Ohio Employment Discrimination Attorney Best Answer: Does a severance agreement stop me from suing my employer for sexual harassment? What is my employment discrimination case worth? When does an oral settlement agreement become binding and/or enforceable in employment litigation? Can a disputed oral settlement agreement be enforced?
One of the most frustrating things for our employment attorneys is having a freshly fired employee come to our office and describe facts that set up a great employment discrimination claim, and then tell us that the employer gave him or her a small severance, say a couple hundred dollars or a week or so of pay. This leads our employment lawyers to follow up with the question, did you sign anything to get the money? Our lawyers know that most employers don’t just give employees a check for no reason. And, usually, when an employer puts a piece of paper in front of an employee that is leaving and asks the employee to sign it, it very very very rarely favors the employee. These types of documents that need to be signed by departing employees will typically include a release of all the employee’s claims against the employer, with that language being buried in small print or somewhere in the middle of a paragraph. The employee wants the severance; signs the release; and bye-bye very good claim.
One possible resolution to any employment dispute is, of course, by the parties entering into a settlement agreement. In fact, a settlement agreement is often, if not most times, the best way of resolving litigated matters. However, a settlement should be reached with both parties openly and knowingly understanding what is going on as well as the consequences. Navigating the waters of settlement negotiations can be difficult and treacherous at times. Even in cases where both parties to a lawsuit have engaged in good faith settlement negotiations and have orally entered into an actual settlement agreement, any potential dispute between the parties in translating and transcribing said oral settlement agreement into a written, signed, and executed settlement agreement can potentially lead to a complete collapse of the overall settlement agreement and the parties will end up squarely back on track to a looming trial date. A recent Decision by the United States District Court, District of Columbia, examines just such a scenario where a settlement became disputed even with attorneys involved. It also highlights why it is important to have qualified employment lawyers handle your case as opposed to general practitioners (I call these lawyer, “oh, sure, we also do employment law” attorneys).
The employee in Rahel A. Demissie v. Starbucks Corporate Office and Headquarters, filed an action against Starbucks asserting claims of unlawful employment discrimination and wrongful termination on the basis of race, gender, and national origin. In an effort to resolve the matter in lieu of trial, the employer and employee, with their lawyers, met for Court referred mediation/settlement conferences on four separate occasions. The parties made progress over the course of the first three mediations and agreed to multiple terms of a settlement agreement including, but not limited to: a “release of all claims” provision that would expressly exclude the employee’s separately maintained Workers’ Compensation claim against Starbucks; that the employee would voluntary resign; the employee would agree to a “no rehire” provision; and that there would be a mutually agreed to confidentiality agreement between the parties.
The fourth mediation between the parties was held on November 6, 2014, at the conclusion of which it was “announced” that a settlement agreement had been reached between the parties. At this point, it is important to note that of all the terms discussed during the four mediations, and the email communications between the parties’ attorney’s prior to November 6, 2014, did not include any discussions regarding tax allocation of the settlement amount.
The issue of the “tax allocation” of the employee’s settlement amount thereafter became a source of contention between the parties. As a result, the settlement agreement quickly began to deteriorate. In this regard, the employee held the position that a settlement agreement had not been reached and consequently filed a Motion to Compel depositions in preparation of trial. Conversely, Starbucks asserted that a settlement agreement had been reached at the November 6, 2014 mediation, and, accordingly, filed a Motion to Enforce said settlement
In response to Starbucks’ Motion to Enforce the settlement agreement, the Court held an evidentiary in order to determine whether the November 6, 2014 mediation resulted in a binding and enforceable settlement agreement. In order to examine and determine the validity of said proposed settlement agreement, the Court applied the following standard during the Motion to Enforce evidentiary hearing:
It is well established that federal district courts have the authority to enforce settlement agreements entered into by the litigants in cases pending before them.” When there is a genuine factual dispute as to whether the parties agreed to a binding settlement, the Court must hold an evidentiary hearing in which the parties are afforded the opportunity for cross-examination. The moving party bears the burden of proving by clear and convincing evidence that the parties reached a binding agreement. For a contract, written or oral, to be enforceable under D.C. law, the court must find that there was “(1) an agreement to all material terms, and (2) intention of the parties to be bound.” (interior and parallel citations omitted).
Accordingly, the Court first had to determine which terms of the alleged agreement were material.
In this regard, the parties agreed that several material terms had been negotiated and agreed to, such as the employee’s voluntary resignation; a “no rehire” provision; release of all claims (excluding the employee’s workers’ compensation claim); and a mutual confidentiality agreement. However, the parties disagreed as to whether the tax treatment of the employee’s settlement amount was a material term to the parties settlement agreement.
In regard to materiality, the Court found that: “. . . the facts weigh heavily in favor of defendant’s position. The tax treatment of the settlement amount was not mentioned prior to the end of the November 6, 2014 mediation and, even then, only after the parties reconvened after reaching an agreement and shook hands.” In its’ analysis, the Court noted, in part that, that terms not discussed by the parties during negotiations, but are only brought up after-the-fact, may be deemed immaterial. Accordingly, the Court then went onto conclude that the parties reached agreement on all material terms.
Having found that the parties had agreed as to all material terms orally at the November 6, 2014 mediation, the Court next had to determine whether the parties “intended to be bound” by the orally negotiated November 6, 2014 settlement agreement. In order to assess said issue, the Court considered several email correspondence between the parties’ attorneys following the November 6, 2014 mediation, and testimony indicating that at the conclusion of the November 6, 2014 mediation, the parties discussed staying further litigation and also discussed which party would be responsible for drafting the settlement agreement. In consideration of the foregoing evidence, the Court found said actions of the parties to be consistent with the intent to be bound by the terms that were ultimately accepted at the conclusion of the November 6, 2014 mediation.
Based upon the preceding, the Court concluded that Starbucks had established by clear and convincing evidence that the parties had indeed intended to be bound by the terms of the November 6, 2014 orally negotiated settlement agreement. Accordingly, the Court granted Starbucks’ will grant defendant’s Motion to Enforce the orally agreed to November 6, 2014 settlement agreement.
In consideration of the foregoing, it is important to realize that the litigation process encompasses everything from inception of a case through resolution. An agreement in principle, or an oral agreement must be reduced to writing and executed by signature of the parties before it can really truly be considered to be final. When leading up to that point, as Demissie demonstrates, it is highly important to maintain clear and detailed notes and documentation regarding the terms of the all-but-written-and-signed settlement agreement. In addition, rather than leaving it to a Court to decide whether a term is material to an agreement, if a term is considered material to the party proposing said term, simply be clear in negotiations and create a written record memorializing that a particular term is “Material” to any such settlement agreement between the parties.
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