When an employee is terminated, their employer may offer a severance package in exchange for signing a release. This agreement typically requires the employee to give up certain legal claims against their employer in exchange for compensation.
But what happens if an employee signs a severance agreement and later believes their dismissal was unjust? Can they still file a complaint?
In Bank of Montreal v. L., 2020 FCA 22, the Federal Court of Appeal confirmed that signing a release does not prevent an eligible employee from bringing an unjust dismissal complaint under the Canada Labour Code.
What Happened in Bank of Montreal v. L.?
The employee was terminated from employment with the Bank of Montreal (BMO) after nearly six years of service.
Following the termination, the employee signed a settlement agreement accepting a lump-sum payment in exchange for releasing the employer from claims arising from the employment relationship and dismissal.
Despite signing the agreement, the employee subsequently filed an unjust dismissal complaint under section 240 of the Canada Labour Code.
The employer argued that the signed release prevented the employee from pursuing the complaint and that the adjudicator therefore lacked jurisdiction to hear it.
The adjudicator disagreed, relying on the earlier Federal Court decision in National Bank of Canada v. Canada (Minister of Labour), which established that employees cannot contract out of their statutory right to bring an unjust dismissal complaint.
The adjudicator’s decision was upheld by the Federal Court, and the employer appealed to the Federal Court of Appeal.
What Did the Federal Court of Appeal Decide?
The Federal Court of Appeal upheld the decision allowing the employee’s unjust dismissal complaint to proceed despite the signed settlement agreement.
The employer argued that the earlier National Bank decision should no longer be followed. According to the employer, preventing employers from relying on signed releases could discourage them from offering employees compensation above statutory minimums until the 90-day deadline for filing an unjust dismissal complaint had passed.
The Court rejected this argument, finding no basis to depart from the earlier decision. Its reasoning was consistent with section 168(1) of the Canada Labour Code, which provides that the statutory provisions addressed by that section apply despite any other law, custom, contract or arrangement. The Court confirmed that an employee cannot simply contract out of their statutory right to bring an unjust dismissal complaint by signing a release.
Importantly, the Court also acknowledged that although a signed release does not prevent an unjust dismissal complaint from proceeding, the settlement agreement may still be considered when determining an appropriate remedy.
The employer subsequently sought leave to appeal to the Supreme Court of Canada, but leave was denied.
Can a Signed Release Prevent an Unjust Dismissal Complaint?
The decision in Bank of Montreal v. L. confirms that an eligible employee’s statutory right to bring an unjust dismissal complaint under the Canada Labour Code cannot be eliminated simply by signing a release.
However, this does not mean that every severance agreement is unenforceable or that employees can disregard all the terms of a signed settlement.
The decision specifically concerns unjust dismissal complaints under federal employment legislation. The legal effect of a release may differ depending on the employee’s circumstances, the type of claim being pursued, and whether provincial or federal employment law applies.
Unlike a typical wrongful dismissal claim, an unjust dismissal complaint may result in reinstatement, compensation for lost wages or other remedies. This is one reason why understanding these statutory protections is particularly important before accepting a severance package.
Employees who have already signed a severance agreement should seek legal advice to understand whether they may still have rights or remedies available.
Who Can File an Unjust Dismissal Complaint Under the Canada Labour Code?
The unjust dismissal provisions of the Canada Labour Code apply to eligible employees working in federally regulated industries, including banking, telecommunications, airlines and certain interprovincial transportation businesses. Employees who are unsure whether their workplace falls under federal jurisdiction can review our list of federally regulated employers in Canada.
For more information about eligibility, employee rights and the complaint process, read our guide to unjust dismissal in Canada.
Generally, employees must meet the following requirements:
- Have completed at least 12 consecutive months of employment with the same employer.
- Not be covered by a collective agreement.
- Not be employed in a managerial position.
- File their complaint within 90 days of dismissal, subject to limited exceptions.
Unjust dismissal complaints must first be filed with the federal Labour Program. If the complaint cannot be resolved, it may be referred to the Canada Industrial Relations Board for a decision.
For more information about eligibility and the complaint process, visit the Canada Industrial Relations Board’s unjust dismissal information page.
Employees should be aware that strict filing deadlines apply, even if they have already signed a severance agreement.
Speak With an Employment Lawyer About Your Rights
If you have been terminated from a federally regulated workplace, including a bank, you may have rights under the Canada Labour Code, even if you have already signed a severance agreement or release.
Monkhouse Law Employment Lawyers assists employees with unjust dismissal complaints, severance agreements and other employment law matters. Contact Monkhouse Law today for a free 30 minute phone consultation to understand your legal rights and available options.