Severance Contract Never Paid

Yes, you can sue them

Dear Paul H.

With the facts you state, yes, you have a breach of contract claim. What we call "pre-judgment" interest is a bit more problematic because, you must show lack of good faith on the part of the breacher. Currently, I believe statutory interest is 8% per annum.

I suggest that an attorney should look at the severance agreement to make sure that it did not have a loophole, but your assessment that the agreement can not be verbally modified is most usually the case.

Good luck.

Neil Rubin

This post is not meant to: 1) contain my signature; 2) contain legal advice; 3) create an attorney/client relationship; or 4) guarantee confidentiality.

posted by Neil Rubin  |  May 22, 2008 10:44 AM [EST]

You can file for breach of contract and collect interest

It sounds like you have a valid contract. Once you have a valid contract, a fundamental truth of contract law is that neither party can rescind it without a material breach by the other. Since it appears that you kept your side of the bargain, the company has no grounds for rescission. The requirement that any change to the contract must be in writing reinforces this conclusion.

By failing to pay the agreed upon severance, the company has breached the agreement. You can therefore sue for damages for breach of contract, which would be the unpaid severance. If the severance amount is less than $3,000, bring suit in the small claims division of the municipal court covering your employer. If the claim is between $3K and $5K, bring the claim in the general division of the same municipal court. If the claim is over $15K, bring the claim in your county court of common pleas.

Interest on the unpaid severance is set by the Ohio Tax Commissioner. It is based on short term Treasury notes and has been in the 6% to 8% range in the last couple of years. By law, the rate is to be posted by the clerk of courts, who should be able to tell you what it is.

If you decide to pursue a claim on your own, the Ohio Legal Services Foundation just added a nice section to their website to help with this. It is located at http://www.ohiolegalservices.org/ in the For the Public section.

Best regards,

Neil Klingshirn.

posted by Neil Klingshirn  |  May 22, 2008 10:15 AM [EST]