You agreed to settle your employment dispute. Congratulations! Perhaps you and the employer agreed to the major terms verbally, by email, or in mediation. Perhaps your terms included money and other consideration.
But then you receive a formal settlement agreement from the employer's legal team. What do these terms mean? What's with all this legalese?
Introduction
Perhaps your agreement looks similar to this agreement. Maybe you settled an EEOC case, and your agreement looks like this EEOC agreement. Perhaps you're a Postal Employee, and your agreement looks like this USPS agreement.
This article will simplify the most common terms in settlement agreements typically drafted by defendant employers in employment disputes.
Video Explanation
First, you should watch this video.
Table of Contents
The Who, What, and When Clauses
The Main Terms
The Waiver and Release
But What if I Discover New Facts About my Case?
Voluntary Dismissal of Any Filed Claims
"No Admissions," No Guilt
Complete Agreement, Complete Understanding
The Enforcement Clause
If Disputes Arise
Special Enforcement for Federal Sector EEOC Cases
The Older Workers Clause
The Confidentiality Clause
The Severability Clause
Third-Party Payors
Takeaways
Let's dive into the typical settlement terms that are in most settlement agreements.
The Who, What, and When Clauses
The first parts of the agreement identify the parties to the agreement, the purpose of the agreement, and the specific case or dispute that is being resolved by the agreement:
This Settlement Agreement and Release of Claims (Agreement) is made and entered into by and between Mr. John Doe (Complainant) and the Federal Agency (Agency), collectively referred to as the Parties.
Additionally, the purpose or intent will usually be articulated:
Except as specifically set forth herein, the Parties wish to bring a complete, final, and irreversible end to any andall claims and/or disputes which arise or could have arisen from the above-captioned complaint, to reach a full and final settlement of all matters and claims, of any nature whatsoever, as of the date of the execution of this Agreement.
While these parts identify the dispute(s), the agreements usually have a waiver of all claims you may have, as discussed in the Waiver and Release section below.
The Main Terms
These are the main terms for which you agreed and negotiated. This part may fit under a heading called "consideration," "obligations," or other similar words.
In many cases, despite the length of the contract, the main terms may only be a few sentences or paragraphs, especially when the parties are settling for just money.
Other negotiated terms may be more robust, numerous, or creative. Be on the lookout for the main terms because these are the terms you really negotiated for. The language may look like this:
In consideration for the promises contained in this Agreement, Complainant and the USPS agree to the following:
MONETARY PAYMENT. A check for $150,000 will be made payable to Complainant and represents non-wage compensatory damages, and a check for $50,000 will be sent to Complainant's attorney as attorney’s fees (the “Payment”).
The Waiver and Release
The defendant will likely include a waiver of all claims or potential claims. This is called a global settlement. This means that this is a full settlement for claims and potential claims, except for the enforcement of the agreement, or claims that cannot be waived, such as federal worker's compensation claims.
You may see something that looks like this:
FULL AND FINAL RELEASE. After full and open discussion, Complainant hereby releases and forever discharges the USPS, its past and present respective officers, agents, and employees, from any and all claims, demands, suits, rights, damages, union grievances, charges, administrative remedies (including but not limited to Equal Employment Opportunity Commission or Merit Systems Protection Board filings), and causes of action of any and every kind, nature, and character, known and unknown, which Complainant may now have or has ever had against the USPS, or any of its officers, agents, and employees, which arose in whole or in part from Complainant’s employment relationship with the USPS, and which are based upon incidents, occurrences, or actions allegedly giving rise to the claims in this EEO proceeding (the “Claims”).
What a mouthful!
This waiver/release is important because you may have multiple cases or potential claims with the same defendant, and you'll be giving up those claims. This may be fine if you are knowingly making an informed decision, but sometimes a plaintiff employee may have other claims that they do not desire to relinquish, and therefore the language in the waiver will need to be negotiated to specifically exclude claims you do not wish to relinquish.
But be realistic. While this can successfully be negotiated from time to time depending on the strength and leverage of the case or cases, defendants are less likely to settle a case in a piecemeal fashion.
The good news is the waiver/release does not cover future claims that can be brought for future wrongdoings. Such a waiver would be illegal and unenforceable. If you are an employee, for example, and you are subjected to retaliation or discrimination after the settlement, then the agreement cannot restrict your future right to bring an action based on those new wrongful acts.
But What if I Discover New Facts About the Case I Settled and Waived?
The waiver will usually have a provision that specifies that you give up all claims based on facts that are known and "unknown." This is how the language may look:
It is understood by both parties that the facts in respect of which this agreement is made may subsequently prove to be other than or different from the facts now known by either of them or believed by either of them to be true, as set out in this agreement. Each of the parties accepts and assumes the risk of the facts proving to be so different, and each of the parties agrees that all the terms of this agreement shall be in all respects effective and not subject to termination or rescission by any such difference in facts.
Complainant expressly acknowledges that different or additional facts may be discovered aside from what Complainant knows or believes to be true with respect to the Claims. Complainant agrees that this Agreement will remain in effect in all aspects as a full and final release of the Claims released, notwithstanding any different or additional facts.
Absent fraud, misrepresentation, or other exceptions, the agreement will cover all facts (known or unknown) for the entire period prior to the settlement being signed and you will not be able to bring a claim upon discovering new facts. It's important to investigate and assess your claim prior to resolving it.
Waiver and Voluntary Dismissal of Any Filed Claims.
If you already have a claim filed in court or before an administrative body, such as the EEOC, then you'll usually agree to withdraw your complaint.
In consideration of the foregoing, Complainant hereby dismisses with prejudice the above-referenced EEO Complaint, and any and all MSPB appeals or grievances.
This does not prevent you from bringing an enforcement action, however, if the defendant breaches the agreement. Additionally, in certain circumstances you may be able to reinstate your case if a breach of the agreement occurs.
"No Admissions," No Guilt
This is a common term included in virtually every agreement. It's common for plaintiffs to want an apology or some kind of admission of wrongdoing. A plaintiff may also feel that the settlement means the other side is admitting to wrongdoing. This clause prevents the settlement agreement from being used as an admission of guilt or wrongdoing:
Neither the terms nor the Agreement itself shall be deemed or construed as an admission by the Agency of guilt or any wrongful acts whatsoever by or against Complaint or any other person, nor does any arrangement(s) made with Complainant constitute an acknowledgment of the validity of any claim, charge, liability or cause of action asserted, it being expressly understood that all such claims are in all respects denied by the Agency. This Agreement or any arrangement resulting from this Agreement cannot be cited as precedent or to seek the same or similar terms by any of the Parties in any future case.
A settlement is a compromise, not an admission of guilt. There can be many reasons the parties settle, including practical reasons such as the time, costs, and risks of litigation. So if you see this clause in your agreement, don't take it personally.
In rare circumstances, I've successfully negotiated for an apology. Such a term would have to be negotiated, however, and you may still see this "no admission" clause because a defendant would not want their apology to be interpreted as an admission of guilt. Again, this is standard and reasonable.
Complete Agreement, Complete Understanding
There will usually be a clause or clauses that say that this agreement is entered into voluntarily, that you made an informed decision, and that there are no other terms outside the four corners of the contract:
The parties acknowledge that each and every term of this Agreement is understood and entered into knowingly and voluntarily. Both parties acknowledge and represent that they have been provided with a reasonable amount of time to consider the terms set forth before signing it. Each party acknowledges that they fully participated in the negotiations leading up to this Agreement and that the resulting Agreement is not the product of coercion, duress, threat, intimidation, or other undue pressure of any kind. Each party has fully considered the terms of this Agreement, and understands that this is intended to create a legal, valid and enforceable agreement and voluntarily agrees to the terms and conditions of this Agreement prior to affixing signature.
This agreement embodies the entire agreement of the parties respecting the subject matter. There are no promises, terms, conditions, or obligations other than those contained in the agreement. This document supersedes all previous communications, representations, or agreements, either verbal or written, between the parties. By executing this agreement, the undersigned parties warrant and represent that they have not relied on any promises or representations not contained within this agreement.
This is inserted to prevent a party from coming around later to assert that other terms were omitted. It's important to review the main terms of the contract and compare those terms with the terms you negotiated to ensure they are included.
The Enforcement Clause
If Disputes Arise
Many agreements specify what law applies, how to resolve any disputes (such as arbitration), and the venue for disputes.
Special Enforcement for Federal Sector EEOC Cases
For EEOC cases, the settlement agreement is required by regulation to include an enforcement clause that specifies an informal mechanism for resolving any issues with any breaches or failure by the employer to follow through on the agreements. The term usually looks like this:
The parties agree that if any dispute arises over the implementation of the terms and conditions contained therein, Complainant may seek to enforce the terms and conditions of this Agreement pursuant to 29 C.F.R. §1614.504. If Complainant believes that the USPS has failed to comply with any terms of this Agreement, Complainant must notify the USPS’ EEO Director, in writing, of the alleged noncompliance, within 30 days of when Complainant knew or should have known of the noncompliance, as required by 29 C.F.R. §1614.504(a).
The signed agreement is filed with the EEOC to preserve your option for enforcement.
The enforcement clause is very important! You have 30 days from when you knew or should have known that the agency is not complying with the agreement to notify the point of contact listed in the agreement under this enforcement clause.
So you should keep an eye on this after your case is settled because, usually, your attorney's services end when the agreement is filed, and the attorney you hired to litigation and settle your case may not be responsible for keeping tabs on whether the agency is following through after the case is settled. That kind of work would normally require separate consideration for the lawyer, or the lawyer may decline to be involved at all in this process or may ask you to exhaust these informal options outlined in this enforcement clause by trying to work it out with the agency first per the regulation.
This informal mechanism for resolving possible breaches, however, usually results in the issues getting resolved without the need to incur further attorney fees or rehire a lawyer to deal with compliance issues, especially if the main terms are simple and straightforward, such as a lump sum payment.
