Making Sneaky Changes to a Contract Before Signing It

In this post on his Connecticut Employment Law Blog, Daniel Schwartz tells an odd story, one that he first saw in Wolters Kluwer’s Employment Law Daily (here).

What Happened

An employee of Chanel’s fashion division was terminated. As a condition to being paid severance, she was asked to sign a “separation and release agreement” that, among other things, stated that the employee released the company from all claims, “including, but not limited to, claims of discrimination and harassment” and a bunch of other specified kinds of claims.

The employee signed the release agreement, but before doing so she re-typed the page containing the release language, using the same font and margins but changing “including” to read “excluding.” She didn’t discuss that change with the employer, though the parties dispute whether she used a yellow sticky note to flag it. Chanel claimed that it didn’t notice the change; it paid the employee $14,940 in severance.

Five months later, the employee filed a discrimination suit with a federal district court in New York, and Chanel moved to dismiss based on the release agreement. The court noted that it had to consider whether the waiver satisfied the relevant standards. It went on to hold that by changing the word “including” to “excluding,” the employee had “manifested an intent to preserve her right to file a discrimination claim.” Thus, she did not knowingly, willfully, and voluntarily waive her right to file a discrimination claim, regardless of whether the agreement, in either the unaltered or altered form, represented the agreement of the parties. Accordingly, Chanel’s motion was denied. (Go here for a copy of the opinion.)

My Thoughts

One hopes that this holding is of limited relevance, in that it applies to a motion to dismiss. I’d like to think that if it were to consider the employee’s case on its merits, the court would take into account the employee’s apparent subterfuge.

I say that because it’s not realistic to expect that parties to a contract are in a position to scrutinize every page of a signed contract looking for signs of deceit. A contract party shouldn’t be allowed to reap the fruits of trickery.

I particularly liked, as a matter of contract language, the idea of “excluding, but  not limited to.” In other words, I’m releasing you from all claims, excepts this stuff, and who knows what else! Changing “including” to “excluding” renders the release language nonsensical.

Posted in Process | 17 Comments

  • schwarda

    Notably, the motion to dismiss was changed midstream to a motion for summary judgment perhaps giving the case slightly more relevance. But it still seems to be an outlier decision.

  • http://www.lawnotes.com D. C. Toedt

    That’s why I like to include a redlining representation in every contract’s general provisions. In this case, such a rep would have let the employer file a motion for summary judgment — and maybe a counterclaim — on grounds of fraud. (Self-cite: http://www.oncontracts.com/general-provisions/#sec-35 .)

    • Chris Lemens

      DC:
      Isn’t that needed only in the move from the agreed-in-form version to the signed version? One problem I have with your representation is that people incompetently use Microsoft Word’s track changes feature. For example, they often click the “reject” button, which means that a change is made to the document in a way that is not called to the other side’s attention. So I have always been reluctant to include your kind of representation in a form agreement. But maybe limiting it to changes between the last communication of the form of the agreement (where the recipient could run their own redline) and the signature of the agreement (where the recipient can’t) would limit the problem. What do you think?
      Chris

      • http://www.lawnotes.com D. C. Toedt

        Chris, you make a good point about incompetent use of Word’s track-change feature. I still like to have the redlining rep, although that doesn’t mean I won’t run my own document comparison (and I frequently do just that).

  • Enertse

    Subterfuge is certainly a reasonable inference: why go to the trouble of re-typing the page only to change two letters?

  • http://www.licensinghandbook.com jigordon

    Putting aside the moral/ethical implications of this for a moment, I have no problem with what this former employee did.

    When you present a contract to someone else, and you get it back signed – the obligation is on YOU to either read it again before signing (and/or to ask the other side if they changed the document in any way before THEY signed). Given that this was a release drafted by Chanel, they were relying on Style to clue them into the fact that it APPEARED to be the document they sent to this former employee.

    Shame on them for not reading what they were signing.

