Negotiating and Documenting the Deal
Reaching agreement on the settlement amount is only part of the job.
Employment settlements frequently require careful consideration of tax treatment,
Employment Insurance repayment, releases, confidentiality, payment terms and
the precise obligations undertaken by each party.
The materials below address the negotiation, structure and documentation of
employment settlements, together with the consequences that may follow when
settlement terms are incomplete, disputed or breached.
Negotiating the Settlement
Negotiating the Deal
An introduction to the financial considerations that commonly arise in
employment settlements, including the allocation of damages, tax treatment,
Employment Insurance repayment and the possibility that taxing authorities
may obtain access to settlement information.
Tax Treatment & CRA
Tax Issues in Employment Law
A review of the taxation of employment-related settlements, including
CRA’s treatment of retiring allowances and the distinction between taxable
employment payments and damages that may receive different tax treatment.
These issues can materially affect the structure and value of a settlement.
Is CRA at the Table?
Can CRA obtain documents and information arising from apparently confidential
settlement negotiations? This article considers a Federal Court decision
allowing CRA access to settlement-related material and the implications for
counsel when allocating damages in a settlement.
Bill C-47
A discussion of amendments to the Income Tax Act concerning the mandatory
disclosure of certain transactions and their possible relevance to employment
settlements involving tax allocations, indemnities and payments characterized
as non-taxable damages.
Employment Insurance & Settlement Funds
EI Clawback in Canada: When Benefits Must Be Repaid
A review of the Employment Insurance repayment rules that may apply when
settlement funds are received after termination. The article also considers
circumstances in which particular settlement payments may not be treated as
earnings for EI purposes, including payments relating to an existing right
of reinstatement.
Drafting & Enforcing the Settlement
When is a Deal not a Deal?
A settlement may be reached even though details such as a release,
reference letter, confidentiality term, tax allocation or EI treatment
remain to be documented. This article reviews the principles used to
determine whether an enforceable agreement has been made and whether
later disputed terms are essential or merely incidental.
Settlement Terms Call for Default “Penalty”
A review of an Ontario Court of Appeal decision enforcing a settlement
provision that substantially increased the amount payable following default.
The case illustrates the importance courts place on enforcing negotiated
settlement terms.
Breach of Minutes of Settlement
A consideration of the consequences that may follow when a party fails
to comply with agreed settlement terms, including a Human Rights Tribunal
proceeding seeking recovery of settlement funds following an alleged breach.