What Does It Mean To Retire - a/k/a The Dangers Of Imprecise Contracts

Defining, or redefining, “retirement” is not just a topic of commercials for annuities or RVs. It is a question so meaningful that the Court of Appeals has recently issued an opinion in which a central issue was the definition of the word.

The ubiquitous Google provides a good starting point for an analysis. A Google search for definitions of the meaning of retirement quickly yielded 14 different results. These definitions share some common themes, but they also have some very distinct differences.

This illustrates the problem of using, but not defining, the word “retirement” as part of a contract. As with any legal issue, where a contract leaves a term undefined there is an opening for a dispute that may need the intervention of the courts for resolution.

In an unpublished opinion in the matter of Nardi v. Satellite Servs., Inc., the Court of Appeals took on the issue of defining retirement. As a matter of background, the plaintiff was a former employee of the defendant. As part of an employment agreement, plaintiff was entitled to certain rights if his employment ended by virtue of “retirement.” The plaintiff left the defendant and went to work for another company, he alleged that he had “retired” and was entitled to certain benefits as defined by the contract. The defendants disagreed, alleging that “retirement” meant that the plaintiff was required to stop working in any occupation. In this matter, the Court of Appeals agreed with the plaintiff:

Resolution of this issue turns on the meaning of the word “retirement,” which is not defined in the contract. Defendants argue that “retirement” means that plaintiff was required to stop working in any occupation. However, the word “retirement” means “removal or withdrawal from an office or active service.” Random House Webster’s College Dictionary (1997). As noted by the trial court, however, today Americans often continue working in some capacity after they have begun drawing retirement benefits from a previous employer. See Derr v Murphy Motor Freight Lines, 452 Mich 375, 391 n 6 (Mallett, J.); 550 NW2d 759, amended 453 Mich 1204 (1996). Therefore, the modern understanding of the word “retirement” is an employee’s withdrawal from a particular “office” to collect vested benefits that have accrued to the employee, usually from years of faithful service. The contract’s other provisions support this definition of the word “retirement.”

Keep in mind that this is an unpublished opinion, so it is not binding as a matter of legal precedent, but it is informative on this issue. Moreover, it illustrates the problem that can occur when a contract does not expressly define a key term.

In the employment arena, or with regard to succession planning (such as buy-sell agreements and shareholder agreements), I suggest you take the opportunity to review your agreements. Is the word “retirement” used without definition? Are other key terms undefined?

What other practical advice can you take away? Spending the time with a qualified attorney to carefully draft significant documents may add to the up-front expense of a project. But the additional cost of litigation that can be the direct result from a dispute based on an imprecise contract will far outweigh the benefits of any slight cost savings from trying to cut corners when creating the agreements that will affect you and your business for years to come.

Is Your Company Prepared For The Threat Of Workplace Violence?

The terribly tragic recent workplace shooting in Troy, Michigan and the horrific massacre at Virginia Tech are dramatic examples of the very real danger of workplace violence. For employers, consider yourselves warned.

In addition to the moral duty to provide a safe work environment, companies also must face the reality of the potential legal and financial damages that can result from failing to take appropriate protective measures.

Although the general rule is that an employer is not liable for the acts of an employee that are outside the scope of employment, a company may still be liable under other theories, such as negligent hiring, supervision or retention. When the liability is related to workplace violence, the potential damages can be enormous and can threaten both the existence of the company and the livelihood of all the people who depend on it.

While there is no way to provide absolute protection against an incident of workplace violence, there are many important steps that your company should take in order to protect fellow employees, the company and its owners.

Take a moment and review your company’s readiness for workplace violence. In doing so, consider the following key areas:

• Are job applicants, including their employment and any criminal history, adequately screened?
• Do you have a clearly defined “no tolerance policy” towards violence and weapons?
• Do your employees know the warning signs of potential violence?
• Does your HR department know how to investigate alleged incidents of violence?
• Have your employees been provided with procedures to follow in the event of a violent incident?
• Does your HR department have a plan for the safest way to handle the termination of a potential hostile or violent employee?
• Are procedures in place to maintain building security?
• Do you have procedures to deal with a bomb threat?

These issues and more can all be addressed in policies for your employees and for management. Regardless of the size of your company, a simple and clearly defined set of workplace violence policies can be an important part of your company’s risk management program.

It is too late to plead ignorance to the threat of workplace violence, and once an incident occurs it is too late to create the policies that could have prevented the incident. Protect your company and its employees by planning ahead. As always, contact me if you have questions or if you want to discuss how these important issues.