    • http://www.adamsdrafting.com/ Ken Adams

      Yikes! How can you put aside the ethical or moral implications? And I don’t see how one could function if you had to check every signed contract to make sure someone hadn’t surreptitiously changed a word.

      • http://www.licensinghandbook.com jigordon

        For purposes of discussion, I set them aside because they cloud the other issues.

        But yes, you should re-read everything you are about to sign unless you completely trust the person you’re getting the document from.

        In addition, I think it’s important to note here that these two contracting parties are an interesting subset of the contractual universe. They’re adversaries. They’re not looking for mutual benefit, not really (at least, not in the traditional sense).

        Chanel is bribing a former employer to not sue. Granted, the former employee is accepting the bribe (and here come more ethical implications, for those who can’t avoid them – as I think there’s an argument to be made that this type of agreement should actually be illegal). But all the more reason that you should read before you sign.

        • http://www.adamsdrafting.com/ Ken Adams

          Once your contract volume exceeds a certain level, reading every word become impractical.

          • http://www.licensinghandbook.com jigordon

            Not to sound snarky, but would that be your defense? “I had too much to read, your honor?”

            When I was doing contracts on a daily basis, I was closing nearly 400 deals/year. Which required several reads of every contract. The only way to do it was to control the document – password protecting Track Changes so that only I could accept/reject any modifications.

            But when the other side wanted document control (not very frequently, folks were pretty trusting or lazy), I would do a compare docs check and validate every modification.

            I just don’t see how you can argue against your own diligence in what you sign.

          • http://www.adamsdrafting.com/ Ken Adams

            If you’re talking about electronic versions, sure. But this case involved a printed document.

          • FreeMindsThinkAlike

            Yet, Users of online services are expected to read all the terms of service and the admins of these online services use the advantages given to them in those terms to the full extent to which they can. Guess the everyday person is not as important as a lawyer or company, who you seem to think should be excused for not reading legal documents before signing or agreeing

      • http://www.licensinghandbook.com jigordon

        Oh, and for the record, changing a contract without telling the other side (or making the change obvious) isn’t something I agree with or condone.

        But at the same time, unless I’m ABSOLUTELY sure that the other side didn’t change the document I’m working on, I re-read key negotiated provisions before signature. As the saying goes: trust, but verify. Or, for legal Latin aficionados, caveat signator.

  • some jd

    It sounds like the former employee went out of her way to make the change difficult to spot. Given the confabulatory way most people read (as opposed to professional editors) even a line by line review of the document could have missed the change. More evidence of fraud.

  • http://www.adamsdrafting.com/ Ken Adams

    I think that “not being courteous” is way too generous an assessment.

  • formerempoyee

    when large firms try to protect themselves from discriminatory treatment of employees by trying to buy their silence at termination, I agree that it only sets up an adversarial relationship. Chanel and other large companies have a long history of protecting executives rather than employees. Im sure this case has greater depth.

  • lenny

    p { margin-bottom: 0.25cm; line-height: 120%; }

    as an employee I
    will be held to the terms of a contract I sign, it doesn’t matter
    if it is 100 pages long and full of obscure legal terminology I will
    be held to its terms.

    Employers
    deliberately draft contracts in such a way as to be impenetrable to
    the average worker so they can put whatever nasty vindictive clauses
    that they want to in. to give an example when I worked at a car parts
    store one of the terms was that the company reserved the right to
    move me to any of their outlets across the country with a weeks
    notice, I was paid minimum wage!

    Had they enacted the
    term and had I complained I would simply be told that’s what you
    signed up to, you should have read the terms properly.

    Why is it any
    different when the boot is on the other foot? Why is it reasonable to
    expect the kid at Mc Donald’s to go through each clause with a fine
    toothed comb when it is apparently not reasonable to expect the same
    scrutiny from the legal department of such a company. Many contracts
    are legal instruments designed to squeeze the most from the worker
    and give the least in return, why is it so wrong for two to play at
    that game?