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Settlement Agreement Provisions To Consider When Settling Discrimination Claims

Posted in Discrimination & Harassment, Highlight, Human Resources (HR) Compliance, Litigation, Manager & HR Pro’s Resource Center

Giving claims a final resting place

A few days ago, I came across a thoughtful post from Work Matters, a longtime blog run by Michael Maslanka.

In it, Mike describes a clause in a settlement agreement to get around an issue that sometimes arises — how do you minimize the threat of an EEOC claim when the EEOC has taken the position that an employee cannot agree to a provision in which he or she agrees to not file a charge at the EEOC?

Mike solution is one that we often use too — a clause that limits the employee’s right to any recovery if he or she files a claim with the EEOC.  If you’re curious on the specific language, visit Mike’s blog post.

But Mike’s post got me thinking about other settlement provisions that pop up from time to time.   Of course, I wrote a bit about it back in 2011 so I’m not going to repeat what I said then; it’s a good place to start if you’re thinking about the subject.

Nor will I repeat the wisdom I’ve seen from one of the better articles I’ve seen about settlement provisions from attorney Robert Fitzpatrick.  I cited it (briefly) all the way back in 2008 and that I’ve cited from time to time. Robert’s article on settlement agreements was written ten years ago so it’s missing things like dealing with Section 409A, but the overwhelming majority of the article stands the test of time.  At over 90 pages, it pretty much covers the provisions you’ll need to consider including non-disparagement clauses, no-rehire provisions, and the like.

Indeed, in this age of shared information, employers need not draft an agreement from scratch. For employers, there are publicly available examples of settlement and severance agreements on the Internet.  For example, want to see the severance agreement that Marissa Mayer and Yahoo! have agreed to? It’s publicly posted.

Of course, employers shouldn’t just copy these.  It’s vitally important to get experienced employment law counsel to review your standard agreement (and specific ones, if possible).  Why should employers do this (besides a self-serving reminder to hire attorneys like myself)?

Because there are so many tricky little provisions that it’s easy to get tripped up.  Take “tender back” provisions (requiring employees to pay back settlement proceeds in the event of a lawsuit challenging the validity of the agreement).  They were generally struck down by the EEOC years ago. But your form may still have them, thereby putting your company at risk.

And if your eyes glazed over at my mention of Section 409A provisions before (and wondered what they were), that alone provides yet another reason.

Reaching an agreement with a former employee to resolve a claim of discrimination is difficult enough without worrying about whether your written agreement is valid.  Make sure you’ve covered yourself so that when you resolve the matter — it’s actually resolved.

Settlement provisions aren’t that complicated, but when reaching finality in claims, it’s better to cover your bases than cut corners.