Termination Letter Template
Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only. If you are an employer or employee and need legal advice with respect to employee termination, you should seek professional assistance (e.g. make a post on Dynamic Lawyers). We have Toronto, Ottawa, Hamilton, Brampton, Mississauga and other Ontario lawyers registered to help you. You can contact me directly if you need a lawyer.
This is the second of a series of article posts I'm writing about employee termination. In this article, I'll briefly discuss some nuances that you should be aware of when it comes to an Employee Termination Agreement. In the first article, I reviewed what these agreements are and how they can be structured.
Consideration
Before getting into the nuts and bolts of a basic Employee Termination Agreement, it is worth discussing one important element that helps make these agreements valid and enforceable to begin with. That element is called "Consideration". Consideration is something of value given by both parties to a contract that induces them to enter into the agreement. Consideration is typically something like money for goods or services, etc. One party receives something of value and the other party receives something of value. This makes the contract valid, binding, and enforceable. For an Employee Termination Agreement, the Consideration will be the money that the Employer pays the Employee. This amount could reflect the common law (i.e. judge-made law) or statutory (i.e. Employment Standards Act, 2000) requirements of minimum or reasonable payment in lieu of notice which the Employer is required to provide when terminating an Employee. In exchange for receiving this money, the Employee agrees to settle all real and possible disputes and release all claims against the Employer relating to his or her employment and termination thereof.
Defining the "Released Claims"
In the background section of the Employee Termination Agreement, the Employer gets the chance to describe the claims that are going to be settled and released. Typically, this will relate to claims that could arise from the Employee's employment or way in which they were terminated. This description becomes a defined term ' the "Released Claims" ' for ease of reference to be used throughout the rest of the Agreement. While the Employee will want to have a narrow interpretation of the Released Claims (to help cast a wide net of liability on the Employer), the Employer will want a very broad interpretation of the Released Claims (to help reduce the likelihood that the Employee will go after it for future claims).
Payment
The first part of the body of the Employee Termination Agreement typically says something to the effect that the Employee agrees to settle and release the Employer in respect of the Released Claims in exchange for money. Now, here's where you can get a bit more detailed:
- When is the money to be paid (e.g. immediately after signing the agreement, within a set period of time, promptly but in any event within a few days, etc.)?
- How is the money to be presented (e.g. cash, certified cheque, money order, personal cheque, readily available funds, etc.?) and paid (e.g. lump sum, over time, is there a deposit?)
- Are there any taxes involved that need to be included in the settlement amount?
Release of Claims
So now that the Employee has his or her money and has agreed to settle the claims, the Employer wants to have a bullet proof release of claims section. Not only does the Employer want to be released from past, present, and future claims of any kind and in any forum whatsoever, but it also wants its LEGAL REPRESENTATIVES released as well. So who are these other persons? Well, there's a whole bunch of different terms here worth going over:
- Directors and Officers: these are individuals who manage a corporation.
- Heirs: someone who would benefit (under the law) when the Employer dies without a Will.
- Executors / Administrators: a person appointed by a testator to carry out his or her will.
- Successors: typically used for corporations that succeed and assume the obligations of other corporations
- Assigns: a person who receives the benefit of an assignment, and can include individuals andcorporations
As you can see, directors, officers, heirs, executors and administrator relate to individuals while successors and assigns can relate to both individuals and corporations. Who exactly goes into the release will depend on how the Employer carries on business: is it a sole proprietor, partnership, corporation, etc.? If it's a corporation, it will have officers, directors, employees, etc. to act on its behalf, so they should be included in the release. For sole proprietorships, there won't be any officers or directors.
No Claims, Assignment, Assistance, Admission
In addition to getting an air-tight release for both itself and other important persons, the Employer also wants to make sure that the Employee does not do a few more things. First, the Employee can't start or maintain any claims respecting the Released Claims. If he or she has started a claim already, it would be wise on the part of the Employer to put in a requirement that the claim (and describe it as best as you can) be immediately released, cancelled, settled, etc. with the court at the Employee's sole expense and that proof thereof be provided immediately thereafter to the satisfaction of the Employer. You can play around with the language but you get the point. Next, what if the Employee had previously assigned its rights to go after the Employer, for example, to a trustee in bankruptcy? Well, the Employer will want the Employee to give a representation that he or she has not and will not assign his or her rights to be able to go after the Employer. A full settlement first means that the Employee is capable of settling (i.e. that he or she is entitled to go after the Employer but that it will not because of the settlement). Next, the Employer wants and the Employee to acknowledge that it will not assist any person in any claim respecting the Released Claims. Remember: these are contractual terms so a breach of this term could result in damages being sought and awarded. Finally, the Employer wants the Employee to acknowledge that there is no admission of guilt or liability. In fact, the only thing being admitted here is that there is no such admission!
In the next article, I'll continue my discussion of the various terms you can find in an Employee Termination Agreement.
By the way, if you need an Employment Agreement or Employee Termination Agreement, you've come to the right place. We have both! The Employee Termination Agreement can be used by an Employer to terminate an Employee's employment. It is drafted in favour of the Employer: it contains a release of liability, settlement of claims relating to the employment and termination thereof, and includes restrictive covenants (e.g. non compete and non solicitation clauses). If you're looking for an employment agreement, just go here. Both sell for only $47 and they come with video tutorials and 2 free written guides (the form and the written guides are lawyer-prepared).
About the Author:
Toronto Employment Lawyer Michael practices business law and litigation at Carabash Law and helps clients understand, draft, negotiate and resolve disputes over business agreements. If you're looking for an Employment Agreement, Employee Termination Letter, or other legal form, check out http://www.dynamiclawyers.com