Employer Unsuccessfully Attempts to Resile From Settlement After Learning Ex-Employee Is Employed by Competitor

In a recent decision, the Ontario Superior Court upheld a settlement that was reached between a former employee and his ex-employer at a mediation over the employer’s attempt to resile from the settlement after finding out that the former employee had since gained employment with a competitor.

The plaintiff commenced a lawsuit against his former employer for payment of certain benefits after his employment was terminated.

The parties attended a mediation at which the lawsuit was resolved. As is often the case, the formal paperwork was not completed at the mediation.

Two days after the mediation the former employer learned that the plaintiff was working for its competitor, in breach of the non-competition provisions of his employment contract. The former employer indicated that it would not be following through with the settlement arrangement and would be suing the plaintiff and his new employer for their wrongful conduct.

The plaintiff brought a motion to have the settlement enforced and the former employer brought a cross-motion for a declaration that no binding settlement was reached.

The decision provides a useful summary on the law of settlements. After reviewing the evidence the court ruled that the parties intended to create a legally binding agreement and that an agreement was reached on all of the essential terms. The court also concluded that no injustice would arise by allowing the settlement to be enforced, as the former employer was still at liberty to pursue its new, semi-unrelated lawsuit, pertaining to the breach of the non-competition provision.