Can settlement negotiations be binding?

Settlement is an integral aspect of most litigation.  The majority of court claims commenced in Ontario are settled by the parties at some point.

When negotiating a settlement agreement with another party, be very careful what you say.  Parties can be unpleasantly surprised when what they thought were simply part of ongoing negotiations have been found by the courts to be a binding component of a concluded settlement agreement.

Situations in which negotiations can be elevated to the level of a concluded settlement agreement include when the parties are negotiating by correspondence, email, or telephone, or where there is no single document which defines all of the terms of the alleged settlement.  In these situations, the courts will look at all of the documents and evidence of negotiations to determine whether the parties have reached consensus.

The end result is that you could be locked into a binding agreement which was not your intended bargain or final outcome, and may not be in your best interests.  This is true even if you have not executed settlement documentation.

In Olivieri v. Sherman (2007 ONCA 491), the Ontario Court of Appeal found that in order to determine whether a binding contract exists, the court must consider whether the words and action actions of the parties show that they had a mutual intention to create a legally binding contract, and reached an agreement on all of the essential terms.

You can protect yourself in these situations.  Retaining a lawyer can ensure your interests are protected, that negotiations remain non-binding, and that concluded settlements are representative of your interests and intentions.  If you don’t have a lawyer, it is recommended that you ensure both parties work from one master settlement document during discussions and that any amendments in the context of negotiations are clearly identified as such (including marking them “without prejudice” as required).   Restrict any statements, either verbally or in writing, outside of the master document to ensure that they are not inadvertently relied upon by the other party.

The commercial litigators at Brown Litigation tenaciously represent the interests of our litigation clients, and can assist you with negotiating resolutions of all manner of disputes.

Posted by D. Jared Brown – Lead Counsel Continue reading

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GOVERNMENT PROPOSED NEW LEAVES FOR ONTARIO WORKERS

The Ontario government recently proposed a new piece of legislation, titled the Employment Standards Act (Leaves to Help Families).   If passed, the three new leaves would be:

Family Care Leave

Under this leave, an employee would be entitled to a maximum of 8 weeks of unpaid leave in a given year.  The aim of the leave is to allow an employee the opportunity to provide care and support to a family member with a serious medical condition.  To be eligible, the employee would be required to produce a doctor’s note certifying that the applicable family member of the employee has a serious medical condition.

 Critically Ill Child Care Leave

Under this proposed leave, an employee may be entitled for up to 37 weeks of unpaid leave to provide care or support to a child who is critically ill.  This could be in addition to any Family Care Leave which the employee might have taken.  However, to qualify, the worker must have been employed by his or her employer for at least six consecutive months in order to be entitled.

Crime-Related Child Death and Disappearance Leave

Here, an employee may be entitled to up to 52 weeks leave of absence without pay, where the employee’s child has disappeared, as a result of a crime.  Where the child had died as a result of a crime, the employee would be entitled to up to 104 weeks of leave without pay.  One notable qualification in this section is that the employee would not be entitled to the leave if he or she is charged with the crime.  The leave would also not be available where it has been determined that the child was a party to a crime.  Also, like the Critically Ill Child Care Leave, the employee must have been employed with the employer for at least six consecutive months.

The passage of the proposed amendments to the Employment Standards Act would provide workers with increased job security.  Employees would have the assurance that their absence from work, due to family emergencies, could not be used by an employer to justify their termination.  Employers who violate these provisions would be liable for sanctions under the Employment Standards Act, as well as a civil claim for damages based on wrongful termination.

If you have any questions regarding your rights as an employee, or employer, feel free to contact one of the employment lawyers at Brown Litigation.

Posted by D. Jared Brown Lead Counsel

Does the duty to mitigate apply to all dismissed employees?

While the application of common law reasonable notice remains central to the determination of damages in wrongful termination cases, written employment agreements, with termination clauses fixing notice entitlement in the event of termination, are becoming more common.

Employers, no doubt, resort to written agreements with the aim of limiting their exposure to damages upon an employee’s without cause termination.  Such written contracts may be attractive to the employer as they create a degree of certainty and predictability in terms of the employer’s liability in the event the employer ends the employment relationship.  However, unless carefully drafted, a written agreement might not necessarily limit an employer’s exposure to the extent desired.

For example, in Bowes v. Goss Power Products Ltd., 2012 ONCA 425 (CanLII),  the Ontario Court of Appeal recently considered the issue of an employee’s duty to mitigate in the face of a written employment agreement where the parties had agreed to fix the amount of notice payable upon termination.

Mr. Bowes worked for Goss Power for just over 42 months.  There was a written employment agreement, prepared by Goss Power.  The employee’s entitlement upon termination, without cause, was set out at paragraph 30(c) which provides that:

30. The Employee’s employment may be terminated in the following manner and in the following circumstances:

(c) By the Employer at any time without cause by providing the Employee with the following period of notice, or pay in lieu thereof:

Six (6) months if the Employee’s employment is terminated prior to the completion of forty-eight (48) months of service;

Following his dismissal, and in accordance with paragraph 30(c), Goss Power initially confirmed that Mr. Bowes would be paid his salary for a period of six months.  The employer also advised Mr. Bowes that he had a duty to seek alternate employment during the notice period, and to keep Goss Power updated on his mitigation efforts.  However, the employment agreement itself made no reference to mitigation.

About 12 days after his termination, Mr. Bowes found a new job paying him a salary equivalent to that which he was being paid at Goss Power.  Goss Power then ceased further payments on the basis that the employee had fully mitigated his losses.

The employee commenced an application under rule 14.5 of the Rules of Civil Procedures, R.R.O, 1990, Reg. 194, seeking a determination of his rights under his employment contract.  In support of his application, Mr. Bowes argued that, given that the notice period was fixed by terms of the contract, there was no accompanying duty to mitigate.  He argued, therefore, that he should be entitled to the full 6 months’ pay in lieu of notice, despite having found replacement employment.

However, the lower court agreed with the employer in finding that the Mr. Bowes was not entitled to any further payments, as he had fully mitigated his damages with his new employment.  The court found that this was consistent with the case law, and that absent an agreement to the contrary, a dismissed employee has a duty to mitigate.

In setting aside the lower court’s decision, the Court of Appeal states at paragraph 34 that:

An employment agreement that stipulates a fixed term of notice or payment in lieu should be treated as fixing liquidated damages or a contractual amount. It follows that, in such cases, there is no obligation on the employee to mitigate his or her damages.

The Court of Appeal points out that it was an error to consider employment contracts with fixed notice periods as being akin to damages in lieu of notice at common law.  According to the Court, the correct approach is that the fixed notice should be regarded as liquidated damages or a contractual sum, which is not subject to mitigation.  The Court also rejected the lower court’s view that a duty to mitigate applies unless the contract provides otherwise.  Instead, the Court of Appeal holds that where the employment agreement is silent on mitigation, the common law duty to mitigate will not be applicable.

Brown Litigation regularly advises and assists both employers and employees with respect to contracts of employment, and has traditionally recommended that the contracting parties specifically stipulate if any notice period is subject to mitigation or setoff.  The Court of Appeal has now confirmed the importance of proper planning and contract review.

Posted by D. Jared Brown – Lead Counsel