We've all made mistakes at work, but have you made a $2,666,594.03 mistake? On one employee? Hold onto your hats, because you don't want this to happen to you. Here's what happened.
Trico Products Corporation laid off Francois El-Hayek after 28 years of service. He was supposed to receive 34 weeks worth of severance pay in exchange for signing a general release. (A general release is a legal document that basically says in exchange for this severance I won't sue you--except for things that you can't legally waive.) This is all pretty standard in a lay-off situation. At the time of termination, El-Hayek was earning $123,585 per year, so with 34 weeks of pay that should be $80,805.97. Not a bad amount of severance. (Although for the record, I recommend a minimum severance of two weeks per year of service, but no one asked me.)
However, the HR Director made a mistake. Mistakes happen, and we understand that. But, this was a big mistake--she wrote he should receive $80,805.97 per week instead of in total. As you can imagine, El-Hayek had no trouble signing this document. When the severance checks started rolling in for considerably less than $80k per week, El-Hayek sued.
Can those of you who make severance agreements feel your heart rate increasing? I spent 3 years running layoffs for a large company and this case gave me a nervous twitch. Mistakes happen, but a mistake this big shouldn't happen. Here's how you can prevent this type of error at your company:
Leave the legal documents to the lawyers
Now, I've written many legal documents in my day, and I'm not a lawyer, therefore every single one was reviewed by an attorney. Multiple attorneys, actually. My job-share partner and I did the research and writing, but nothing went out until the lawyers approved it. Nothing.
Standardization is good
I've laid off more than 1,000 people in a single day, so you can bet that I didn't write each document from scratch. Instead, we had a database that fed the relevant information into a template. In this case, El-Hayek was the only one who received a release with a weekly severance payment rather than a total severance payment. That word "weekly" would not have appeared if they had used a standardized document, to begin with.
Double and triple check
- Using documents from the previous layoff, my job share partner and I (both HR) updated the documents for this round of layoffs.
- The attorneys, always more than one, reviewed the documents and we made any relevant changes. Then the attorneys reviewed the documents once more.
- We gathered the relevant information that would populate the template and we reviewed it to make sure it was accurate.
- We sent the information to the HR business partner over each area so that they could review for accuracy.
- We created the individual documents for each employee and checked them for accuracy before placing them into a folder for each employee.
- Prior to notification day, the HR person assigned to each person's termination hand checked the information for accuracy and completeness.
- During notification, the person's manager delivered the news, but the HR person who had reviewed and verified the information was present in the meeting to answer any questions.
As a result of this process, even laying off more than a thousand people in a day, we never had problems. Were there ever errors? Of course, but they were caught long before step 7.
Check when the documents are returned
You should always encourage your laid off employees to take their documents home, review them and get a legal opinion before signing them. When they sign them and return them, double check just to make sure they are the same document. You may think I'm joking, but I'm not. A bitter employee can get sneaky and her computer prints the same fonts yours does. When everything is ship-shape, the company representative can then sign, as the document is final. If the employee has made changes, please do not sign it. It's not a final document until everyone has signed.
The rest of the story
In case you're still in a panic over a $2.6 million dollar mistake, take a deep breath. The court sided with the company and declared it a mistake. Employment attorney Eric B. Meyer summed it up like this:
And, fortunately, the court didn't have the stomach to enforce the agreement against the company either. Indeed, the company presented the court with "clear and convincing, uncontroverted evidence that the separation agreement contained a mistake, made by defendant when it drafted the document." Further, the former employee presented no evidence to support his subjective belief to the contrary. Indeed, the court concluded that the plaintiff had engaged in "inequitable conduct."
In other words, "Gotcha" doesn't play well in the Oakland Circuit Court in Michigan.
So, all was well, except for the court costs and stress, which I'm sure were not negligible. Next time, I'm sure, Trico Products Corporation will have more than one pair of eyeballs on every severance agreement.