Throw out the release?

The situation is a common one.

  • Employer terminates the employment of an employee.
  • Employer provides a severance agreement with its signature already affixed. 
  • Employee signs it and returns the agreement to the employer.
  • Employer, likely reviewing just the signature, pays the severance.

But here’s where things get interesting. Employee then sues the employer for discrimination. Employer says, “wait a minute”, the employee already signed a release.

Except the employee has the equivalent of baseball’s hidden ball trick up her sleeve.

Before the employee signed the agreement, she re-typed the entire page with the general release using the same font and margins. (You can download the agreement here.)

And, most importantly, she changed the word “including” (when referring to specific claims she was releasing) to “excluding” (thereby trying to exclude the laundry list of claims that typically follows an “including” clause).

She signed the agreement and returned it to the employer.  (There is some dispute as to whether the employee attached a yellow sticky note to the change.)

Those facts are described in a remarkable new case out of a federal district court and were first reported in the Employment Law Daily briefing

The employer argued that the employee, under either version of the release, had settled “all claims” against the employer. The court raised its own issue suggesing that the waiver was not knowing or voluntary — at least at this stage of the litigation.

Here, by changing the word “including” to “excluding” prior to the list of claims covered by the Chanel Separation and Release Agreement before signing the agreement and returning it to Defendant, Plaintiff manifested an intent to preserve her right to file a discrimination claim. Thus, Plaintiff did not knowingly, willfully, and voluntarily waive her right to file a discrimination claim, regardless of whether the Chanel Separation Release Agreement, Plaintiff’s Release, or neither represents the agreement of the parties.

The case will proceed with discovery now and it remains to be seen whether there will be additional facts gleaned during the case that could change the court’s analysis.

Regardless, the decision is a stark reminder to employers that things may not always be what they seem and that, unfortunately, it is up to the employer to police the agreements.  

When a severance agreement is returned to the employer, the case now emphasizes a need for employers to make sure that what was signed was actually the version that was sent to the employer in the first place.  

I tend to disagree with the court’s decision that a party should profit from such trickery but the court — at least in this case — refused to come down harshly on the employee.

Ultimately, it’s a scary decision for employers — particularly those that may process dozens of such agreements during a reduction in force.

  • Mary E. Wright

    Employers must be especially careful now that there’s a published opinion on the subject. While we may look at it as trickery some attorneys may advise their clients to engage in conduct, if not blessed, at least not punished by the court. Wow.

  • VMS

    How soon we forget about textbook cases. Every contracts text contains a case (whose name escapes me at the moment) where an employee did this. The law is pretty well settled that this is a fraud on the employer, and the employee lost big time.

    The case in the contracts text is slightly different. There the employee retyped the agreement so it looked just like the original, signed, and then the employer signed. So arguably, the employer should have read the agreement. The court did not buy that argument. Here, however, the employee altered the agreement already signed by the employer. In either case, it is fraud.