Bringing human rights complaint after signing release not necessarily bad faith

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FOCUS readers will be aware that not all terms of agreements drawn up between employers and their employees are strictly enforceable. Courts have generally taken the view that such agreements must be closely scrutinized due to the perceived imbalance of bargaining power in favour of the employer.

Foremost among these agreements are the releases discussed in “Finishing touches — wrapping up the termination process” in this issue of FOCUS on our Publications page. Now, a recent case demonstrates that, even when the release contains specific language releasing the employer from human rights claims and there is no duress, an employee may be entitled to have his or her complaint taken up by the Ontario Human Rights Commission.

Colleen Pritchard was an employee of Sears Canada who complained to the Human Rights Commission that she had been dismissed from her employment and denied re-employment after alleging that she was the victim of sex discrimination and sexual harassment. At the time of her dismissal in July 1996, she had been offered payment of 14.56 weeks’ salary, or just two weeks more than her entitlement under the Employment Standards Act. In exchange, she had been required to sign an agreement releasing Sears from all employment-related claims, including those under the Human Rights Code.

TIME GIVEN, ADVICE OBTAINED, RELEASE SIGNED

Sears gave Pritchard a week to consider the offer. During this time, she contacted a lawyer who requested an extension from Sears. Sears agreed to a further four days, but the lawyer indicated that this was not enough time to assess Pritchard’s human rights claim. Pritchard also spoke to an Employment Standards Branch employee who advised her that the release would not be binding. Following the four-day extension, Pritchard signed the release. The agreement stated that she had either obtained independent legal advice or waived her right to do so.

Some time later, Pritchard filed a human rights complaint. The Commission exercised its discretion not to deal with the complaint, citing among its grounds the fact that Pritchard had signed the release, and that proceeding with the complaint in the face of the release was evidence that she was acting in bad faith.

This decision was consistent with a policy set out in the Commission’s Policy and Procedures Manual, which indicated that “the presence of a full and final release … will virtually always be evidence of bad faith in bringing a human rights complaint”. The only exception cited was if there was evidence of duress in the signing of the release, but the Manual noted that this did not include “so-called ‘economic duress'”.

CONTEXT OF RELEASE IGNORED

In Pritchard v. Ontario (Human Rights Commission) (June 9, 1999), the Ontario Divisional Court held that, in following this procedure, the Commission had improperly limited its discretion. The Court noted that the term “bad faith” normally implies moral blameworthiness on the part of the person against whom it is alleged.

According to the Court, bad faith may be an issue in some cases where a person who has signed a release turns around and brings a complaint, but not in all:

“[I]n other cases, the facts may show that the employee misunderstood the significance of the release, or received little or no consideration for it beyond the statutory entitlements …, or was in such serious financial need that she or he felt there was no choice but to accept the package offered. To take the approach that there is bad faith whenever a human rights complaint is brought after signing a release risks ignoring the context within which a particular complainant has signed the release.”

In this case, the Court pointed out, Pritchard had been told by an employee of the Employment Standards Branch that signing the release would not affect her legal rights, and her lawyer had not been given the time requested to study her human rights claim. Moreover, Pritchard received little more than her statutory entitlement, and the amount of the excess was not clearly spelled out to her. These facts, the Court stated, showed the potential for injustice in the Commission’s interpretation of the term “bad faith”.

“AN IMPORTANT STATUTORY MANDATE”

The Commission, the Court observed, has “an important statutory mandate to protect human rights”. In another context, the Divisional Court had held that this mandate was sufficiently broad that the Commission was not bound to approve the terms of a settlement between an employer and a complainant, even when the settlement had been reached without duress.

Given this mandate, and the normal meaning of “bad faith”, the Court held that the Commission had improperly limited its discretion in its interpretation of “bad faith” and, as a result, had ignored many relevant facts in determining that Pritchard had acted in bad faith. Accordingly, the Court referred the complaint back to the Commission for proper consideration.

In Our View

One of the problems with the release in this case was the near total absence of consideration, or something of value, promised by the employer. The employee received little more than that to which she was entitled under the Employment Standards Act and, in return, was asked to relinquish significant statutory rights. It is possible, therefore, that under ordinary principles of contract law, an agreement such as this would be unenforceable for lack of consideration.

Here, however, there was the added dimension of the fact that the rights at issue were those under the Human Rights Code, a statute given quasi-constitutional status by the courts. In view of the important public purpose behind human rights legislation, it is perhaps not surprising that a court would give close scrutiny both to an agreement to forego these rights, and to the Commission’s willingness to be bound by such an agreement.

For further information, please contact Jacques A. Emond at (613) 563-7660, Extension 224, or J.D. Sharp at (613) 563-7660, Extension 233.