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Typo might have cost 34-times annual pay in severance!

A typo in a severance agreement might have cost one employer, big. Fortunately the error was so large, the Michigan Court of Appeals set aside the agreement as an obvious mistake.

The company intended to offer the plaintiff severance in the total amount of $80,805.97, to be paid over 34 weeks, but when the HR professional wrote up the agreement, she accidentally wrote in $80,805.97 to be paid weekly for 34 weeks. It as an obvious error. The employee earned approximately $123,000 a year. The employee said nothing, signed then sued when the company refused to pay him $2.7-million plus, instead of $80,805.97.

The Michigan Court of Appeals noted that the law considers mistakes in contracts different depending on if they are a “mutual” mistake (where both parties misunderstood what they signed) or a “unilateral” mistake (where only one misunderstood). Here, the employee claimed he thought he was really going to get the full $2.7-million, so this was a case of unilateral mistake; it was only the company claiming a misunderstanding.

The law required the company to show, in the event of a unilateral mistake, that not only its HR professional misunderstood what she signed but that the employee knew it was a mistake. The HR professional submitted an affidavit establishing she had made a mistake, but the employee denied that he thought there’d been a mistake. The employee claimed that he thought at the time he really deserved $2.7-million in severance; he submitted an affidavit claiming he thought $2.7-million in severance was “fair based on my 28 years of service.” The court noted that he submitted no evidence to suggest any other employee was paid such an amount or had been. Perhaps most importantly it was uncontested that, whatever the severance agreement said the weekly amount would be, the HR professional had told the employee it would be a “continuation of his regular salary,” which a 34x increase certainly would not have been.

Having decided the $2.7-million number was a mistake, the court then, instead of setting aside the agreement in its entirety, affirmed its being rewritten to be a total of $80,805.97 paid out over 34 weeks.

Source: COA 331283 FRANCOIS EL-HAYEK V TRICO PRODUCTS CORPORATION Opinion – Per Curiam – Unpublished 06/27/2017