Author: Daniel A. Lublin
In life, seldom do small mistakes have large consequences. In law, that is not always the case. This is the tale of one Ontario company that just learned this lesson the hard way.
Despite having just lost her job, Kelly Stowar must have been elated. As an administrative employee, Stowar was not entitled to more than a few weeks’ severance. Instead, however, she was given a letter by her former employer, Telehop Communications, stating that she would be paid five months’ salary. Stowar signed her name on the space provided, indicating she was satisfied with the contents of the letter, and left the Toronto area office to go home.
A few days after signing the letter, Stowar returned to Telehop’s office to return some of the company’s property that she still had. She was met by Telehop’s human resources manager and called into a meeting. Stowar was told that the company had made a “mistake” and that she would only be receiving three weeks’ termination pay, not the five months that she was initially offered. She was then asked to sign a release, indicating that she agreed with the revised offer. Stowar refused, claiming she had agreed to a deal for five months’ pay just days earlier.
Since Telehop only paid Stowar three weeks’ pay, the parties next met in court. The issue for the judge to decide was whether the letter that Stowar received and then signed amounted to an agreement and, if so, was Telehop bound by its terms.
Upon dismissal, employees are typically given their statutory payments, which are set by provincial or federal legislation. Most are then offered a greater amount in exchange for signing a release, which prevents them from bringing any further legal action. That offer is usually set out in the letter of termination and it forms a contract, once both sides have agreed to the terms.
Here, the court concluded that there was nothing to suggest that Telehop intended to offer any further compensation other than what was set out in the letter it provided to Stowar. By requiring her to sign that letter, the company had done nothing to suggest that she wouldn’t have been paid in accordance with its terms. Stowar wasn’t expected to know exactly what the legislation said about her termination and it was reasonable for her to presume that she was “entitled” to the five months’ pay she was offered.
As a result, it did not matter that Telehop’s generous offer was actually made in error. The court ruled that once Stowar signed the letter, there was a binding agreement compelling Telehop to pay her in accordance with its terms.
Whether you are an employer or an employee, you can glean valuable lessons from how this case was handled: Employees should be encouraged to obtain legal advice before signing important legal documents, such as a letter of termination. Even if the employee doesn’t wish to see a lawyer, make sure that he or she is given that opportunity anyway.
If you are an employer, never pay any termination or severance monies without receiving a release in exchange.