Skilled drafting saves employer from costly separation agreement oversight

Iowa Employment & Labor Law Dickinson Law Firm Des Moines Iowa

Posted on 12/30/2013 at 07:53 AM by The Newsroom

A recent decision of the Eighth Circuit Court of Appeals, St. Louis Produce Market v. Hughes, 735 F.3d 829 (8th Cir. 2013), reminds employers of the benefits of having legal counsel: (i) draft and/or review previously drafted separation agreements; and (ii) re-review separation agreements prior to signing to check for employee alterations or modifications. Clarence Hughes' position with St. Louis Produce Market (the Market) was eliminated in August 2009. The separation agreement prepared by the Market granted Hughes a lump sum payment equivalent to 14 weeks' salary. Hughes and his attorney altered the agreement to provide for 104, as opposed to 14, weeks' pay. Market's president signed the altered agreement without noticing or being informed of the change. The Market sought a declaratory judgment that Hughes' fraud voided the separation agreement. Hughes counterclaimed for breach of contract arguing the agreement was enforceable as modified. Based on a separate provision of the agreement, the district court granted summary judgment for the Market without having to address Hughes’ alleged fraud and misrepresentation. The agreement provided that the Market’s payment obligations were conditioned on both Hughes’ return of all company-owned property and his written certification that all such property had been returned. The Market was able to show that Hughes violated this explicit condition by failing to return the battery, power cord and hard drive of a company-owned laptop. Accordingly, the Market was excused from its own payment obligations to Hughes under the separation agreement. The Eighth Circuit upheld the district court’s decision. Thus, skilled initial drafting of the separation agreement saved the employer from what could have been an expensive subsequent oversight. Employers should make consultation with legal counsel regarding the use and contents of separation agreements a consistent best practice. If you have questions or seek the preparation or review of a separation agreement, please contact a Dickinson attorney at (515) 244-2600.  

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