There are so many pitfalls to the common client misconception that settlements are not final until they are signed on the “dotted line”. Settlements are meant to be a process for finality and closure but can also be a minefield for contractual interpretation litigation if someone changes their mind, or if parties cannot agree on settlement document language. This article will take a look at the general principles that the courts in Ontario have used to deal with this scenario, as well as the procedural differences for settlement enforcement in the Human Rights of Ontario (HRTO), and the Ontario Labour Relations Board (OLRB).
What’s in a Yes?
Employment law cases can be emotional for the parties involved, given that they often deal with things like job loss or workplace harassment. It can therefore be the case sometimes that a party has second thoughts about a settlement after saying yes to an offer, thinking that things are not final until they have signed documents. Parties need to understand however that in saying yes to a settlement offer, they are forming a legally binding contract that will be difficult to resile from if they change their minds. This contract can be final and enforceable even if minutes of settlement have not been signed. Indeed, multiple court decisions have confirmed this.
Per the 2007 ONCA case of Olivieri v. Sherman, the Courts will look at two things when the existence of a settlement is questioned or challenged: firstly, whether there was a binding settlement agreement, and secondly, if there was any reason to not enforce the settlement. With respect to the first part of the test, Courts and Tribunals will look to whether there was a meeting of the minds based on an “objective” reading of the language chosen by the parties to put their agreement into effect. The actual, subjective state of mind of the parties entering into the settlement will not be relevant in that kind of inquiry.
Emails between counsel have been found to be enough to show that there is a binding settlement even before Minutes are signed. Courts will also be mindful of the well-established notion that settlement implies a promise to furnish a release, such that the wording of a release is not a valid reason to suggest that parties had not reached agreement on essential terms (see for example, para. 19 of Lumsden v. Toronto Police Services Board).
The overarching policy consideration per Lumsden and similar cases is that settlements are to be encouraged. For that reason, where the first part of the Olivieri test is met, litigants need a very good reason to then demonstrate under the second branch of the test why the court should not give effect to the agreement. The courts have described it as a “rare” occurrence that this discretion under the second part of the Olivieri test will be exercised to not give effect to a settlement: some kind of “injustice” must occur in order for the settlement to not be enforced. This is a high bar and absent some kind of unconscionability or duress, the second part of the Olivieri test is rarely met.
Enforcement Procedure
In most cases, hopefully through advice to clients and communication between counsel, things can be resolved if the issue is a failure to agree on minutes of settlement language. Failing that, there is of course the ability to bring a motion under Rule 37 of the Rules of Civil Procedure to enforce the settlement (or Rule 76 for a Simplified Procedure action), or a summary judgment motion where appropriate. But what avenues of recourse are available in the case of non-civil, Tribunal actions?
The HRTO and the OLRB are popular employment law forums for Human Rights Code and Employment Standards Act issues respectively. Practitioners should note the specific differences and approaches in these two forums for settlement enforcement.
The HRTO has its own settlement enforcement process through the Form 18: Contravention of Settlement Applications, pursuant to Rule 24 of the HRTO’s Rules of Procedure. There is a significant amount of case law at the HRTO that examines contravention of settlement (see for example, Currie v Ontario). Similar to civil courts, the focus of the HRTO will be on whether an agreement was reached, and/or if the terms of the agreement were adhered to. It is important to note that there is a six (6) month limitation period from the date of an alleged breach to bring a Contravention of Settlement application.
Another unique aspect of the HRTO’s Contravention of Settlement process is the HRTO’s ability to award damages for breach of settlement to the party who has suffered the consequences of the breach. The HRTO has broad discretion under s. 45.9(3) of the Human Rights Code to make any order it considers appropriate to remedy the contravention, if a contravention is established. This has been interpreted to include the awarding of damages in some circumstances, particularly where the breach has caused significant emotional distress in an Applicant’s case. The quantum of these damages remains fairly low, with most cases falling between $500.00 and $3,000.00. The Tribunal will also not award contravention of settlement damages that exceed the amount of the actual settlement (see Bunbury v. Brightpath Early Learning Inc. at para. 13).
In contrast the OLRB, which for non-unionized employees is the mechanism for dealing with Occupational Health and Safety Act Applications and appeals of ESA complaints, does not have its own formal process for settlement enforcement. Settlement enforcement case law at the OLRB often involves the scenario where a party backs off from the mediator-facilitated settlements that often occur in the lead-up to the OLRB hearing process. Since the OLRB’s Rules of Procedure do not have a specific process for dealing with this, parties in an ESA appeal can likely request a hearing date, if one is not scheduled already, to specifically deal with the issue of a settlement if necessary.
In Silveira v. A to Z Group Inc., the OLRB reviewed court jurisprudence on settlement enforcement against section 120(1) of the ESA which sets out the effect of a settlement on an ESA appeal. Like the Olivieira test, the Board commented in Silveira that settlements play an important role in achieving the ESA’s purposes of a timely and final resolution of disputes that arise under it. However, the analysis at the OLRB will also account for s. 120(4) of the ESA, which specifies that a settlement is not binding on the parties until they do what they have agreed to do under it.
Additionally, if a settlement is mediator-facilitated at the OLRB, then any correspondence with the mediator will not be admissible given the overarching rule under the ESA and OLRB regime that its mediators cannot be called to give evidence in a proceeding. In Silveira, the email correspondence that was being relied upon to enforce an agreement was largely between the OLRB-appointed mediator and the parties. The Board was unable to accept this as evidence and was therefore unable to find that there was a binding agreement since this was the only correspondence available to show the terms of agreement between the parties.
Conclusion
As the range of case law cited above shows, failure to agree on settlement terms, or some other breakdown in the settlement process, can unfortunately happen in any forum to any litigant. Beyond knowing the various mechanisms available for enforcement, it is always wise to be upfront with clients long before an offer is made or accepted about what it means to say yes.
ABOUT THE AUTHOR
Richa Oza is a staff lawyer at Don Valley Community Legal Services practicing employment law in the legal aid clinic system on behalf of employees.
Any article or other information or content expressed or made available in this Section is that of the respective author(s) and not of the OBA.