Settlement Agreements and Negotiating Exit Agreements Joseph A. - - PDF document

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Settlement Agreements and Negotiating Exit Agreements

Joseph A. Ernst Rachel K. H. Miyashiro

What do you need for an effective settlement agreement?



Introductory Provisions

 Preamble  Recitals 

Settlement Provisions

 Releases  Confidentiality  No Rehire  Non-disparagement  Covenant not to sue  Indemnification  Choice of law  Severability

Introductory Provisions

 Preamble  Identifies all parties to the agreement Includes signatories and non-signatories  Date Sometimes identifies an “Effective Date” Helpful if you want to sign the agreement prior

to the final day of work or make it retroactive

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Introductory Provisions

 Recitals  Some agreements use recitals Typically very formal Consider the employee  Provides employment history  Identifies any governing agreement – employment

contract, independent contractor agreement, etc.

 Identifies underlying litigation (if any)

Introductory Provisions

 Sample Recital Clauses  This Settlement Agreement and General Release (“Agreement”) is

made and entered between Employee (“Plaintiff”) and Employer (the “Defendant”).

 WHEREAS, Plaintiff filed a lawsuit against Defendant pending in

the Circuit Court of _____ entitled Employee v. Employer, Civil

• No. 17-1-0459 (the “Lawsuit”);

 WHEREAS, Defendant contests all of Plaintiff’s claims and denies

any wrongdoing; and

 WHEREAS, the Parties desire to compromise and resolve all

disputes Plaintiff has with Defendant.

Main Settlement Provisions

 Dismissal of pending litigation, if any  Generally states that on the date of execution, counsel

for plaintiff will execute a voluntary stipulation to dismiss the case with prejudice

 Also states that plaintiff will assist in ensuring dismissal

if needed

 Attach proposed order as an Exhibit  Warrants no other claims, charges, or lawsuits

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Main Settlement Provisions

 Sample Dismissal of Lawsuit Provision  Upon the Effective Date of this Settlement Agreement,

the Parties shall immediately file with the District Court/Circuit Court/etc. an agreed motion to dismiss lawsuit with prejudice in the form of the attached Exhibit A, which is made a part hereof and incorporated herein by reference.

Main Settlement Provisions

 Settlement Payment Provision  Describes the settlement In consideration for the agreement, defendant will

deliver payment, job recommendation, etc.

 Includes classification of payment General damages Wages Withholdings or Form 1099  Disclaims tax advice

Main Settlement Provisions



General Release

 Typically identifies that plaintiff and all of plaintiff’s family,

representatives, heirs, etc. waive claims against defendant/employer , related entities, directors, officers, employees, etc.

 Includes specific provisions of employment law  Title VII  ADA  FMLA  Hawaiʻi Employment Practices Act  ADEA  General waiver of any other federal, state, or local statute and

common law

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Main Settlement Provisions

 General Release  Note regarding ADEA/OWBPA  Waiver must include “additional consideration”  No waiver of future rights  Must advise plaintiff/employee to consult with an attorney of

their choosing

 Must provide set time limits for consideration  21 days for most separations  45 days for early retirement or incentive programs offered

to a group

 Must provide 7 day revocation period

Main Settlement Provisions

 General Release  LIMITATIONS Can never waive: Rights under the agreement Vested benefits in any retirement plan Claims that cannot be waived Can not prevent plaintiff/employee from filing a

charge or providing accurate information to a government agency, court or entity as required by law

Main Settlement Provisions

 General Release  Express statement that plaintiff will be responsible for

the payment of their attorney’s fees

 Waives right to make a claim for those fees  Workers’ Compensation Offset Settlement sum offsets any amounts found due

under Hawaiʻi Revised Statutes Chapter 386 for work related injury

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Main Settlement Provisions

 Joint Tortfeasor/Obligor Release  Protects both parties against the cost of defending any

claims related to the subject matter of the agreement by persons not a party to the agreement

 Shares potential exposure  Made pursuant to the provisions of the Uniform

Contribution Among Joint Tortfeasors Act, Hawaiʻi Revised Statutes Sections 663-11 through 663-17, and the Uniform Joint Obligations Act, Hawaiʻi Revised Statutes Chapter 483

Main Settlement Provisions

 Lien Release  Plaintiff/employee agrees to defend, indemnify, and

hold the defendant/employer harmless in the event that any lien holder asserts a claim against the employer for satisfaction of a lien arising from the benefits or payment to employee