It gets more complicated and involving where the agreement requires you and the agency's HR department or another point of contact to work together regarding more complicated terms, such as reinstatement with retroactive back pay and benefits, retroactive correction to the records, reassignment to another position, and other terms that require you to be interactive so you can determine whether the agency is complying, or whether the agency has breached the agreement by exceeding their reasonable time to pay, for example, or by failing to correct any deficiencies or inaction.
After you provide the notification of a breach, you may file an enforcement action anytime after 35 days have passed if there has been no final determination by the agency's EEO department as to whether a breach occurred.
If you receive a final agency decision regarding the breach, however, you must file an enforcement action within 30 days if you are dissatisfied with the decision or, if the agency finds a breach occurred, you can elect instead to reinstate your case (and this would be an exception a waiver of claims as discussed above) but then you'd have to return any money or relief you received. Ouch!
Needless to say, when you receive a final agency decision regarding the breach and feel the agreement is not fully implemented to your satisfaction, this is the part where you should promptly seek consultation with a lawyer regarding a formal enforcement action or other options.
The Older Workers Clause
For certain workers and age-related claims, you may have 21 days to consider the agreement, and 7 days to revoke the agreement after signing it. This clause may contain some of the following language required by law:
As to any claim of discrimination based on age, 40 years or older, the Parties agree that this Agreement complies with the requirements of the Age Discrimination in Employment Act and the Older Workers Benefit Protection Act.
In particular, The Complainant is hereby advised to consult with an attorney before signing and delivering this Agreement ,to read the entire Agreement and to seek clarification of any provision(s) she does not fully understand before signing this Agreement
The Complainant is advised that she has twenty-one (21) days from the date of receipt of this Agreement to consider its terms.
The Complainant is advised that she has seven (7) days from the date that she signed this Agreement to revoke this Agreement.
The Confidentiality Clause
Employers often overlook adding a confidentiality clause, which means that you may discuss the case and settlement with third parties if desired and allowed by law. A confidentiality term may look like this:
Complainant agrees to keep confidential and not to publicize the terms of this Agreement. Complainant shall not disclose this Agreement or the terms thereof, unless: (a) specifically authorized by law; (b) lawfully ordered by a court, legislative, or administrative body; (c) to legal advisors or financial advisors with a need to know, provided Complainant informs said person(s) of its confidentiality, or (c) such disclosure is made to a VA employee whose responsibilities and duties include enforcing the terms of this Agreement. Said confidentiality should be read to be consistent with and not supersede or otherwise alter the employee obligations, rights, or liabilities created by existing statute or Executive Order relating to: (a) classified information; (b) communications to Congress; (c) the reporting to an Inspector General of a violation of any law, rule, regulation, mismanagement, a gross waste of funds, an abuse of authority, or a substantial and specific danger to public health or safety; or (d) any other whistleblower protection.
The Agency and the Complainant agree that the facts of this Agreement, and all terms contained in it, shall be kept confidential and pledge not to release any of the terms contained herein to any person except to the extent necessary to effectuate its terms, or pursuant to any legitimate court order or requirement imposed by law or to their accountants or advisers.
The confidentiality clause does not prevent you from disclosing the agreement to an attorney, an accountant, or in an enforcement action, or to others with a need to know.
The Severability Clause
This clause merely means that if any clause is found to be unenforceable, it will not tank the entire settlement:
Severability. The rights and obligations under each of the provisions of this Agreement shall be separate and independent of the rights and obligations of the parties under any other provision of this Agreement. In the event that any provision or portion of this Agreement shall be determined to be unlawful or unenforceable, said provision or portion shall be severed from this Agreement, leaving the remaining provisions and portions thereof intact and enforceable to the extent that mutual consideration remains.
There are exceptions to this. For example, as pointed out in our recent victories section of our website, we discuss the case of Gia M. vs. Dept. of Army, where we successfully argued on appeal to get an entire agreement set aside based on the main term being unenforceable.
Third-Party Payors
Oftentimes, there may be insurance or other third parties involved. The defendant has to make reasonable efforts to make sure these third-party payers are provided everything they need to comply with your agreement.
For example, in federal sector EEOC cases, payments are usually paid by third-party entities in the federal such as the Defense Finance Accounting system (DFAS):
The Agency agrees to pay $150,000 to Complainant.The Agency agrees to use reasonableefforts to ensure the necessary paperwork is submitted to DFAS for paymentin a timely manner; however, the Parties understand that DFAS is a separateagency and is not a party to this agreement and the Agency cannot dictatewhen said payment will be made.
Notwithstanding the defendant's attempt to pass the buck to a third party, you should begin the enforcement process if your agreement is not being complied with.
Takeaways
The resolution of a case may be a compromise, but it is often a victory. You've saved time, costs, and risks from engaging in further litigation.
Settlement agreements can be intimidating and confusing for non-lawyers because of the boilerplate, templated legalese inserted into the formal agreement. Luckily, these terms are generally the same and commonly found in most agreements in this context.
You should consult with an attorney, even if it's just to have the attorney review and answer questions about your agreement. Hopefully, this article has equipped you with the basics so that you can understand what you're signing.
To see how the EEOC issues decisions concerning settlement controversies, you should visit the EEOC's Digest, and click on the "Settlement Agreement" section of the quarterly publications. Here are a few links to get you started