An employee always has to be careful when signing a full and final release, for a few reasons. The recent decision in Zelsman v. Meridian Credit Union is an excellent example of this.
Ms. Zelsman's employment was terminated, following which she applied for long-term disability benefits to the LTD insurer, Great West Life. This application was denied. Ms. Zelsman proceeded to litigate the termination of her employment via the Human Rights Tribunal, resulting in a settlement achieved at the mediation, involving a payment to Ms. Zelsman of $90,000, which appears largely to be compensation for the loss of her LTD insurance due to the denial of the LTD benefits.
Then, retaining a different lawyer, Ms. Zelsman appealed the denial of her LTD benefits, and was eventually successful...however, after granting her LTD application, resulting in a hefty lump sum of retroactive benefits in excess of $46,000, Great West Life found out about the full and final release, and - moreover - found out that it contained a term releasing Great West Life from any such liabilities, and reversed the payment.
Normally, if you're not a party to a contract, you don't get to benefit from it. In this context, however, because the release so expressly released Great West Life, the Court was prepared to conclude that Great West Life could rely on it; in other words, the LTD benefits were toast.
So how does this happen? The biggest question is this: How did Ms. Zelsman get to the point of litigating against Great West Life after signing such an express release? Indeed, after getting the LTD benefits, Ms. Zelsman would have been happy to resile from the minutes of settlement, but that's not usually possible to do - particularly without $90,000 cash in hand to refund the employer.
Every management-side lawyer appears to have a different way of dealing with Minutes of Settlement and Full and Final Releases, but the one consistent fact is that they are all quite comprehensive, releasing anything and everything. In fact, usually the releases go well beyond the subject-matter of the current dispute, which adds real value to them for employers, but the consequence is that employee-side counsel have to be careful to ensure that their clients understand that they can't proceed with other claims afterward.
Indeed, given the extremely final nature of these Full and Final Releases, I've occasionally had to go back to employer counsel to get exemptions inserted for such things as pensions - so we're dealing with pay in lieu of notice, but the employee still has a tidy sum tied up in an employer pension plan to be dealt with (which usually isn't in dispute, so my client doesn't need to pay me to help deal with it). The response I usually get is "Well, of course the intention isn't to waive these entitlements", whereupon I respond, "Then you won't mind expressly saying so."
Simply, these releases envision a completely cut cord, saying "We're done dealing with you, and we won't deal with you again." If there is an unforeseen dispute down the road, I don't want these releases getting in the way. But that isn't always the case. So the releases have to be tailored.
Most of the time, it's a matter of saying to the client, "If you sign this, you don't get to come back and sue for more, you don't get to make a Human Rights Application, you don't get to make a claim for any more wages due, etc." Every so often, this shocks the client, because they thought they'd hired a lawyer just to deal with one isolated aspect of their relationship with their employer, and thought very cleverly that they'd get money now then come back for more money later on a different aspect.
In this case, the first lawyer assisting with Ms. Zelsman knew that there had been an unsuccessful application for LTD benefits, and presumably opined that it was better to go after the employer for it than to take on the insurance company. The second lawyer didn't realize that a settlement had been reached, and agreed to take on the insurance company. (They both were pretty successful in their respective tasks, it seems, but it was really one or the other.)
This is the other thing that can happen when you change counsel too many times: Facts get lost. It takes time, effort, and often money for your new lawyer to achieve the same level of familiarity with the file that your previous lawyer had.
Was Ms. Zelsman not told that the Minutes of Settlement would prevent her from going after Great West Life? Perhaps she was told, but didn't fully appreciate it? Or did at the time, but forgot? Or thought that she'd pull a fast one and try to proceed with her claim anyways (she very nearly pulled it off, after all)? As outside observers, we can't know. What seems almost certain is that, had she gone back to her first lawyer afterwards and said, "Now I want to go after the insurer", the first lawyer would have said, "Sorry, with the release you signed, you really can't." (Maybe this happened, and the client didn't listen. Who knows.) But retaining a second lawyer means increased legal fees of her own appealing the denial, increased legal fees (with a third lawyer) in making the Court Application, plus there's now a good chance that she'll end up having to pay several thousand dollars toward the insurer's legal fees.
The lesson to clients is: Tell your lawyer everything, and make sure you listen to what they say. The lesson to lawyers is not to take anything for granted. Maybe you think that the client has accepted your advice not to go after the insurer, but you never know if in the back of their own minds they're thinking that they'll be clever and try for both.
This blog is not intended to, and does not, provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.
Update: Last week, the Court of Appeal upheld this decision.ReplyDelete