Main Settlement Provisions

 Waiver of damages and relief from third party claims  Waives the employee’s right to recover any damages or

relief based on any claim brought on their behalf as part of a class

 If given damages or relief, agrees to provide it back to

employer

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Main Settlement Provisions

 Confidentiality and Non-disparagement  Cover the agreement’s terms as well as negotiations  Include liquidated damages for breach  Carve-out for employee’s lawyers, tax advisor, and spouse  State that confidential nature of agreement was material part of

settlement

 Breach will cause irreparable harm  Plaintiff/employee will make no adverse or disparaging comments  Defendant/Employer has the right to enforce

Main Settlement Provisions

 Sample Confidentiality and Non-disparagement Clauses  Plaintiff agrees that she will maintain the fact of settlement and

the terms of this Agreement in a private and confidential manner, and will never disclose them to any person or entity except to the extent to carry out this Agreement or for due legal process, provided that Plaintiff may disclose this Agreement to her spouse, tax advisors, and legal counsel, provided such recipients of this information are informed of and agree to be bound by this confidentiality provision.

 Plaintiff will make no adverse or disparaging comments about the

Released Parties, that may impugn or injure their reputation, goodwill, and relationships with their past, present, and future employees or employers and with the business community.

Main Settlement Provisions

 Reemployment or Application  Consider whether you want to limit

plaintiff/employee’s right to future reemployment

This can be a sticking point for some agreements Be creative

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Main Settlement Provisions

 Return of Company Documents and Property  Require return upon execution  List all materials specifically and include a catchall  Include any non-privileged work product documents if

in litigation including deposition transcripts

Or create obligation to destroy as a last resort

Main Settlement Provisions

 Integration/Merger Clause  States that the agreement supersedes all other oral or written agreements  Sample:  This Agreement constitutes the entire Agreement of the Parties, and

supersedes all prior and contemporaneous negotiations and agreements, oral

• r written. All prior and contemporaneous negotiations and agreements are

deemed incorporated and merged into this Agreement and are deemed to have been abandoned if not so incorporated. No representations, oral or written, are being relied upon by either party in executing this Agreement

• ther than the express representations of this Agreement. This Agreement

cannot be changed or terminated without the express written consent of the Parties that is executed by the Parties and that unequivocally indicates the Parties’ intention to modify this Agreement.

Miscellaneous Settlement Provisions

 Cooperation Clause Cooperate fully with any pending or future

litigation, arbitration, business or investigatory matter

 Amendment or Modification Agreement cannot be amended or modified orally No waiver of any breach shall be construed as an

implied amendment or agreement to modify

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Miscellaneous Settlement Provisions

 Severability If any provision of the Agreement is held invalid,

illegal or unenforceable in any respect, then to the fullest extent permitted by law, such invalidity shall not affect the validity of any other provision

Miscellaneous Settlement Provisions

 No Assignment Notwithstanding any other clause, the

plaintiff/employee cannot assign any right or

• bligation without written consent

 Governing Law Exclusively governed and construed in accordance

with the laws of Hawaiʻi, without regard to its conflicts of law, except where preempted

Miscellaneous Settlement Provisions

 Venue Hawaiʻi is the exclusive venue  Execution in Counterparts Agreement may be executed in one or more

• riginals, photocopies or telecopied or electronic

counterparts

Each counterpart shall be binding and enforceable

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Negotiation Considerations

 Never make a false statement of material fact (or law) Might be tempting to go overboard when posturing  Don’t forget about meta-data in drafts  Be creative  Plan for non-negotiables and negotiables that can be

presented as non-negotiable

 Understand the ultimate goal  Listen to the other side

Voluntary Separation Programs

 What is it?  Opportunity to voluntarily resign with generous cash

and benefits if position is impacted by a reorganization

 Gives employee dignity, respect, incentive  Still may require a settlement and release

Voluntary Separation Programs

 Considerations  Introduction of the voluntary separation program  Discussion of content prior to rollout Staff reactions Reorganization

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Voluntary Separation Programs

 Introduction for the program  Business must change to compete successfully  Reorganization will help to: Improve operating efficiency Make business stronger  Benefits everyone Clients/customers Staff

Voluntary Separation Programs

 How the program typically works  Business identifies which employees are eligible  Different payouts and considerations for different positions,

tenure, etc.

 Typically tied to both position and years of service  Consider addition of benefits  Continuation of medical/dental  Life insurance needs to be converted to individual policy  Payout of sick and vacation  Employee must typically work through the end date to receive

benefit

Voluntary Separation Programs

 How the program can be rolled out  Employee packet Cover letter Overview brochure Personal benefit statement Election form with deadline  Q & A sessions  Hotline  Contact HR

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Questions?

Mahalo!

Joseph A. Ernst jae@torkildson.com Rachel K.H. Miyashiro rkm@torkildson.com