Don't Be a Punchline in a B-Horror Movie: When Entering into Settlement Agreements, Make Sure the Claims are Really Dead and Buried

(Spoiler alert) The 1958 cult classic “The Blob”, starring a 28-year-old Steve McQueen, ends with the villainous mass incapacitated, frozen, and dropped into the Arctic Ocean. It seems that humanity is saved. However, just before the credits roll, the protagonist notes that the blob is not dead, but merely stopped “as long as the Arctic stays cold.” With those prophetic words, the world (along with good taste) was again jeopardized 14 years later in the cinematographic masterpiece “Beware! The Blob!”

What lessons could “The Blob” possibly have for employers? Well, above all else, when settling an employee’s work-relating claims, employers want to avoid sequels. After all, why invest in a resolution just to have an employee’s claim rise from the dead and strike the company again?

A recent federal case decided in Pennsylvania highlights the need for care in settling claims with employees. In that case, a long-time elementary school teacher received a performance improvement plan (PIP) that warned of potential termination after she returned from a medical leave of absence. The teacher claimed that age and disability status motivated the discipline, and she sought her union’s help. The union and school district worked out a deal in which the PIP was rescinded, the union withdrew its grievance, and the teacher agreed to voluntarily retire the next year. With the crisis seemingly averted, the teacher indeed retired in the summer of 2014.

Unfortunately for the school district, after retiring, the teacher filed suit in federal court, alleging she was forced to retire as a result of unlawful disability and age discrimination. The school district asked the court to dismiss the case, explaining that the parties had already been down that route and the employee had in fact signed a settlement agreement pertaining to these very claims — a settlement agreement which provided that her retirement was “knowing and voluntary” and that was a “complete settlement agreement” of the teacher’s claims.

The court rejected this argument however, concluding that the settlement agreement was not specific enough to serve as a release of future age or disability discrimination claims. Instead, the court noted that the Age Discrimination in Employment Act (ADEA) has very stringent requirements for releasing claims, including for example, a statement directly referring to the fact that the employee is giving up claims under the ADEA. Likewise, the court determined that even though the settlement agreement was deemed “complete,” it did not contain any language specifically releasing discrimination claims under state or federal law. Accordingly, rather than permitting the settlement agreement to foreclose the lawsuit, the court allowed the case to go forward for a determination of whether or not the school discriminated against the teacher.

This recent case should serve as a wake-up call for employers who want to avoid becoming enmeshed in sequels to employment claims that they thought were long buried. Certain types of employment claims, including age claims and wage and hour claims, have very specific requirements for what constitutes a proper release; and, as the Pennsylvania court highlighted, merely stating that a matter is “completely” settled does not adequately close off potential claims. Finally, merely because you have used certain forms of release in the past with no trouble does not mean you will have the same success in the future, if the release is not drafted properly.

As always, if in doubt, before handing over money or something of value to resolve an employee’s claim, make sure you have had adequate legal review to avoid experiencing your own “Night of the Living Dead.”