Tune Up Your Termination Letter and Release by P.A. Neena Gupta

1. Tune Up Your Termination
Letter and Release
By P.A. Neena Gupta

2. Overview
• Legal impact
• Clarifies rights and obligations
• Resolves issues arising from termination
• Human impact
• Letter can soften or sharpen the blow of termination

3. Style Matters – the three “Cs”
• Compassionate
• Comprehensible
• Comprehensive

4. Do Some Homework
• Review any offer letters
• Check any company policies regarding
termination
• Review statutory obligations
• Review any common law obligations regarding
“reasonable notice”
• Consider what has been done in the past in
similar circumstances
• Consult a lawyer, if necessary

5. First Critical Decision
• Are you alleging just cause for termination?
• Is it borderline?
• Just cause at common law?
• Wilful misconduct under statute?
• 95% or more of terminations are without just
cause

6. Just Cause Pointers
• Even if cause/misconduct, are you offering a
package to get a Release?
• “without waiving our rights to assert cause or
misconduct”
• “gratuitously and without legal obligation”
• Exclude any standard language that suggests
employee was a good performer
• Offer confirmation of employment, job title and
job duties, but not positive reference letter

7. Second Critical Decision – Working Notice
Pros Cons
Employee
Employee continues
productivity, morale
to provide value for
and potential for
money
sabotage
Sometimes easier
for employee to find Co-worker
work, because still discomfort
“employed”

8. Rubin v. Home Depot
• Eric Rubin worked as a competitive price
shopper for 19 years and 8 months at Home
Depot
• Terminated due to restructuring at age 63 and
was offered 28 weeks in exchange for Release
• Letter indicated that offer was in excess of
Rubin’s rights under the statute

9. Rubin v. Home Depot
• Letter did not clarify what Rubin entitled to
without Release
• Rubin signed on Release on the same day during
meeting
• Rubin went to accountant to discuss tax
treatment of settlement
• Accountant alerted Rubin to issue
• Shortly thereafter, lawyer stated “Release not
valid.”

10. Rubin v. Home Depot
Was the Release signed by Rubin
valid and enforceable?

11. Rubin v. Home Depot
1. A grossly unfair and improvident transaction
2. Victim’s lack of independent legal advice or
other suitable advice;
3. Overwhelming imbalance in bargaining power
caused by victim’s ignorance of business,
illiteracy, ignorance of the language of the
bargain, blindness, deafness, illness, senility,
or other disability; and
4. Other party knowingly taking advantage of this
vulnerability.

12. Rubin v. Home Depot
• Court overturned Release
• Employer:
• Did not verbally advise Rubin to obtain legal advice
• Told Rubin his options were take package or divert
monies into RRSP

13. Lessons Learned
• Letter could have accurately divided up the offer
under:
• Without Release
• Release
Sample language:
This letter is divided into 2 parts – Part 1
describes your entitlements without a release
while Part 2 explains what the company is
prepared to offer you in exchange for you
executing a full and final release.

14. Part 1 – Entitlements Without Release
• Employee terminated without cause is entitled
to:
• Pay to date of termination
• ESA notice and severance
• In Ontario, benefits to end of statutory notice period
• Offer can NEVER be less than ESA amounts
• Even if employee gets re-employed the next day

15. Part 1 – Entitlements Without Release
• Benefits
• Life insurance
• Short-term disability
• Long-term disability
• Pension
• RRSP

16. Part 1 – Entitlements Without Release
• Compensation can be tricky
• Base salary
• Bonus
• Commission
• Sometimes harder to determine compensation
under ESA, 2000 than at common law

17. Disability and Illness Can Be Tricky
• If employee becomes sick during either ESA or
common-law notice period, may have
entitlements both under disability policy and
arising from termination
• Need to explicitly deal with disability benefits

18. Part 2 – Severance in Exchange For Release
• Consider common-law obligations
• Lump sum versus salary continuation
• Benefits (be clear that disability benefit and out-
of-country benefits cannot be continued)
• What happens if employee finds alternate
employment?
• Do you want to make package contingent on employee
not being employed by competitor?
• Do you want payments to cease, provide a lump sum
of some portion?

19. Additional Matters
• Conversion of benefits
• Usually just life insurance
• Occasionally health and dental
• If conversion privileges exist, must inform
regarding deadlines and method of transfer
• Advise during termination interview

20. Group RRSP and Pension Benefits
• Clarify what will happen to pension benefits
• Is the company contribution vested or not?
• Advise regarding how to access
information/options re Pension
• Advise regarding how to access
information/options re RRSP
• Clarify that pension/RRSP not dependent on
Release

21. Return of Property
• Ensure that you require return of
• Key/passcard/parking passes
• Documentation
• Blackberry/smart phone
• Schedule
• Car
• Samples
• Price List

22. Confidentiality
• Remind employee of duty of confidentiality
• Advise what is confidential
• Price list
• Marketing plans
• Product development and design
• Advise if employee will be required to cooperate
in patent process
• IT lawyers may advise regarding certain consents to
be executed prior to termination

23. Remind of Post-termination Duties
• Non-solicitation
• Of clients
• Of employees
• Any amounts in excess of ESA amounts can be
made contingent on abiding by non-solicitation
or non-competition clause, unless already
promised in contract

24. Important Details
• Advise when ROE will be issued (within week or
after end of salary continuation period)
• Remind employee that tax forms will have to be
sent and request address correction if employee
moves
• Advise if letter of confirmation or reference will
be provided
• To whom should reference inquiries or
questions be directed?

25. Reputation Matters
• Unless reason is abundantly clear, important to
consider how to announce termination internally
and externally
• Offer to work with employee on wording of
announcement
• Give employee a chance to say “good-bye”
• One company gives budget to co-worker (not
manager) to take former employee and peers out
for a “good-bye” lunch

26. Release
• Ensure it releases all related corporate parties
• Ensure release in all jurisdictions where claim might be
brought (e.g. Ontario employee transferred to BC and
California over length of career)
• Cover off explicitly matters which cannot be easily
released (e.g. workers compensation and human rights)
with acknowledgements
• Include acknowledgement re: adequate time to obtain
legal advice
• Refuse to accept executed release on the day of
termination
• Encourage employee to talk to lawyer, financial advisor
and spouse before signing

27. Thank You
P.A. Neena Gupta
Gowling Lafleur Henderson LLP
Barristers & Solicitors
50 Queen Street North
Suite 1020
Kitchener, ON, N2H 6M2
Direct Tel: 519.575.6910
Direct Fax: 519.571.5001
Email: neena.gupta@gowlings.com
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