Employers often view a signed release as the final step in bringing an employment relationship to a close. A recent Ontario decision serves as a reminder that this assumption can be risky, particularly where employee equity is involved.
In Kalal et al. v. Softchoice Corporation et al., 2026 ONSC 4280, the Ontario Superior Court concluded that former employees could continue pursuing shareholder-related claims despite having signed broad releases at the time of their termination. Kalal highlights the importance of carefully drafting releases and expressly addressing equity-related entitlements.
What happened?
The employees participated in an employee share program and accumulated significant shareholdings during their employment. Following the termination of their employment, they signed releases and resolved the employment aspects of their claims.
The employees later alleged that they had been deprived of the true value of their shares. They claimed the employer repurchased their shares at a significantly lower value than the value ultimately realized when the company went public several months later. They brought shareholder-related claims, including claims for oppression under the Canada Business Corporations Act.
The employer argued that the releases barred those claims. The employees argued that the releases addressed employment-related claims only and did not affect their rights as shareholders.
Why the release failed
The most notable aspect of the decision was the Court’s treatment of the release.
The release's first paragraph contained broad language releasing claims relating to the employees’ hiring, employment and the cessation of their employment. The Court acknowledged that this language was broad enough, on its face, to capture claims connected to the employees’ shares.
However, the Court found that the release became ambiguous when read as a whole. In addition to the general release language, the document contained separate provisions addressing claims under the Employment Standards Act, 2000, the Ontario Human Rights Code, and the Occupational Health and Safety Act.
According to the Court, those provisions created uncertainty regarding the scope of the broader release language. The Court reasoned that claims arising under those statutes were already captured by the general release. By addressing them separately, without indicating that they were merely examples of claims caught by the broader language, the release suggested that some claims falling outside the employment relationship — such as shareholder claims — may not have been intended to be released.
The Court therefore looked beyond the text itself and considered the surrounding circumstances, including the termination letter and subsequent correspondence regarding the repurchase of the employees’ shares. After reviewing that context, the Court concluded that the parties had not intended to release shareholder claims.
What employers should take away
The practical lesson from Kalal is straightforward: if an employer intends to release future equity-related claims, the release should say so clearly.
Employers should consider:
- expressly identifying claims relating to shares, stock options, deferred share units, restricted share units and similar incentive plans;
- ensuring that termination letters, settlement agreements and releases are consistent with one another;
- reviewing template releases that rely heavily on general wording; and
- considering whether separate agreements governing equity interests should be specifically referenced in the release.
The decision is particularly noteworthy because courts have recently demonstrated a willingness to enforce broadly drafted releases in other contexts. Employers should therefore avoid assuming that general language will automatically capture every claim arising from the employment relationship.
A release is intended to provide certainty. Kalal demonstrates that uncertainty can arise when the document does not expressly address the claims the employer most wants to extinguish. If equity-related rights are at issue, careful drafting may make the difference between a clean break and further litigation.
