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In Johnstone v Loblaw Companies Limited, the Superior Court of Justice ("ONSC") considered whether settlement negotiations between an employer and a dismissed employee resulted in a binding agreement, despite the fact that the formal documents were never finalized.
The decision serves as a timely reminder that once parties agree on essential terms, a settlement may be binding even if the release and other paperwork are still in draft form.
BACKGROUND
The employee worked for the company for over seven years. In 2022, he relocated from Winnipeg to Ottawa and committed to purchasing a home there. Shortly after relocating, and before the home purchase closed, the company terminated his employment without cause. The parties engaged in settlement discussions addressing severance, benefits, relocation expenses, and the employee's concerns about his pending home purchase.
The company asserted that a full and final settlement had been reached and brought a motion for summary judgment to enforce it. The employee opposed the motion, arguing that there was no agreement on essential terms, particularly regarding housing-related losses arising from his inability to close the purchase of his new home.
DECISION
A Binding Settlement Was Reached
The key issue was whether the parties had reached agreement on all essential terms. The ONSC found they had.
By May 28, 2022, the employee's counsel had emailed confirming instructions to accept the company's offer, "subject to mutual agreement on supporting documentation", which the Court found did not prevent the formation of a binding settlement. Essential terms—including an eight-month notice period, benefits, legal fee contribution, employment letters, and a release—were already settled.
Subsequent attempts by the employee to introduce new terms, including tying the settlement to the successful completion of his home purchase, additional short-term housing costs, and assurances about performance ratings, were viewed by the Court as attempts to renegotiate, rather than clarification of documentation. The ONSC emphasized that settlement documentation need not be finalized for a binding agreement to be formed.
The Court concluded that the employee had "buyer's remorse"; however, that did not undo the binding settlement.
Housing-Related Damages Covered by the Release
The employee alternatively argued that, even if a settlement was reached, it did not bar claims relating to losses from his failed home purchase. The ONSC disagreed. Housing issues were part of the negotiations, repeatedly discussed under explicit headings, and formed part of the parties' bargain. The release was sufficiently broad to encompass such claims.
The company's motion was granted, and the action was dismissed.
TAKEAWAYS FOR EMPLOYERS
Clear, Documented Negotiations: Email exchanges between counsel were central to determining that a settlement existed. Consistent written communications reflecting relevant circumstances carry significant weight during settlement discussions.
"Subject to Documentation" Is Not a Loophole: Once essential terms are accepted, parties are bound, even if the minutes of settlement or release are still being drafted. Employers can rely on acceptance emails from opposing counsel.
New Conditions Cannot Be Added After Acceptance: Attempts to introduce additional terms after acceptance—such as new conditions, contingencies, or expanded benefits—are unlikely to succeed. Parties should raise all essential issues before acceptance.
Releases Capture Matters Addressed During Negotiations: Where parties explicitly negotiate an issue—such as housing-related losses in this case—a broadly worded release will generally bar future claims on that issue. Employers should ensure negotiated matters are reflected clearly in the release.
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.
