solutions available for employers to structure settlement in such a way as to avoid this issue. For further information and advice on dismissals, please contact a member of Taylor McCaffrey LLP’s Labour and Employment Law department.
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