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Protect against breach-of-contract claims

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in Employment Law,Human Resources

Precise language in a settlement agreement helped an employer survive a breach-of-contract lawsuit filed by a former employee.  

Recent case: Mercedes, a San Francisco municipal employee, filed a harassment complaint. She had generally received positive reviews, but was eventually suspended for five days for poor performance.

Later, she was forced to retire. Perhaps anticipating a harassment suit, San Francisco offered Mercedes a settlement agreement that allowed her to collect a lump sum of $55,000 to settle any claims she might have against the city. The agreement also included a promise that her poor evaluations would be placed in an envelope under seal and would never be opened except upon presentation of a court order.

After she retired, Mercedes continued to apply for jobs with the city, but was never again hired. She surmised that someone must have opened the sealed envelope and read the poor reviews.

She sued for breach of contract.

However, the court quickly tossed out her claim. It noted that nothing in the settlement agreement prevented city officials from refusing to rehire Mercedes or even from discussing her past performance, as Mercedes alleged. As long as the documents remained sealed—and Mercedes had no evidence they weren’t—San Francisco hadn’t violated the terms of the settlement agreement. (Borja-Valdez, et al., v. City and County of San Francisco, No. 3:14-CV-04168, ND CA, 2015)

Advice: Have your attorney craft all settlement agreements. In some cases, you may want to include a provision prohibiting former employees from applying for jobs in the future.

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