'Full and final' settlement agreement makes worker's subsequent claim an abuse of process: tribunal
“The default perspective of a court or tribunal considering finality [from a settlement agreement] will be that the case was settled and cannot be reopened.”
So says employment lawyer Rich Appiah of Appiah Law in Toronto, after the Ontario Human Rights Tribunal dismissed a worker’s human rights application that followed a settlement the worker and her employer signed that purported to resolve grievances and a previous human rights application.
The worker was an employee of the City of Hamilton who filed two grievances against the city. She also filed a human rights application in March 2019 alleging discrimination in employment because of disability. The tribunal deferred the application until the grievances were resolved, as they covered essentially the same issues.
On Oct. 11, 2019, the city and the union met with a mediator. The mediation led to a settlement agreement for the grievances and the human rights application. The worker, the union, and city representatives all signed the minutes of settlement.
‘Full and final’ settlement
The minutes of settlement were sweeping in scope, stating that the worker agreed to resign from her employment in exchange for a salary continuance until Dec. 31, 2020, the withdrawal of the grievances, and the withdrawal of the human rights application. The document also confirmed that the payments paid by the city to the worker were “inclusive and exhaustive of all possible entitlements” tied to her employment and its end, whether under the collective agreement, the Ontario Employment Standards Act, the Ontario Human Rights Code, the province’s Pay Equity Act, or any other legal requirements.
It stated that all human rights complaints, concerns and issues arising from the worker’s employment and its cessation had been covered, and the agreement was a “full and final settlement” of any existing, planned or possible code complaints linked to that employment.
The minutes of settlement also stated that the worker had reviewed them, had the opportunity to obtain legal advice from her union, and “fully understands and accepts each of the terms and conditions.”
In December 2020, the worker filed another human rights application alleging disability discrimination. Her application included the same facts from the previous application, but now she claimed that she had been under “extreme psychological and emotional duress, was unwell, and was required to sign the settlement documents without a full understanding of what she was signing.” She included medical reports from late 2018 up to August 2019, and from January 2020.
Worker, union required to acknowledge understanding of terms
The tribunal found that the worker’s new application was an abuse of process. It focused on the breadth of the language she had accepted in the minutes of settlement and the lack of credible evidence that she had been coerced or incapable of understanding what she signed.
Appiah is clear that this was not an accident of drafting. “The employer, in this case, drafted impeccable minutes of settlement to ensure that the employee wouldn’t be able to go back on the settlement that she agreed to,” he says. “The minutes of settlement confirmed that the payments the worker was receiving would be exhaustive of all entitlements that she might have under legislation, the collective agreement, and otherwise at law — and they also required her to confirm that the parties settled all concerns or issues arising out of her employment or the cessation of her employment and that she'd been treated at all times during the course of her employment in a manner consistent with her rights.”
The minutes also didn’t just say the deal was full and final, Appiah adds, pointing out that they tied the salary continuance to a release of all claims arising from the employment relationship and required both the worker and the union to accept that the agreement was a full and final settlement of existing, planned and possible code complaints.
High threshold to prove mental incapacity
While the worker claimed that she signed the minutes of settlement while under extreme psychological and emotional duress and she didn’t fully understand to what she was agreeing, the tribunal stressed that there was a high legal threshold and evidentiary bar for anyone arguing that mental health issues undermined their capacity to agree to a settlement.
The tribunal found that there wasn’t any medical information concurrent with the signing of the minutes in October 2019 and noted that previous cases established the need for clear and convincing evidence, including medical documentation, to prove that mental health problems blocked a worker’s ability to understand and agree to a settlement.
That worker’s argument goes to the heart of what worries many HR teams: the risk that a worker later alleges mental health struggles or power imbalance so serious that any agreement is set aside, according to Appiah.
“It wasn’t so much the minutes of settlement that saved the city as it was the fact that the worker wasn’t able to provide any real evidence that she had been subject to duress or even that she had been subject to a mental health issue that would challenge her ability to understand and sign the minutes of settlement at the time that she signed them,” he says.
Mental health awareness doesn’t undermine good agreements
Although there’s a growing awareness of mental health in the workplace, Appiah doesn’t think this will automatically make full and final settlements easier to attack.
“There’s always risk, but I wouldn’t say that the risk is higher with societal acknowledgement of the challenges that poor mental health can present in decision-making,” he says. “The case law is pretty clear in terms of the high threshold an employee would have to meet to demonstrate that mental health affected her ability to understand the terms that she's signing off on.”
Appiah also points out that the tribunal found that, even if the worker’s claims of psychological or mental duress were true, there was no evidence of illegitimate pressure rising to the level of coercion by the city. “It won’t be sufficient for an employee to allege that they were suffering from a mental health challenge at the time that she was considering minutes of settlement — she'd have to go further and argue that the employer imposed undue pressure to coerce her will. And that's a pretty high bar for an employee to meet,” he says.
The tribunal said that grievance and mediation processes often involve intense negotiations, but that intensity doesn’t amount to duress unless employers cross the line into unlawful or unconscionable conduct, which the evidence didn’t show. A hard conversation about options, delivered with clarity and without threats or deception, isn’t illegitimate pressure; it’s part of resolving disputes, says Appiah.
Opportunity and time to consider terms
Appiah also suggests that employers should provide employees “with as much time as possible to sign minutes of settlement,” particularly in non-unionized environments. Although parties often want a signature before they leave the room in a mediation or grievance hearing, this is only justified where everyone has had legal or union representation throughout the day, he says. Outside that setting, there’s usually more room to be deliberate, so offering a day or two for the employee to review the draft, speak with a lawyer, and ask questions not only makes the process fairer, it also deprives them of the argument that they were railroaded into a complex legal document, he says.
HR teams who treat that confirmation as more than a formality, and who actually create the conditions for employees to get that advice, make it harder for a worker to credibly argue later that they didn’t know what they were giving up, Appiah adds.
In this case, the city “followed a good practice of requiring the employee to sign herself and provide all of the acknowledgements contained in the in the minutes of settlement,” says Appiah.
The tribunal determined that the minutes of settlement did what the city intended and covered the full scope of the worker’s employment and termination, including any human rights-related claims arising during her employment. The minutes constituted a valid agreement binding on the worker and were a complete bar” to continuing the worker’s application, said the tribunal.
According to Appiah, the decision shows that when organizations draft settlements with precision while openly canvassing and releasing human rights issues, representation and opportunity for advice are built into the process, and employers avoid illegitimate pressure even in hard negotiations, tribunals are prepared to enforce full and final agreements.
