There are so many pitfalls to the common client misconception that settlements are not final until they are signed on the “dotted line”. Settlements are meant to be a process for finality and closure but can also be a minefield for contractual interpretation litigation if someone changes their mind, or if parties cannot agree on settlement document language. This article will take a look at the general principles that the courts in Ontario have used to deal with this scenario, as well as the procedural differences for settlement enforcement in the Human Rights of Ontario (HRTO), and the Ontario Labour Relations Board (OLRB).
What’s in a Yes?
Employment law cases can be emotional for the parties involved, given that they often deal with things like job loss or workplace harassment. It can therefore be the case sometimes that a party has second thoughts about a settlement after saying yes to an offer, thinking that things are not final until they have signed documents. Parties need to understand however that in saying yes to a settlement offer, they are forming a legally binding contract that will be difficult to resile from if they change their minds. This contract can be final and enforceable even if minutes of settlement have not been signed. Indeed, multiple court decisions have confirmed this.
Per the 2007 ONCA case of Olivieri v. Sherman, the Courts will look at two things when the existence of a settlement is questioned or challenged: firstly, whether there was a binding settlement agreement, and secondly, if there was any reason to not enforce the settlement. With respect to the first part of the test, Courts and Tribunals will look to whether there was a meeting of the minds based on an “objective” reading of the language chosen by the parties to put their agreement into effect. The actual, subjective state of mind of the parties entering into the settlement will not be relevant in that kind of inquiry.
Emails between counsel have been found to be enough to show that there is a binding settlement even before Minutes are signed. Courts will also be mindful of the well-established notion that settlement implies a promise to furnish a release, such that the wording of a release is not a valid reason to suggest that parties had not reached agreement on essential terms (see for example, para. 19 of Lumsden v. Toronto Police Services Board).
The overarching policy consideration per Lumsden and similar cases is that settlements are to be encouraged. For that reason, where the first part of the Olivieri test is met, litigants need a very good reason to then demonstrate under the second branch of the test why the court should not give effect to the agreement. The courts have described it as a “rare” occurrence that this discretion under the second part of the Olivieri test will be exercised to not give effect to a settlement: some kind of “injustice” must occur in order for the settlement to not be enforced. This is a high bar and absent some kind of unconscionability or duress, the second part of the Olivieri test is rarely met.