Settlement agreements are indispensable. Each day, they resolve thousands of separate controversies, both real and imagined, between employees and employers. Without settlement agreements, our agencies and courts would become gridlocked. Realizing this, courts go out of their way to enforce private settlement agreements. They regularly reject attempts, usually by disgruntled employees, to wriggle out of settlements, thereby making it easier for employers to enforce those settlements. This article will discuss settlement agreements resolving (1) state law age discrimination claims and (2) mediation claims.
Age discrimination claims are confusing because of complex settlement requirements imposed by the federal Older Worker Benefit Protection Act. Yet, all OWBPA requirements apply only to ADEA claims by employees who have not filed an ADEA charge or a lawsuit. The 7-day cancellation period is not required where an ADEA charge or lawsuit is filed. The 21-day minimum consideration period for single terminations is also not required in such cases, although it is a convenient proxy for the “reasonable” period that is required under OWBPA. Congress wanted to give maximum protection to employees negotiating separation agreements who are asked by their employers to sign releases surrendering potential ADEA claims.
Employees entering into settlement agreements waiving state law age claims have a difficult time convincing courts to invalidate those agreements. Common law contract principles apply, not special statutes such as the OWBPA. Employees must show duress, fraud, illegality or undue influence. If the employee fails to satisfy this difficult burden of proof, he/she loses and another settlement agreement is enforced.
In Goode v. Drew Building Supply, Inc., 1999 N.Y. App. Div. LEXIS 11890 (4th Dep’t, November 12, 1999), the Court rejected Mr. Goode’s effort to apply OWBPA standards to his state law age discrimination claim. Mr. Goode also struck out with his arguments that the release he signed when his employment ended should be voided because (1) he did not understand its terms and (2) he failed to consult an attorney before signing. The Court cited Skluth v. United Merchants and Manufacturers, 163 A.D.2d 104 (1st Dep’t 1990), another age discrimination case. That case held “the absence of counsel is far less critical than the opportunity to consult counsel” and also rejected the additional claim that the employee didn’t learn he was replaced by a younger employee until after he signed the release.
Mr. Goode’s final argument was that the employer itself voided the release by failing to provide the outplacement services promised in his settlement agreement. This argument failed as well since sufficient other consideration remained to support the release. The Court cited Elson v. Delaney, 47 A.D.2d 708 (4th Dep’t 1975), an auto accident case where the insurance company paid part ($525) but not all ($1255) of the driver’s medical costs as agreed following the accident. The company’s failure to pay the remaining $700 did not invalidate the release. It only allowed the injured driver to sue the company under the release for that money.
Courts are also favorably disposed to enforce settlement agreements entered into during mediation sessions. Mediation itself may be non-binding but settlement agreements entered into during or following mediation sessions are as binding as other settlement agreements.
In Bitwise Designs, Inc. v. U.S. Trust Company of New York, November 18, 1999 New York Law Journal p. 30, col. 2, Sup. Ct., N.Y. Co., the parties agreed to settle their commercial dispute during a mediation session required under the state court’s ADR Program. The parties’ counsel executed a handwritten settlement agreement when the mediation session ended. This was followed by a stipulation of settlement with slightly-modified terms, also signed by all counsel and filed with the court. At this point, problems arose when defendant Charles Miceli, despite executing the releases required, refused to make payments required under the stipulation.
Miceli sought to vacate the mediation “agreement,” claiming he directed his attorneys not to settle but that, in his absence, they went to the mediation and settled anyway. Miceli’s attack on the mediated settlement agreement failed. Referring to familiar contract principles, Justice Cahn held Miceli had failed “to allege or demonstrate fraud, collision, mistake or accident sufficient to relieve him of the consequences of this Stipulation.#&148; Justice Cahn cited Hallock v. State, 64 N.Y. 2d 224 (1984), where New York’s highest court held “Stipulations of settlement are favored by the courts and not lightly cast aside.”
Miceli’s claim that his counsel was not authorized to sign the settlement agreement was rejected by Justice Cahn as follows:
“The Settlement Agreement signed before the mediator, which was then reduced to a Stipulation of Settlement filed with the Court, was executed by defendant’s counsel and was binding on defendant even if it exceeded counsel’s actual authority.”
Miceli also lost because he had not taken away his counsel’s apparent authority. That same counsel represented Miceli and his company throughout the litigation that preceded the mediation and “went into the mediation to engage in settlement negotiations.” Sending his counsel to the mediation “constituted an implied representation by Charles Miceli to [the other side] that the firm had authority to bind him to the settlement” reached during the mediation session.
The opposing party contended Miceli, contrary to his latest claim, had actually attended the mediation. If so, his presence bound him and his company to the settlement agreement his counsel signed. Being present and not objecting meant Miceli, under Hallock, “acquiesced in, consented to and is bound by the settlement.”
Miceli lost even if (as he contended) he did not attend the mediation. His counsel had been “clothed . . . with the apparent authority to enter into the settlement.” By sending his counsel to the mediation even in his absence and by not specifically advising the opposing party that his counsel’s settlement authority was restricted, Miceli thereby bestowed apparent authority on his counsel amply supporting the resulting settlement. (“It was up to the Miceli defendants or their counsel to reveal any restrictions on counsel’s authority to settle.”)
Decision-makers or corporate representatives with authority attend most mediations. If they do not, it is essential the other side be clearly advised that final settlement authority resides outside the mediation room or a telephone call away. Labor negotiators must tell the other side if their negotiated agreements must be approved by the union’s membership or the company’s board of directors. They cannot assert such restrictions for the first time after an agreement is negotiated.
Bitwise Designs counsels that employers entering mediation sessions must anticipate a settlement may be reached. Lines (and extent) of authority must be clearly outlined to company representatives attending the mediation and restrictions on authority (or the identity of an ultimate decision-maker) disclosed to the opposing party. Silence can mean consent because settlement agreements, whether negotiated or mediated, march to the tune of the same legal drummer, and a supportive judiciary remains ready to enforce them.
Copyright) 2000 Nixon Peabody LLP. All rights reserved.
The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require and further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative.