When a Release Costs More Than You Bargained For: Preston v. Cervus Equipment Corporation
We’ve applied for leave to appeal to the Supreme Court of Canada in Preston v. Cervus Equipment Corporation, a case raising important questions about how employment releases are interpreted. I’m representing the employee alongside my colleagues Kevin Fox and Ken Alexander.
In this case the employer relied on a broad and ambiguously worded release to deny an employee over $75,000 in vested stocks that had already been redeemed and settled months before litigation began. The employee was successful before the Superior Court, but the Ontario Court of Appeal overturned the motion judge’s decision.
The employee has sought leave to appeal to the Supreme Court of Canada.
At the heart of this case lie two critical issues:
Can employers rely on broad and vague language in a release to seize vested employee property - such as stocks or pensions - that was never in dispute?
How should courts interpret employment releases in the post-Sattva era, particularly given the unique and contextual interpretive principles that apply to employment agreements?
Clarity on these questions will benefit employees across Canada, who are routinely required to sign releases upon termination as a condition of receiving their severance. Clear guidance will help ensure that releases don’t end up costing employees more than they bargained for.
The Facts
The employee had used his earnings to purchase shares in his employer’s company under a deferred share plan. It is undisputed that these shares were valued at over $75,000, had vested, and were automatically redeemed and settled on the date of his termination. Not being in dispute, the employee never claimed them in his wrongful dismissal action.
Following a settlement of the dismissal claim, the employee signed a release that broadly referred to "share award, stock option [and] deferred share," but said nothing about vested, redeemed, or already-settled shares. The employer refused to transfer the cash value of the redeemed shares, citing the release as justification for withholding the funds. The employee brought a claim for the redeemed stocks.
In a detailed decision, the motion judge ruled in the employee’s favor, holding that read in its full factual context as required by the SCC’s decisions in Sattva and Corner Brook, the release did not apply to the redeemed stocks which were the employee’s property.
However, the Ontario Court of Appeal reversed this decision, finding the release’s reference to share awards, stock options and deferred shares meant the employee “lost rights to assert a claim for damages for property he had earned…”, i.e. his vested and redeemed stocks.
Why This Case Matters
This decision raises troubling questions for employees and employers alike. Allowing employers to rely on ambiguous release language to deny employees their vested property creates serious risks and opens the door to abuse.
The logic of the Court of Appeal’s decision could easily extend to other forms of employe property, such as vested pensions or retirement savings.
The Supreme Court has long recognized that employees are at their most vulnerable post-termination. This case highlights how vague release terms can exploit that vulnerability, allowing employers to retroactively reclaim entitlements that were never in dispute.
Recognizing the inherent power imbalance between employers and employees, employment agreements are not interpreted as ordinary commercial contracts. How do these principles apply to employment releases? This is an important question given employees across Canada are routinely required to sign releases upon termination as a condition of receiving their severance entitlements.
The Supreme Court has not yet had the opportunity to clarify the interpretation of employment agreements and employee releases in the post-Sattva era. This case presents that opportunity.
Releases should provide closure for both employers and employees, not create new disputes. Hopefully, this case will ensure they do just that.
We routinely represent clients on appeals and judicial reviews. Feel free to contact us to discuss how we can help.
