The Release That Didn't Actually End the Dispute

The situation

Abdi and Yusuf are both plumbers by trade who spent years working for other companies before building their own business: a small supply company in Petawawa that stocks pipe, fittings and fixtures for contractors across the region. Twelve years in, they employed about a dozen people, including a warehouse and inventory coordinator named Sarah who had been with them for nine years, running the ordering system and keeping the shelves stocked well enough that neither owner had to think about it.

A slow winter, with fewer builds underway across the region, forced them to restructure. Sarah's role was eliminated, and the two owners handled the termination themselves, the way they had handled most of the administrative side of the business since the start. They calculated a severance payment using a formula they had seen referenced online, had Sarah sign a one-page release the same afternoon, and paid the amount immediately. From where Abdi and Yusuf sat, the matter was closed. Sarah had been paid, she had signed something, and there was nothing left to discuss. Neither of them had ever had a release reviewed by a lawyer before using it; it had simply worked, or seemed to, for the two smaller layoffs they had handled the same way years earlier.

Five months later, that assumption collapsed. A letter arrived from a lawyer representing Sarah, setting out a wrongful dismissal claim and stating plainly that the release she had signed did not prevent her from pursuing it. By then Sarah had taken a new job as a court clerk and, by her own account, had a better sense than most laypeople of how a civil claim actually proceeded once it reached a courthouse. Abdi called our office the same day, holding the release in one hand and the demand letter in the other, unable to understand how a signed document could mean so little.

The legal problem

In Ontario, when an employee's job ends, two different layers of entitlement can apply. The Employment Standards Act, 2000 sets out minimum notice or pay in lieu, and in some cases minimum severance pay, based on length of service. These are floors, not ceilings, and they cannot be contracted below. Separately, unless an enforceable employment contract says otherwise, an employee is entitled at common law to "reasonable notice" of termination — an amount tied to factors like age, position, length of service and how easily comparable work can be found. For a longer-tenured employee, common law reasonable notice is very often several times larger than the statutory minimum.

A release can extinguish that common law entitlement, but only if it is drafted and executed properly. That generally means clear language describing exactly which claims are being given up, payment that amounts to real consideration beyond what the employee was already owed under the statutory minimum, and enough time and information for the departing employee to understand what they are signing. Many employers assume any signed document does the job. It does not.

The release Sarah signed had several of the weaknesses that plaintiff-side lawyers look for. It was signed and paid the same day it was presented, with no opportunity to obtain independent legal advice. The payment amount lined up almost exactly with the statutory minimum for her length of service, meaning there was a real argument that she received nothing extra in exchange for giving up her larger common law claim. And the release itself was vague about what, precisely, was being settled.

Once we reviewed the file, the honest assessment was uncomfortable: there was a real risk a court would find the release unenforceable, or enforceable only to the extent of the statutory amount already paid. If that happened, Sarah's underlying wrongful dismissal claim — reasonable notice for nine years of service in an operations role, plus interest and the legal costs of a Superior Court proceeding — put the company's exposure at roughly $150,000, against roughly $12,000 already paid at termination.

It is a pattern we see often enough on the employer side that it has a shape to it: a business that handles hiring, scheduling and day-to-day HR competently on its own, using a template found online for the one task — a termination — where the cost of getting it wrong is highest and least visible until months later. The template usually looks professional. It is the substance underneath it, not the formatting, that a court examines.

What we did

1. Reviewed the termination file and the release itself. We assessed the release against the elements a court actually looks for — consideration, clarity, and a genuine opportunity to obtain advice — and gave Abdi and Yusuf a direct answer: it was vulnerable, and litigating to defend it as written was not a strong position.
2. Estimated the realistic range of outcomes before recommending a strategy. Fighting the claim outright and losing could have meant paying the full common law notice period plus costs. Settling early, before legal fees on both sides climbed further, was very likely to cost less overall — even accounting for an additional payment to Sarah.
3. Opened settlement discussions promptly, on the company's terms. Rather than wait for a statement of claim to be issued, we responded to the demand letter directly, acknowledging the weakness in the original release candidly rather than pretending it did not exist. That candour shaped a more efficient negotiation than a defended lawsuit would have allowed.
4. Negotiated a global settlement figure. After several rounds of exchange, the parties agreed on an additional payment to Sarah, on top of the amount already paid at termination, reflecting a compromise between her full common law entitlement and the amount she had already received.
5. Drafted a release built to actually end it. This time, the release was paired with a period to review it, an express recital confirming Sarah had the opportunity to obtain independent legal advice, plain language describing exactly which claims were released, and payment that was unmistakably additional consideration — not a repackaging of money she was already owed.

The outcome

Sarah's claim settled for an additional payment of roughly $48,000, bringing the total amount paid to her, across the original severance and the settlement, to roughly $60,000. Set against the roughly $150,000 the company could realistically have faced had the matter gone to a defended Superior Court trial and the original release been found unenforceable, the settlement contained the damage substantially — but it was still a loss no one at the company wanted to absorb, and a hard number for a small supply business to write a further cheque for.

This was not a case where clever legal work turned a bad situation into a good one. The company paid more than the roughly $12,000 it had budgeted for the termination, and it paid legal costs on top of that. What the second, properly drafted release accomplished was certainty: Sarah cannot bring the claim again, the file is closed, and Abdi and Yusuf are not carrying an open-ended risk on their books.

Since then, the company has changed how it handles every termination, however small. Every departing employee now receives a release drafted for the specific circumstances, with a genuine window to review it and get advice before signing. Abdi has said more than once since that the cost of doing it properly the first time would have been a fraction of what the correction ended up costing.

What you can learn from this