By Audrey Wood,2014-06-03 14:56
22 views 0



    March 19-21, 2003

    Jill Bodensteiner

    University of Notre Dame

    Notre Dame, IN

    Legal Issues in Settlement of Employment Claims

    I. Critical Components of an Agreement

    A. Adequate Consideration

    1. Above and beyond what the employee is already entitled to.

2. Non-monetary consideration, e.g., computer and computer training;

    relocation expenses; outplacement; tickets; use of e-mail address; tuition

    benefit for employee or family members; neutral reference or letter of

    recommendation; waiver of money or property due/owing from employee to


    Make sure parties are aware of tax implications of non-monetary

    consideration, particularly tuition benefits.

    ;General rule: A tuition reduction for education below the graduate

    level is tax free if provided as part of a qualified plan by an

    educational institution to a current employee, a former employee

    who retired or left on disability, a widow or widower of such an

    employee, or a dependent child or spouse of any of the above.

3. Continued employee benefits.

    Do your benefit contracts have Aactively at work@ clauses that might

    prohibit such arrangements? Consider placing employee on Apaid leave@ if

    circumstances allow.

    4. If payment is to be made by certain date, make sure you are not promising to

    pay during the consideration or revocation period mandated by the Older

    Workers= Benefit Protection Act (if employee is waiving age claims).

    B. Confidentiality

    National Association of College and University Attorneys


    1. Confidentiality of both the terms of the agreement and underlying facts. A

    good plaintiff=s attorney will want reciprocal language.

    ;Even if there is no reciprocal language, employers should be very cautious

    about disclosing the information or it will be difficult to prove breach by


    2. The question of confidentiality should be discussed early; settlements have

    potential to fall apart when this is introduced for the first time after other

    material terms are agreed upon.

    3. Include non-disparagement of employer in addition to confidentiality?

4. Remedy for breach should include liquidated damages (e.g., $1000 per

    disclosure) and injunctive relief, attorney=s fees and costs.

    ;Note: Be careful demanding return of full consideration as remedy for

    breach; the employee might have an argument that the entire agreement is

    void for lack of consideration.

    ;EEOC comment on such provisions (in its final regulation on tender-back):

    AIn addition, while the Commission takes no position on non-ADEA

    provisions such as non-disparagement and confidentiality clauses, it notes

    that settlement agreements sometimes contain such clauses along with

    liquidated damages provisions for breach. A reasonable employee must be

    able to determine that any liquidated damages provisions for breach of

    non-ADEA clauses have no effect on the employee=s ability to bring an

    ADEA charge or lawsuit challenging the waiver.@ 65 Fed. Reg. at 77444.

    C. Release Language

1. Use Aany and all claims@ language.

     th Cir. 2002) (holding !Chaplin v. Nationscredit Corp., 307 F.3d 368, 373 (5

    that broad release language applied to bar plaintiffs= ERISA claim, stating

    that Aa general release of >any and all= claims applies to all possible causes

    of action, unless a statute specifically and expressly requires a release to

    mention the statute for the release to bar a cause of action under the


    2. Include a waiver of damages by employee in the event that a state or federal

    agency pursues case on behalf of employee.

    National Association of College and University Attorneys


!Employers cannot seek waivers of an employee=s right to file or otherwise

    participate in charge of discrimination, and cannot prohibit EEOC from enforcing rights of employees and seeking relief for those who have not waived their rights (see EEOC Enforcement Guidance on Non-Waivable

    Employee Rights Under Equal Employment Opportunity Commission (EEOC) Enforced Statutes; April 10, 1997).

    ;A...Promises not to file a charge or participate in an EEOC

    proceeding are null and void as a matter of public policy.

    Agreements extracting such promises from employees may also

    amount to separate and discrete violations of the anti-retaliation

    provisions of the civil rights statutes.@ Id. (emphasis added).

!EEOC acknowledges that employers can obtain waiver of an individual=s

    right to personal recovery from an EEOC enforcement action.

    3. Workers= Compensation

!Do not assume that a release includes pending or potential workers=

    compensation claims.

    ;There are often state law requirements for settlement of workers=

    compensation claims.

     compensation; this could ;Consider specifically excluding workers=

    prove helpful in establishing that all other claims not specifically

    excluded were agreed to be included.

See, e.g., Seman v. FMC Corp. Retirement Plan for Hourly Employees,

    2002 WL 385571 (D. Minn. Mar. 7, 2002) (granting summary judgment for defendant on plaintiff=s ERISA claim for disability pension benefits because the plaintiff and his employer had previously settled an age and disability discrimination charge filed with the EEOC and included broad release language that barred the current ERISA claim; the court noted that the fact that plaintiff=s workers= compensation claims were explicitly excluded from the release reinforced the court=s reading that Aany and all@ other claims

    were released).

    National Association of College and University Attorneys


    ;Note: Also consider the reverse scenario. When you are settling a workers= compensation case B often pursuant to state-mandated language,

    forms and/or approval by the Workers= Compensation Board B are you

    expecting a release of related claims?

See, e.g., Jefferson v. Calif. Dep=t of Youth Auth., 121 Cal. Rptr. 2d 391

    (Cal. 2002) (employee settled a workers= compensation claim against her

    employer for work-related stress due to sexual harassment; the court held that the workers= compensation settlement signed by employee prohibited her from bringing a sexual harassment claim against her employer because she had knowledge of the potential harassment claim and did not expressly exclude it from her workers= compensation release).

    4. Family and Medical Leave Act

!29 C.F.R. ' 825.220(d): AEmployees cannot waive, nor may employers

    induce employees to waive, their rights under FMLA.@

! Dierlam v. Wesley Jessen Corp., 222 F. Supp. 2d 1052 (N.D. Ill. 2002)

    (holding that the Department of Labor regulation prohibiting waiver of FMLA claims is a permissible construction of the FMLA and consistent with Congress= expressed intent; therefore, waiver of FMLA rights in employee=s Separation Agreement was unenforceable as a matter of law).

    5. Miscellaneous Items

!Ability to reapply for employment; use clear language (see, e.g., Dhaliwal thv. Hesston Corp., 930 F.2d 547 (7 Cir. 1991) (agreement that employee

    would not seek reinstatement in the position from which he was terminated did not extend to prohibit former employee from seeking other positions at defendant employer).

    ; In many cases, lawyers must balance the negative impact this

    language will have on the employee and/or the possibility that

    employer might want to re-employ the individual vs. the likelihood

    that the employee will apply for future employment, be denied and

    bring a retaliation or other claim (prospective claims cannot be

    waived, so employer cannot defend based on settlement agreement).

    !Express waiver of right to use any internal appeal process?

    National Association of College and University Attorneys


    D. Knowing and voluntary

    1. Settlement of age claims: Aknowing and voluntary@ minimum standards are