The settlement's wording was clear, comprehensive, and released all claims: court
In a recent decision, the Ontario Court of Appeal ruled that a settlement agreement between a former employee and their employer released the employee’s claim for damages related to vested stock units.
The employee, who worked with the company from 2014 to 2018, participated in the company’s deferred share plan. This plan allowed employees to acquire stock units through bonus contributions and employer matching. Upon termination without cause, the employee held vested stock units. The employer’s termination letter stated that these units could be exercised under the terms of the share plan.
The employee initiated a wrongful dismissal claim in mid-2018, seeking damages in lieu of reasonable notice but did not include a claim for the vested units. The case was resolved through a settlement agreement, with the employee receiving a lump-sum payment. Settlement documents signed by both parties contained a broad release of all claims related to the employment.
Before finalizing the agreement, the employee requested payment for the vested stock units. The employer did not respond until several months later, taking the position that the settlement agreement released the claim. The employee then initiated a separate legal action, seeking damages equivalent to the value of the vested units.
The motion judge ruled in favour of the employee, finding the vested units were not included in the settlement. The employer appealed.
The appellate court disagreed with the motion judge’s interpretation. It found that the settlement’s wording was clear and comprehensive, releasing all claims, including those related to the vested stock units. The agreement explicitly stated it was final and inclusive of all entitlements arising from employment. The release language specifically addressed claims for “any bonus, share award, stock option, deferred share or similar incentive plan,” which encompassed the stock units in question.
The court ruled that the motion judge committed an error by allowing contextual factors to override the plain wording of the agreement. It also held that evaluating the perceived fairness or economic benefit of the settlement fell outside the proper scope of contractual interpretation.
Ultimately, the Court of Appeal set aside the earlier judgment and ruled in favour of the employer, concluding the claim for vested stock units was released in the settlement.
