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What mental capacity is required to sign a release?

In a past Stringer Update, Releases Protect Employers from Human Rights Complaints, we emphasized the importance of having terminated employees sign a full and final release, as protection against a future human rights application. We highlighted the factors that the Human Rights Tribunal (the “Tribunal”) will consider when determining whether a release will be enforceable, which include (1) the actual language of the release, and (2) other factors including duress, fraudulent misrepresentation and the applicant’s capacity to understand the terms of the release ( click here to read our Stringer Update).

In two recent decisions, the Tribunal addresses the issue of the requisite mental capacity necessary in order for a release to be enforceable.

In Adams v. Community Life Care Inc., the applicant contended that she lacked the mental capacity to fully understand the terms of the settlement which contained a provision prohibiting her from bringing a human rights application. As evidence of her lack of capacity she provided clinical notes that confirmed a diagnosis with Adjustment Disorder with Depressive Mood.  The notes provided, however, that she had “no formal thought disorder or cognitive impairment”.  The clinical notes were dated after she had signed the release.

The Tribunal found that her evidence fell short of proving lack of capacity. She was unable to prove when her symptoms of psychological distress began, nor did she show that the disorder would affect her ability to enter into the agreement.

In Kerkezian v. Donway Place Retirement Home, the applicant alleged that her poor mental health rendered her incapable of understanding the release she signed. The applicant provided the Tribunal with two doctor’s notes, the first indicating that she had depression, and the second indicating that her mental and physical state had diminished.  Both letters were dated after she signed the release.

The Tribunal found that she did not provide sufficient evidence that she lacked the requisite capacity. She did not establish that her medical condition prevented her from understanding the terms of the release.  However, it is interesting to note that the Tribunal found that she presented some evidence that she was experiencing depression at the time she signed the release, even though both medical notes post-dated the execution of the release and did not explicitly mention her capacity during that time period.

In order to render a release unenforceable for reason of mental illness or disability, the applicant must provide the Tribunal with clear evidence that they lacked capacity at the time the release was signed.   This is a high threshold.  In the absence of clear medical information, the Tribunal is likely to uphold the enforceability of the release. However, there may be circumstances were an applicant discharges this burden which would leave the employer open to a human rights application even after entering a settlement and executing a release.

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