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The Practical Employer

The Practical Employer

Employers, Read Those Severance Agreements

The moral of story is that employers must read agreements, and not merely assume that a recently terminated employee will play fair.

June 27, 2013
Related Topics: Harassment, Discrimination and EEOC Compliance, Legal
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Allen v. Chanel, Inc. (S.D.N.Y. 6/4/13) teaches businesses an important lesson about reviewing agreements that employees send back, and not assuming that the agreement returned is the same as the agreement originally sent out. When Chanel terminated the employment of Anu Allen, it presented her with a Separation Agreement and Release, which, among other terms, offered $14,940.19 in severance pay in exchange for a full release of all potential claims. A corporate representative pre-signed the agreement before giving it to Allen. The release clause in the agreement stated as follows:

For and in consideration of the payments and benefits to be provided to you … , you … hereby forever release and discharge [Defendant] … from any and all claims … including, but not limited to, claims of discrimination and harassment on the basis of race, color, … sex, sexual orientation, age, … and any other legally protected characteristic … and any and all claims under any contract, statute, regulation, agreement, duty or otherwise.

Upon receipt of the agreement, Allen, believing she had been the victim of discrimination and wanting to preserve her right to sue, pulled a fast one. She retyped the page of the agreement containing the release word-for-word, with the same font and the same margins, so that it appeared to be identical, but with one key change. Allen changed the word "including" to "excluding," so that the release paragraph read:

For and in consideration of the payments and benefits to be provided to you … , you … hereby forever release and discharge [Defendant] … from any and all claims … excluding, but not limited to, claims of discrimination and harassment on the basis of race, color, … sex, sexual orientation, age, … and any other legally protected characteristic … and any and all claims under any contract, statute, regulation, agreement, duty or otherwise.

She then initialed each page, signed the agreement, and returned it to her ex-employer, which, failed to notice the change and released the severance check. When Allen later sued for discrimination, Chanel sought the dismissal of her lawsuit, believing that Allen had released and waived the claims in the agreement. The court, however, did not agree, relying on Allen's chicanery to conclude that the parties did not have a meeting of the minds on the key release language:

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. Consequently, Defendant has failed to show that Plaintiff waived the claims she raises in her Complaint.

Are you as disturbed as I am that the court provided a game-playing employee with a huge benefit? The moral of story, though, is that employers must read agreements, and not merely assume that a recently terminated employee will play fair.

Written by Jon Hyman, a partner in the Labor & Employment group of Kohrman Jackson & Krantz. For more information, contact Jon at (216) 736-7226 or jth@kjk.com.

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