Does Your Severance Agreement Have A Gotcha? Penn State Sues Former President For Hiding Sexual Molestation Charges

I see this kind of language in proposed severance agreements all the time. Something to the effect of, "Employee represents that he is unaware of any violations of any law, statute, ordinance or government regulation by Employer, its agents, employees, officers or directors." There are all kinds of problems with this seemingly benign language, as Penn State's former President may be about to find out.

You see, Penn State is countersuing Graham Spanier, who sued them for breach of his severance contract. Their claim is that Spanier knew of the former football coach's sexual misconduct and didn't disclose it. They say he had a duty to disclose. And if he had language in his severance agreement representing he didn't know of any legal violations by any of their employees, they may be right.

If he's in breach of his severance agreement, they may not have to pay the severance, or may get to demand he repay all or part of it.

The more common problem I see with language like this is that the severance agreement was presented after the employee raised issues of discrimination or blew the whistle on some illegal activity. My cure for that is to add to the clause, "that he hasn't already disclosed." That way, if he's disclosed race discrimination, unpaid wages or any other issues, he isn't lying that there were no such issues.

However, if you have any such language in your agreement, you'd better make sure you have disclosed every single legal violation you know of. Otherwise, you could be in trouble.

I'm not sure if Spanier's contract has this language. They seem to be alleging that he defrauded them by not disclosing material information, and that had they known he covered up Sandusky's misdeeds, they wouldn't have entered into the agreement. That's a whole 'nuther kettle of fish. Fraud is tough to prove. If they're trying to negate his contract based on fraud or some duty to disclose, I think they'll have a difficult time.

This case is a cautionary tale for anyone thinking about signing a severance agreement. Read it carefully and make sure you comply. If you can't, or it says something that isn't true, ask that it be changed before you sign.