If you are involved in civil litigation in Ontario – especially employment-related disputes – it is important to understand the rules around disclosure of settlement agreements. The recent decision in Peninsula Employment Services Ltd. v. Castillo by the Ontario Superior Court of Justice sends a clear message: the courts will strictly enforce the rule of “immediate disclosure” when settlements are made with only some parties to an ongoing lawsuit.
This decision is particularly relevant for those seeking advice from a Toronto employment lawyer, severance package lawyer in Toronto, or wrongful dismissal lawyer, as it demonstrates how procedural missteps can permanently derail a case.
Understanding the “Immediate Disclosure” Rule in Ontario
In Ontario civil litigation, when a party settles with some but not all of the defendants, that settlement must be disclosed immediately to the remaining parties. This rule is in place to maintain a level playing field and ensure that all parties are aware of any change in the adversarial nature of the proceedings.
The reason is simple: once a settlement is reached, the dynamics of the litigation change, especially if the settling party agrees to cooperate with the plaintiff (such as an employee in a wrongful dismissal claim). In such cases, other parties must be notified right away so they can adjust their legal strategy.
What Happened in Peninsula Employment v. Castillo?
In this case, Peninsula Employment Services Ltd. brought a claim involving multiple defendants. During the litigation, Peninsula reached settlement agreements with three of the individual defendants, but failed to immediately disclose those settlements to the remaining defendants, Marc Castillo and Castillo HR Consulting Inc.
Here’s a timeline of events:
-
Sept. 12, 2024: entered into a settlement agreement with the defendant, Anita Crawford.
-
Sept. 16, 2024: the plaintiff served one of the defendants, Castillo, with a Notice of Discontinuance for Ms. Crawford – but no mention of the settlement agreement that was reached between them.
-
Sept. 20, 2024: the plaintiff was verbally notified Castillo’s legal counsel it had reached a settlement agreement with Ms. Crawford.
-
Sept. 24, 2024: the plaintiff entered into separate settlement agreements with the other defendants, Erika Saclayan and Nikki Mathews.
-
Sept. 25, 2024: the plaintiff served Castillo with a Notices of Discontinuance for both of those two defendants – again, with no disclosure of settlements.
-
Oct. 7, 2024: the plaintiff advised Castillo that it had reached settlements with Ms. Saclayan and Ms. Mathews.
While these delays (8 days for Crawford and 12 days for Saclayan and Mathews) may seem short, the court deemed them long enough to constitute an abuse of process.
Court’s Ruling: Zero Tolerance for Delay in Partial Settlements
In its decision, the court was clear that any delay, even a matter of days violates the rule of immediate disclosure. Importantly, it held that:
“There should be no delay that can be counted in days or weeks at all… the only remedy for this abuse of process acceptable to courts in Ontario is a permanent and non-discretionary stay of proceedings.”
In short, the plaintiff’s case was permanently stayed, meaning it could no longer proceed – despite the fact that the delay was less than two weeks and no evidence of actual harm or prejudice to Castillo was presented.
Why This Matters for Employment Law in Toronto
While this case was not strictly an employment law dispute, its implications are highly relevant if you are negotiating a settlement in a wrongful dismissal or constructive dismissal claim in Ontario involving more than one party.
In many employment cases, there may be multiple parties, such as a former employer, individual managers, and related corporate entities. Settling with one party but not others is common, but the requirement to disclose that settlement immediately remains.
Failing to do so, as this case demonstrates, can result in your case being thrown out regardless of its merits. As this decision made clear:
-
disclosure of a partial settlement (that is, with some but not all of the defendants) must be made the same day the agreement is finalized, or as close to that as practically possible.
-
simply providing a Notice of Discontinuance (which drops the claim against the settling party) does not count as disclosure of the settlement agreement.
-
even short delays may be fatal to a case.
Legal Takeaways for Employment Dispute Litigation
1. Disclose Settlements Immediately
If you are involved in a legal dispute and settle with one or more parties, it is is generally required to advise the remaining parties right away. Waiting even a few days could be considered an abuse of process.
2. Seek Legal Advice Before Settling with Some Parties
Before finalizing any partial settlement, consult with an experienced employment contract lawyer or litigation lawyer in Toronto. Ask whether the immediate disclosure rule applies in your situation.
3. Defense Strategy: Keep in Mind Potential Partial Settlements
If you are a defendant in a case and later discover a partial settlement was made without your knowledge, you may be able to seek a permanent stay of the proceedings – effectively ending the lawsuit.
This is where having an experienced Toronto employment lawyer can be important. Legal counsel can assess whether the plaintiff has complied with their disclosure obligation and advise on the best course of action.
Need Help With a Settlement or Employment Dispute?
If you are facing a complex employment dispute or are unsure how to handle settlement disclosures properly, speak with an experienced Toronto employment lawyer who understands both the legal landscape and the high stakes involved.
Call Toronto Employment Lawyer Now
It is important for an employee (or an employee) to obtain a legal consultation before taking any action that could affect the situation at workplace. Sezar has experience advocating for both employers and employees, which allows him to anticipate the other side’s arguments and develop an effective strategy, including termination of employment.
If you are looking for a wrongful dismissal lawyer in Toronto, call us today at 647-822-5492 for a case evaluation with an experienced employment lawyer.
Disclaimer: The content on this website and blog is not legal advice or legal opinion of any kind, and is only to provide general information. It is in no way particular to your individual case and should not be relied upon in any way. The outcome of a legal matter depends on its unique circumstances, and prior successes are not indicative of future results. No portion or use of this website or blog will establish a lawyer-client relationship with the author, this law firm or any related party. Should you require legal advice for your particular situation, please fill out the form below, or call 647-822-5492, to request an initial consultation.