- with Senior Company Executives, HR and Finance and Tax Executives
- in Canada
- with readers working within the Basic Industries, Healthcare and Oil & Gas industries
In a recent decision, Johnstone v. Loblaw, the Ontario Superior Court of Justice rejected a former employee's unilateral attempt to add new terms after a settlement had been reached, noting: "Buyer's remorse, a change of heart, or even growing concern about his ability to close his house purchase do not entitle him to renege on a settlement." Below, we highlight the key takeaways from this decision for employers should be aware of.
Background
Mr. Johnstone was employed by Loblaw Companies Limited ("Loblaws") for seven years. On April 11, 2022, he was terminated without cause, shortly after relocating from Winnipeg to Ottawa for work, and while in the process of closing on a new home in Ottawa.
Following the termination of his employment, the parties entered into settlement negotiations. Loblaws initially offered Mr. Johnstone seven months' salary continuance in exchange for a release. Through counsel, the parties exchanged several offers and counteroffers, negotiating terms such as the notice period, legal fees, relocation expenses and issues related to Mr. Johnstone's pending home purchase.
On May 19, 2022, Loblaws proposed:
- Eight months' salary continuance;
- A $500 contribution toward legal fees;
- A detailed employment letter; and
- Contact information of a member of Loblaws' HR department who could take a call from a mortgage broker to confirm Mr. Johnstone's employment and salary in the letter.
After further negotiation, Loblaws increased its legal fee contribution to $1,500 and provided a draft reference letter. On May 28, 2022, Mr. Johnstone's counsel emailed Loblaws confirming instructions to accept the most recent proposal:
I can confirm receipt of instructions to accept your most recent proposal, subject to mutual agreement on the supporting documentation that I would suggest you prepare for our review.
Loblaws then prepared and circulated the settlement documents. Shortly thereafter, Mr. Johnstone's counsel requested additional terms, including making the settlement conditional on the successful completion of the house purchase, further relocation costs, and a guarantee regarding Mr. Johnstone's performance rating. Loblaws refused to include these new terms, maintaining that they had not been part of the prior negotiations.
Mr. Johnstone refused to sign the settlement documents, and was unable to complete the purchase of the Ottawa home and claimed that the property's sellers initiated legal action against him. He subsequently commenced a wrongful dismissal lawsuit against Loblaws, seeking damages for his failed home purchase. Loblaws brought a motion to dismiss the lawsuit on the grounds that the parties had already reached a binding settlement, which precluded Mr. Johnstone from introducing any new terms.
The Court's Analysis
The Court granted Loblaws's motion, dismissing Mr. Johnstone's claim on the basis that the parties had entered into a binding settlement agreement.
To constitute a binding settlement, the Court emphasized two key requirements (citing Cellular Rental Systems Inc. v. Bell Mobility Cellular Inc., 1995 CanLII 10638 (ON SC)):
- the parties must have intended to create a legally binding relationship; and
- they must have agreed on all essential terms.
The Court further noted that a meeting of the minds is required and that the failure to sign formal settlement documentation does not release a party from the agreement. Instead, it obliges the parties to work together to finalize the documentation.
In this case, the parties had agreed on all essential terms: an eight-month notice period, $1,500 in legal fees, continuation of benefits as per the original termination offer and they agreed to a standard form release. These terms were reflected in the draft minutes of settlement exchanged between counsel.
The Court agreed with Loblaws that the new terms attempted to be introduced after the fact then, which included housing costs and relocation costs, were not mere changes to the supporting documentation, but rather efforts to alter the essential terms of the agreement. The Court characterized Mr. Johnstone's actions as an attempt to revisit settled issues and negotiate a better deal, noting that "Buyer's remorse, a change of heart, or even growing concern about his ability to close his house purchase do not entitle him to renege on a settlement."
The Court also rejected Mr. Johnstone's argument that the parties had only agreed to a framework for a future agreement, distinguishing this case from Wilson v. Bkk Enterprises Inc., 2015 ONSC 4394 (CanLII), where the parties' agreement was contingent on further events and third-party approval. Here, there was no such uncertainty.
Finally, the Court emphasized the importance of counsel being able to rely on clear communications of acceptance in settlement negotiations. An email from counsel confirming instructions to accept an offer is sufficient evidence of an intention to create a binding legal agreement.
Significance for Employers
The decision in Johnstone v. Loblaw serves as an important reminder for all parties: once the essential terms of a settlement are agreed upon the deal is done.
To view the original article click here
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
