Standard Release Language May Not Protect Against Sexual Harassment Allegations

The Ontario Superior Court recently found that sexual harassment does not necessarily “arise out of” the employment relationship, even when it is perpetrated by another employee at the workplace. As such, releases purporting to settle all claims arising out of, or in any way connected to, an employment relationship may not effectively bar subsequent sexual harassment claims.

The Facts

The employee in Watson v. The Governing Council of the Salvation Army of Canada sued her employer and its National Director of Operations, in his personal capacity. The employee sought damages for negligence, intention infliction of emotional harm and breach of fiduciary duty related to alleged sexual harassment she suffered at the hands of the National Director.

The employee left her position with the employer in 2011, and had negotiated a severance package. She did not raise this claim until 2015, after being contacted in relation to an ongoing investigation against the National Director involving sexual harassment allegations by several employees.

The National Director brought a motion for summary judgment arguing that the employee had previously executed a memorandum of settlement and full and final release, and had been paid $10,000 in consideration by the employer.

The relevant portion of the release stated as follows:

In accordance with the terms of settlement outlined in the attached letter dated August 8, 2011, I, Emma Oliveira Watson, agree to release any and all claims I have or may have against The Salvation Army, past, present or future, known or unknown, which arise out of or which are in any way related to or connected with my employment or the ending of my employment.

This release of claims shall include any claims against anyone or any organization in any way associated with The Salvation Army which arise out of or which are in any way related to or connected with my employment or the ending of my employment.

The Decision

The Court noted that, although the National Director was a third party to the settlement and release, there are circumstances in which a third party can enforce such a contractual benefit.

The Court found that the terms of the release were limited to the employment relationship. Although many of the alleged events occurred at the workplace, and even “because” of the employment, the Court noted that “sexual harassment, intimidation and other improper conduct are not connected to employment”. As such, the release did not bar the employee’s claim for damages, and the National Director’s motion for summary judgment was denied.

The Takeaway

This decision is potentially troubling for employers that have been relying on generic release language when settling employment law matters. In its decision, the Court suggests that employers should use language specific to sexual harassment in order to bar such future claims by employees. It is not clear what other sorts of conduct may be found to fall “outside” of the employment relationship. For instance, what of harassment based on other protected grounds, such as race or disability? Further, it is only possible to use specific language if the employer is aware of the alleged conduct. It seems in the instant case, for example, that the employer may not have been aware of the sexual harassment allegations at the time the employee’s employment ended, and the settlement was reached.

There may be unintended consequences to this approach. If employers are not able to know with certainty when settling an employment matter that further claims will not arise at a later date, this will impact the quantum of any settlement offers they are willing to make.

Further, because this motion for summary judgment was brought by the third party National Director, it seems that the Court did not specifically comment on the potential liability of the employer itself. Generally, employers cannot be vicariously liable for sexual harassment perpetrated by their employees absent a nexus to the employment relationship – whether that be by virtue of statue such as the Ontario Human Rights Code, or by tort.  If the harassment did not arise out of the employment relationship, which is why the release does not apply, it is not clear how the employee could have a reasonable prospect of success in her claim as against the employer.

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