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The Employer Handbook Blog
The Most Expensive Severance Mistake You’ll Read About This Year
What happens when a severance agreement promises $680,000 per month for sixteen months—but the employer insists they meant $680,000 total? You get a contract dispute with eight figures at stake and a costly reminder that a few words can swing a deal from routine to ruinous.
TL;DR: The First Circuit just revived a dispute over a severance agreement that, on its face, required $10.8 million in payments. The employer said it was a scrivener’s error. The employee said: read the contract. The court said: it’s ambiguous—so back to the trial court it goes.
👉 Read the opinion here (No. 24-1350)
“$680,000 per month for sixteen months”: What the agreement said
After separating from a senior executive, the company offered a severance package. The written agreement stated:
“monthly severance payments … in the amount of $680,000 for sixteen (16) months.”
The company insisted this was a typo: the total severance was supposed to be $680,000, not $680,000 every month. But the executive refused to amend it. So the company sued for reformation.
The employer’s mistake(s): Poor drafting, worse assumptions
The trial court found that a mistake had occurred—but denied reformation. Under Massachusetts law, courts won’t rewrite contracts based on one party’s intent alone. To reform a contract, there must be proof of a mutual agreement to different terms before signing. The company didn’t have that.
On appeal, the First Circuit didn’t reach the reformation question. It found the clause ambiguous: the phrase “monthly severance payments … in the amount of $680,000 for sixteen months” could reasonably mean:
- $680,000 per month (totaling $10.8 million), or
- $680,000 total, paid out over sixteen months.
Because both readings were plausible, the contract’s meaning couldn’t be resolved as a matter of law. The district court should have considered extrinsic evidence—emails, discussions, or draft language—before deciding who was right.
The case now returns to the trial court for further proceedings. If factual disputes remain, a jury could ultimately decide whether this was a multimillion-dollar mistake or a binding obligation.
Employer Takeaways
- “Scrivener’s error” isn’t a get-out-of-contract-free card.
Courts won’t rescue sloppy drafting unless there’s solid evidence that both parties agreed to something else. Absent that, you may be stuck with the plain—or ambiguous—language. - Watch your modifiers.
“Monthly payments in the amount of…” sounds innocuous—until it’s not. Be specific about whether dollar figures refer to installments or totals. - Use plain language and a second set of eyes.
If multiple reviewers missed this error, that’s the problem. For large severance payouts, draft in clear terms, specify whether it’s a lump sum or installments, and make sure the total amount is unmistakable. If paying over time, reference the total explicitly and consider using payroll to document it.
The Bottom Line
One unclear sentence nearly turned a routine separation into an eight-figure payout. When your severance clause leaves room for interpretation, it also leaves room for litigation.