As the old saying goes, “its not over until the paperwork’s done”. Nowhere is this more true than the conclusion of your employment discrimination case. It really doesn’t matter what specific area of law you have settled your employment law case on (age, sex, race, national origin, industrially injured worker, medical or physical condition, etc.): all settlements require attention to some common elements of concern. .
Who is being released? Your attorney should advise you on whether all named defendants are being released. In many cases, defendant employers will only agree to a settlement if all named defendants and any potential, unnamed ones are released. However, not all defendants may contribute towards the settlement. This could leave you exposed to a lawsuit for malicious prosecution or abuse of process unless the unsettling defendants join in signing off on the agreement, even though they are not paying money to you. You should ask your attorney if you are being given mutual releases as to all causes of action which have ever existed between you and all of the named defendants.
What is being released? It is common for a long list of virtually every known employment law cause of action to be listed in the settlement agreement. Normally, that’s acceptable; however, if you have or are considering filing a workman’s compensation case, or are pursuing one that has already been filed, take the time to exclude that actual or pending case. Similarly, be careful if your release calls for dismissing and not pursuing a case against the company for some other issue, such as pension, profit sharing. Here’s a checklist of claims which can’t be released by law:
Worker’s compensation claims without the formal ok of the Work com Appeals Board (per Labor Code 5001); indemnification of work[-related losses or expenses under Labor Code 2604; claims for overtime or wages under Labor Code 206.5 and 1194…”unless the release is part of a settlement of a bona fide dispute over those wages”; claims for unemployment insurance (Unemp. Ins. Code Section 1342).
The Worker Workers Benefit Protection Act (OWBPA) provides that rights under the Age Discrimination in Employment Act “ADEA”) may not be waived unless the waiver is knowing and voluntary. The waiver must be in writing and voluntary, and refer specifically to ADEA rights. If a lawsuit has not yet been filed, then the employee has 21 days to consider a proposed written release and an additional 7 days to rescind after signature. If a lawsuit has been filed, then OWBPA protections are less and there is no set time for considering the terms of the release, only that the time be “reasonable” and that there is no set revocation period. One court has held that revocation of a release that covers both ADEA claims and other claims rescinds the settlement as to all claims. Neely vs. Good Samaritan Hospital, 345 Fed Appx. 39, 43 (6th Cir. 1009).
Virtually every release contains a recital of California Civil Code 1542. This short section of law basically releases the defendant from damages known or unknown at the time of the harm. That means if you find yourself with a more serious injury than you thought (lets say you later find out you have PTSD vs just a minor depressive disorder), you may no re-sue or re-open the case to plead for more damages. Your future economic and non-economic damages are not going to be known precisely, so settle with the knowledge that a one-time award will have to cover future losses.
You may have a pending action with the Equal Employment Opportunity Commission or the Department of Fair Employment and Housing. Expect the defendant to ask that you dismiss that charge or at the very least to waive (give up) any interest in a financial recovery from that case. Conversely, if you have sued the employer for sexual harassment or other offensive behavior, you may want to demand that the employer provide sensitivity training, make a donation to a worthwhile (relevant) cause, or post an apology in the workplace.
Is the defendant asking you to pay “liquidated” damages? This is an amount of money (usually between $5,000 and up to the client’s share of the recovery) which you promise to pay in the event you breach confidentiality and tell anyone except family, attorneys and tax advisers about the amount of settlement (or even that you did settle at all–most employers want weasel words like “resolved to everyone’s satisfaction.”). We insist that if liquidated damages are to be paid, the same amount will be owed by the corporation for disparagement of our client if the settlement contains a non-disparagement clause. Consider making any liquidated damages you owe contingent on a finding of intentional vs negligent disclosure.
Is time of the essence? These critical words assure that a late payment may be grounds for rejection of the entire settlement, or the entry of judgment for a stipulated amount. We recently had the court enter judgment on a stipulated amount for $75,000. The actual settlement was only $50,000, so our client ended up ahead on that deal. If payments are to be spread out, have you asked for security to make sure the payments are made? We have asked many times for personal guarantees by the owner of a small corporation in the event he bankrupts his corporation.
Probably the largest single area of contention in settlements is tax liability. Employment attorneys usually do not give tax advise and urge their clients to seek professional guidance. However, we have noted that where physical injury is alleged, that may be free of income tax. Some of our clients ask us to get two or more checks from the employer, one for the taxable portion, one for the 1099 portion (which may or may not be tax free but will not be due until the next tax return is due) and one for the attorney. The release will call for you the employee to “hold harmless” the employer from any tax liability incurred as a result of not withholding taxes, Since punitive damages are never a tax deduction to an employer and are always income to an employee, it is usually in everyone’s best interest not to settle on an amount that represents punitive damages exposure. Claims such as sexual harassment, assault and other intentional torts might well provide a jury the grounds to award punitive damages, but there’s no reason to include them in a settlement.
The release will call for dismissal of the underlying lawsuit or pending arbitration. In California it is common to ask the court (the judge should sign off on acceptance of the proposal) to retain continuing jurisdiction over the dispute pursuant to Code of Civil Procedure Section 664. If the defendant misses a payment (or fails to pay the only installment), the court can order payment and attorney fees (depending on language in your agreement). In some cases, an arbitration award has not been confirmed as a judgment of the court prior to the time it is used as a basis to settle a case. Discuss with your attorney the legal effect of an arbitrator’s award that has not been confirmed by the court as a judgment. Long story short, it is always better to have a confirmed arbitration award.
The above is a generic list of some common issues. Unique rights may arise in specific areas and so a release should be well-tailored to the specific issues in your case. We recommend that plaintiffs’ attorneys come to the mediation or settlement conference with a prepared settlement agreement, needing only dates of completion and the ever-important amounts to add.
Many of our cases contain slander and defamation causes of action. One form of slander is called “self compelled republication”. Essentially, this means that you may be required to slander yourself in the future based on something dishonest the employer said about you. If you have to re-slander yourself in the future, this is a new wrong which can be sued upon in the future. Generally, employees have one year to sue for slander in California.
It still happens that employers attempt to prevent settling employees from working in the industry or for a competitor. Such agreements are strictly prohibited by California Business and Professions Code 16600 and have no place in your settlement agreement. If included, it would not be enforceable in most every case. it is appropriate and legal for an employer to ask that customers not be solicited by the departing/separated employee.
Settling an employment law case on appeal? Remember that an appellate court can’t reverse or vacate a trial court on a stipulation unless it finds that there is no reasonable possibility that the reversal will adversely impact the interests of non parties or the public, and the parties’ “reasons” for requirement reversal outweigh the erosion of public trust that may result from setting aside the judgment and the risk that the availability of stipulated reversal will reduce the incentive for pretrial settlement. Where we have knowledge of (or are counsel for) another wage and hour or other class action involving the same company, careful consideration must be given to the terms of the dismissal.
This blog should be considered educational in nature only. Legal advise can only be given by an attorney licensed in your professional, familiar with your facts, and knowledgeable about employment law.