Oopsy daisy! In the process of permanently laying off a group of employees after Defendant-company was purchased, the terminated employees all received separation pay as part a legally executed separation agreement. Courtesy of a typo in one particular agreement, instead of getting 34 weeks of pay amounting to $80,805.97 as was intended, the Plaintiff’s agreement stated he would get $80,805.97 per week for 34 weeks amounting to a very generous, but erroneous $2,747,400 separation payout.
Cha-ching!!!
The chagrined (and with hair probably much grayer) Director of Human Resources stated she had mistakenly entered the total amount the Plaintiff was to receive over 34 weeks, instead of the correct weekly amount he was to receive that would have resulted in the correct total payout over 34 weeks of just $80,806 (rounded).
When the Plaintiff received his first check, and it was not the $80,806 expected, rather than chuckle and say “well that’s what should I have expected,” he sued claiming breach of contract. After all, a deal’s a deal.
Not so fast said all of the courts this was taken too. The motion for summary disposition by the Plaintiff that in essence states “there is no doubt as to what the contract says so give me my money” was counter-sued by the Defendant-employer with a claim requesting the court to recognize the unilateral error in the separation agreement. The lower court denied Plaintiff’s motion for summary disposition asking for enforcement of the agreement. Plaintiff then appealed.
The Appeals Court reviewed the trial court’s decision. The Appeals Court reasonably looked at a totality of the facts finding that 1. The HR Director stated she made a mistake. 2. A separate paragraph of the separation agreement stated that the separation pay and benefits were being provided pursuant to terms in a Change of Control Guideline and this document, which was used in all the separation agreements, clearly stated the correct amount to be granted. The gross monthly base salary for a specific amount of time and not $80,806/week.
Michigan Courts, as well as most others across the country have the power, “sitting in equity”, to reform a contract if it was the result of “fraud, mistake, accident or surprise” Johnson Family Ltd Partnership v. White Pines Wireless, LLC 281 Mich. App 364 (2008). Plaintiff could offer no explanation as to why the payment he was receiving should be supported “without any basis in objective fact.” The Court also took issue with the fact Plaintiff made no attempt to bring the error to light beforehand and sought to take advantage of it. Plaintiff of course denied this and argued he had no idea this windfall was some sort of mistake. Evidence was further presented by the Defendant-employer stating he was told several times during the course of the termination process “that severance pay meant continuation of his regular salary.” The court also reasoned plainly that “simple math demonstrates that the amount of separation pay stated in the agreement is 34 times the Plaintiff’s weekly salary at the time of his termination.” This all supports the Court’s action of reforming the contract accordingly.
Though justice appears to be served here, the lesson was undoubtedly an expensive one for the employer. It is not cheap having to suffer a lawsuit up through an appeal. Why would the Plaintiff’s “good, sincere but strident” legal counsel pursue this clearly mistaken contract so far? Might it have been in the hope the employer would at some point during this long and expensive legal process wish to settle for more than the $80,805? The Court’s opinion does not say, of course.
Of the many lessons this case contains, Human Resource professionals should note the basic importance of proof reading its documents to avoid such costly and distracting errors. Though justice can sometimes be expected to prevail in correcting such “boo-boos,” it does not come cheaply.
Source: Francois El-Hayek v Trico Products Corporation No.331283 (June27,2017)