A question of ethics

Widener and Mozumder were employed as geophysicists by Arco Oil and Gas Co On March 31, 1986, both employees were notified by letter that they were being placed on "surplus" status—which meant that if they were not placed in another position in the company during the next sixty days, their employment would be terminated. On termination, they would become eligible for benefits, including lump-sum allowance payments, under either of two company termination and retirement programs. To be eligible for payments under either plan, the employees were required to sign release documents. The employees were given informational packets outlining each plan in detail and advising the employees to contact the company's benefits specialist, Barbara Hough, about which plan they wished to elect. The employees went to Hough's office and signed various documents, among which was a general release that read, in part: "I release and discharge the Company . . . from all claims, liabilities, demands, and causes of action known or unknown, fixed or contingent, which I may have or claim to have against the Company as a result of this termination and do hereby covenant not to file a lawsuit to assert such claims." After signing the release, each employee received a lump-sum payment. When the employees later sued Arco, alleging wrongful discharge on the basis of age discrimination, Arco claimed that the release document signed by the employees released it from any liability. The employees contended that they had not voluntarily and knowingly given the releases. The release document was confusing because it was not entitled a release, and Hough had never informed them of the significance of what they were signing. She only told them that they had to sign the various documents before they left. The court held that the releases were valid and granted Arco's motion for summary judgment.

A QUESTION OF ETHICS
1. As a general rule, the law presumes that persons signing contracts or any other documents know what they are signing. In the case of Widener and Mozumder, both men were obviously well educated and capable of understanding what they were signing. According to the court, "Plaintiffs' allegations that they did not know that they were signing the releases is without merit. The release form is clear and unambiguous. The language of the release is contained on the front side of the document, the term general release is clearly set forth, and the size of the lettering is identical throughout the document. In fact, the language of the release is in bold type."
2. Some exceptions are made to the rule that people are presumed to know the contents of the documents they sign—particularly when the signer does not comprehend the language in which the document is written or when one party to the contract has vastly superior bargaining power over the other, as is the case in an adhesion contract—but these exceptions are rare. In the court's opinion, the release forms signed by Widener and Mozumder were clearly indicated as such, and even a person less educated than Widener or Mozumder could determine the meaning of the provisions of the document.
3. In answering this question, the first factor you will want to consider concerns the implications of assenting to a contract. By signing a contract, a party indicates assent to that contract and its terms. If the courts were to allow people to avoid contractual obligations by claiming that they did not consent to them (because they did not understand what they were signing, etc.), it would dramatically reduce the predictability that contracts will be enforced. As a result, people would be more reluctant to enter into contracts with others. The second factor has to do with fraud and misrepresentation. In the case of Widener and Mozumder, no fraud or misrepresentation occurred, at least in the eyes of the court. According to the court, the form that the men signed was clearly and conspicuously a release from liability, and anyone who could read the English language would be held to have knowledge of this fact.
4. Increasingly in the last decade or so, firms have offered early retirement options to employees as a compromise solution to an ethical dilemma. On the hand, to increase efficiency and profit margins, firms often need to consolidate operations or weed out un-necessary personnel. On the other hand, firms have both a duty to deal fairly with employees who have proved their loyalty and competence and a need to protect themselves from potential liability for wrongful discharge, under both statutory and common law. Early retirement and benefits options offer an inducement to employees to voluntarily leave their employment, therefore freeing the employer from liability for wrongful discharge, as well as easing the firm's "conscience" in respect to its duty to employees. Requiring the departing employees sign a release is simply added "insurance" against liability.
Many employees close to retirement have welcomed the early retirement/benefits option. But some employees contend that the necessity of choosing between early retirement/benefits or potential at-will discharge is unfair. The tradeoff here is clear: some employee rights—particularly the right to continue working—are sacrificed for the sake of promoting economic efficiency and commerce. Society at large seems to have deemed this an acceptable tradeoff.