Before You Make The Retirement Or Severance Deal, Make Sure You Really Want The Deal

| William A. Schreiner, Jr.

"University Sign"

Sometimes, the things that seem most straightforward and widely understood are the very things people tend to forget – or misunderstand – the most.  These things that “go without saying” often actually need to be said. 

Take the case of Professor Andrew Ortony of Northwestern University.  Professor Ortony – who, up until recently, taught computer science, psychology and education– was recently taught (or reminded) that his retirement agreement – which was written in clear language, fairly bargained-for by both sides, and entered into without any evidence of deception – would be enforced exactly as written, meaning the professor would be considered retired on the day the contract said he would. 

Seems straightforward.  But because he decided he didn’t want to retire on that day, Professor Ortony tried to get out of the contract, and the Fifth Circuit Court of Appeals held last week – unsurprisingly – that he couldn’t.  So, the first straightforward lesson from Professor Ortony’s case is this: if you make an employment agreement with your employer (or, if you’re an employer, and you make an employment agreement with an executive), make sure the agreement is something you want – or at least something you’re willing to live up to.  

The case began this way.  In 2007, Professor Ortony asked for a year off so he could teach as a visiting professor at another university.  His boss, the dean, made a counteroffer: if Ortony agreed to retire in five years (2012), he could have two years of that five as paid time off, and he’d only have to teach for the other three.  The two discussed the deal, and ultimately Professor Ortony signed a letter agreement that quite clearly said he would retire in 2012, and before then he’d have two paid years off. 

In 2011, the dean reminded Professor Ortony that he was coming up on his retirement date.  Professor Ortony protested that he had never agreed to retire in 2012 – the bargain, he said, only gave him the option to retire then if he chose to do so. Ultimately, Ortony sued Northwestern, alleging the university violated the Age Discrimination in Employment Act (which we’ve written about several times).  The trial court granted the university judgment on the pleadings – a very early dismissal of Ortony’s case – on the ground that the professor’s case was untimely: he needed to file it within 300 days of learning he had been discriminated against, and that time began to run not when Ortony was reminded he was due to retire, but rather when he entered the agreement that set a clear retirement date and allegedly was the discriminatory act.  Because Ortony’s 300 days began running in 2007 (when he learned he’d have to retire), his 2011 suit was far too late. 

Ortony appealed, and the Fifth Circuit not only affirmed the trial court’s holding, but reviewed Ortony’s other arguments and rejected all of them.  Ortony argued that a deceased university provost was present when he made the deal with the dean in 2007, and would have supported his construction that the contract gave him the option to retire but didn’t mandate it – but that is inadmissible, the court held, because the university couldn’t contest the dead provost’s testimony.  The court also rejected Ortony’s argument that his assumptions about the contract should be considered in interpreting the contract: “judges understand written agreements to mean what reasonable people understand them to mean.   The potential exception for parol [outside of the contract] evidence is limited to understandings that the contracting parties exchanged during negotiations,” and the contract would have clarified those understandings.  Ortony also contended that the university discriminates by offering retirement packages to older professors but not younger ones – and the court knocked that out: “Retirement packages…are a benefit of age because they are the sort of offer one would pay to receive, rather than pay to avoid.” 

So, in short, Professor Ortony agreed to retire, then he changed his mind.  And that brings us to our second shouldn’t-have-to-be-said lesson from his case: the time to change your mind about an executive arrangement, whether you’re the executive or the employer, is before you sign on to a clear, bargained-for contract.  It’s very hard to change your mind later, as Professor Ortony has now learned.