The recent case of Bradley v. Dhybrid Systems, LLC, No. 21-4047, 2023 WL 1978683, at *1 (10th Cir. Feb. 14, 2023) provides a cautionary tale to both employers and employees regarding how to properly handle employment law claims and what can happen if you play games. In this case, the employee Xavier Bradley worked for Worthington Industries and dHybrid Systems, both Ohio companies. While working for these employers, Bradley both filed a workers’ compensation claim and complained that three of his coworkers were racially harassing him in violation of Title VII of the Civil Rights Act of 1964. Shortly after doing both, the employers fired Bradley.
As is common, Bradley hire one attorney to handle the worker’s compensation claim and a separate attorney to handle his claims for employment discrimination and wrongful termination.
Mistake No. 1: Bradley did not inform his attorneys about each other. He probably figured that these were two separate issues that did not overlap. While a worker’s compensation claim may not overlap with a race discrimination or wrongful termination claim, in the instances where it does, it is critical for the attorneys to know everything that is going on.
Mistake No. 2: The employment law attorney on the wrongful termination claim should have specifically asked if the client had ever filed any worker’s compensation claims against this employer. At Spitz, The Employee’s Law Firm, we not only ask about claims against the target employer, but we also affirmatively check to if our client has any potentially open worker’s compensation claims.
Because the employer knew about all of the claims (worker’s compensation and the wrongful termination/race discrimination), when it came time to settle the worker’s compensation, it demanded that any settlement include a release of all claims – including the employment claims. Because the employer was concerned that the Bureau of Worker’s Compensation would not approve a settlement that tried to globally release not only WC claims, but the employer also required the employee to sign two releases – one for $20,000 to settlement WC claim (so that it could get approval) and a different settlement for the wrongful termination and race discrimination claims for $100 – which is clearly no value at all. It is mind-blowing how a WC attorney can just give away other viable legal claims just to get a settlement in the worker’s compensation case.
Mistake No. 3: The request to settle non-worker’s compensation claims should have set off a light bulb for Bradley’s worker’s compensation attorney. Having identified that there were employment claims that the employer was worried about, this WC attorney should have: (a) asked Bradley if he was pursuing those claims; and (b) if not, at least properly evaluated those claims before settling them (or consult with an attorney who is qualified to do so).
Mistake No. 4: Bradley signed the settlement agreements without consulting his employment law attorney regarding the impact on his race discrimination and wrongful termination claims. By signing the agreement, even if he did not read it, Bradley gave away those claims for pennies on the dollar. Image how shocked those employment law lawyers were when they learned that the case was settled out from under their noses.
Mistake No. 5: The employer did not send the check for the $100. As a result, the employment lawyers jumped back in months later, withdrew the settlement agreement for failure to pay, and filed a wrongful termination and race discrimination lawsuit in the United States District Court for the District of Utah. In Court, the employer argued that the settlement agreement was still enforceable to release the employment claims because the $20,000 was paid in the WC settlement and that the failure to pay the $100 was due to an “accounting error.” The District Court wasn’t buying that argument; and entered a $495,900 final judgment.
On appeal, the United States Court of Appeals for the Tenth Circuit affirmed, holding:
Defendants assert that the district court erred in finding the Settlement Agreement and Compromise divisible because the agreements are integrated. They argue that because the Settlement Agreement’s plain language incorporates the Compromise, the two documents are one, final contract. And because Defendants paid $20,000 of the $20,100 owed to Plaintiff, Defendants contend that they did not materially breach their contract with Plaintiff. Thus, Defendants conclude, without a material breach, Plaintiff could not rescind the contract and sue them for his employment claims.
This argument lacks merit. …
[T]he contract … required the defendant to pay for rights he received from the contract. But he never paid. Because the defendant “failed to perform the only obligation required of him in the contract,” the Utah Supreme Court held that he “committed an ‘uncured material failure’ sufficient to render the contract unenforceable for failure of consideration.” The same reasoning applies here. The only promise Defendant Worthington made in exchange for Plaintiff releasing his other employment claims was to pay Plaintiff $100. And at the time Plaintiff rescinded the contract—five months after the parties signed the Settlement agreement—Defendant Worthington still had not performed. That failure of performance was material breach of a divisible part of the parties’ agreement, allowing Plaintiff to validly rescind that portion of their contract.
Simply put, after settling Plaintiff’s employment claims for $100, Defendant Worthington failed to uphold its end of the bargain. We therefore hold that the district court correctly granted partial summary judgment in Plaintiff’s favor.
Id. at *3-5 (citations omitted).
So, with this in mind, understand that the WC’s mistakes and Bradley’s failure to read the settlement agreement and consult with his employment lawyers almost cost him $494,900. That’s not a small mistake. On the flip side, the failure to cut a $100 check was a half million dollar f’up. I’m guessing that a “whoopsie” does not cover this one.
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