Don’t Accidentally Settle Your Severance Claim

This is Stuart Rudner with another Rudner Law video employment law update. 

Today I want to warn people against accidentally settling their severance claim. How is that possible you ask? It’s not unusual for us to see people who come to us after initially having discussions with their former employer. They may have received a severance package and either consulted with friends or family, or otherwise thought about it themselves, and sent off a hasty response to HR saying I want X instead of the Y that you offered. And sometimes HR writes back and says okay. What does that mean in that case? Does that mean that you have a deal? We often see situations where the person goes through that exercise, then they come to us, and we tell them that although they asked for X, they really should have been asking for two times X, and we now send a letter on their behalf to the former employer who is bewildered by the fact that they thought they had agreed on a settlement with this individual and now they’re getting a letter from their lawyer. So you never want to have that informal discussion with your former employer until you properly understand your rights and obligations. If you’re entitled to two years, don’t offer to settle for six months, and that’s what some people do and it can come back to haunt them. 

One recent example of this is a case involving Bombardier. In that case there were three individuals who were let go and they sought legal advice, had a consultation, then they directly wrote back to Bombardier and said that they would accept the initial offer if Bombardier gave them a certain amount of money toward their legal costs. Bombardier wrote back and said they agree, and they sent the individuals updated settlement documents, which the individuals refused to sign, went back to their lawyer, and filed a claim. In response, Bombardier moved to have the claim dismissed, saying it had been settled, and in fact there was an agreement in place. The defence on the part of the individuals was that there was no signed agreement, therefore they should not be held to it. And ultimately they lost. 

What the court did was look at all the circumstances, and what the court found was that there was an offer, in this case the individuals offered to settle on the basis of the original offer plus a certain amount of money for legal fees, Bombardier accepted, therefore there was acceptance, and there were clear terms, which are the three things you need to have a binding contract: an offer, acceptance, and clear terms. And a binding contract does not have to be on fancy legal stationary, it can be on a cocktail napkin, or it can be in an email, in a text message, or a verbal agreement, although of course those are harder to prove. 

The reality in this case was that there was a clear agreement set out in a number of email messages and therefore the individuals could not go and file a claim when they had already accepted, or offered to accept a certain amount, which Bombardier agreed to. They had a contract in place which they could not get out of. 

So lesson learned for these individuals and for any individuals out there who have received a severance offer, don’t engage in those informal, haphazard negotiations with your former employer because you do risk entering into an agreement that will not be favourable to you. Before you agree to any terms, seek legal advice and make sure you understand your rights. And for employers, if there is going to be an agreement make sure that you understand all the terms and that it is clearly documented, again it does not have to be a formal legal document, it could be email, but make sure that the terms are clearly documented, and, if you have entered into an agreement and you now find yourself getting either a lawyer’s letter or a statement of claim, you may well be able to defend it on the basis that the matter was settled. 

So as I always say, if you think you might need an employment lawyer, you probably do. Feel free to reach out to any member of the Rudner Law team, we’d be happy to help you and make sure that you understand your rights and your obligations before you do anything that might compromise them.

Thanks for tuning in, have a great day.