No money changed hands? Legal settlement still stands — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

No money changed hands? Legal settlement still stands

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in Employment Law,Human Resources

Have you ever considered settling an employment dispute by having an employee promise to quit or retire, without any monetary payment? Don’t worry that such an agreement will later fall apart.

Traditionally, money needs to change hands before a contract to settle will be upheld. However, other “consideration” also works. For example, allowing someone to resign instead of facing disciplinary action is adequate consideration, even if there is no offer of money to seal the deal.

Recent case: Justino, who is from Puerto Rico and over age 65, worked for years as a math teacher. He claimed that when a new principal took the helm at his school, she began to find ways to criticize his teaching as a way to push him out.

Then several female middle school students accused Justino of unspecified sexual misconduct. After scheduling disciplinary action, Justino was persuaded to retire instead of facing termination over the allegations. He signed the agreement and retired.

Then he sued, alleging national-origin and age discrimination.

He tried to convince the court that since no money had changed hands in the settlement, it was invalid.

The court disagreed. It pointed out that by giving up the right to trigger the full disciplinary process and potentially fire Justino, the school district gave him something just as valuable as cash—a chance to avoid being fired, stigmatized and ostracized for conduct many would consider abhorrent.

The court said that was good enough to make the settlement enforceable. Justino’s case was dismissed. (Ortiz v. Department of Education, No. 11-CV-6027, ED NY, 2015)

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