A recent Michigan Court of Appeals opinion highlights the importance of clearly and precisely drafting separation agreements.
Meaning of “Disparagement”
In Sohal v. Mich. State Univ. Bd. of Trs. & Davoren Chick M.D., (May 17, 2011) the parties executed a Resignation Agreement and Release relating to Plaintiff’s agreement to voluntarily resign from MSU’s medical residency program. Specifically, Plaintiff agreed to resign from his position and the parties further agreed that they would not “knowingly disparage” the other.
After signing the Resignation Agreement plaintiff filed suit alleging that since leaving MSU, he “attempted on numerous occasions to associate with another residency program . . . . In each case, he was initially accepted into the program but as soon as the program contact[ed] Defendants . . . , [he] was denied a resident position based on information conveyed by the Defendants.”
There were a number of legal issues involved in Plaintiff’s suit, but for purposes of this post, the parties disagreed as to what a key term – “disparage” – meant.
Defendants relied on a legal definition of the term “disparagement:” “Disparagement” is “a false and injurious statement that discredits or detracts from the reputation of another’s property, product, or business.” Black’s Law Dictionary (7th ed. 1999).
Plaintiff argued for a different definition of “disparagement:” “The American Heritage Dictionary states that ‘disparagement’ is ‘(1) To speak of in a slighting or disrespectful way; belittle. (2) To reduce esteem or rank.”
The trial court accepted Plaintiff’s definition. On appeal, the Court agreed and further concluded that the term “disparage” in a non-disparagement clause of a resignation agreement was unambiguous and should be given its plain, ordinary dictionary meaning – not the Black’s Law Dictionary. Because it was unambiguous, extrinsic evidence (evidence outside of the four corners of the agreement) could not be considered to determine the meaning of the term.
The take away
Unfortunately, having reviewed a number of separation agreements in the recent past, both employers and employees would greatly benefit from re-reviewing with experienced legal counsel their separation agreements (or any employment agreements for that matter). Such a review could eliminate or at least reduce the risks that a party will later successfully claim the agreement’s ambiguities preclude enforcement or requires a court to decide what the contract means.
Further, this review will also benefit employers in overlooking any of the numerous legal obligations that an employer must satisfy when an employee is terminated. The last thing an employer wants to discover is that a problem employment issue believed to have been resolved is now resurrected because of mistake in drafting.