Be Careful When You Negotiate Severance Agreements!

In Creative Consumer Concepts, Inc. v. Kreisler, the Tenth Circuit—the federal court having jurisdiction over Utah—discussed several evidentiary matters arising out of a severance agreement gone bad. Creative Consumer Concepts, Inc., terminated the employment of one of its vice presidents in 2004. In terminating the relationship, the company offered the vice president a severance agreement. The severance agreement proposed by the company included a provision that waived all claims the vice president had against the company. Unbeknownst to the company, before signing the document, the vice president had changed the language of the release to include a release of any company claims against the vice president. Of course, the former vice president did not disclose the change, and the company official signing the document did not carefully review the agreement when she signed it on behalf of the company.

After the company discovered that the former vice president had embezzled almost a million dollars, it discovered the change in the language but nevertheless brought suit against the former vice president. The former vice president attempted to avoid liability by claiming the waiver was valid. The Tenth Circuit upheld several evidentiary rulings of the trial court that allowed the company to proceed and prevail against the vice president.

This case illustrates the importance of carefully reviewing and negotiating any severance agreements.