Settlement agreements, properly done, are hard to set aside. Your basis for trying to set this one aside sounds like it would be duress. You will need to research, or have a California lawyer consult with you on, whether this fact pattern qualifies as the sort of duress that could set aside the agreement. Fraud is also a possibility. However, it sounds like the former employer threatened to turn the case over to a prosecutor---which technically is not the a factual misrepresentation as is required for fraud. It may have been a bluff, but bluffs are used all the time in settlement negotiations and are not illegal. You may want to investigate another approach as well. Under my state (Texas)'s ethics, it is unethical to threaten criminal action to gain an advantage in a civil case. If you can prove they did that, you might win an ethical complaint against the law firm. Perhaps the threat of doing so would gain some traction in getting them to set aside the settlement; but even if it did not, it would cause them some grief.
In California, a settlement agreement can only be set aside upon a showing of mutual mistake of fact, fraud, mistake, duress, or undue influence. This is extremely difficult to do for any contract, especially a settlement agrement since courts favor enforcement of settlement agreements.
Essentially, you need to prove to the court is that the parties to the settlement agreement did not mutually assent to the proposed objectives and terms of the settlement agreement. There will be no binding contract without the real consent of the parties. Apparent consent may be vitiated because of mistake, fraud, innocent misrepresentation, duress, or undue influence, all of which are defenses to the enforcement of the settlement agreement.
I agree with Mr. Armstrong and Mr. Chen with regards to setting aside the settlement agreement. To add to discussion, the California Rules of Professional Conduct (CRPC) provide that attorneys shall not threaten to present criminal charges to obtain an advantage in a civil dispute. If the company’s attorney was the one applying the “muscle” by threatening criminal prosecution, you may wish to consider filing an ethical complaint with the State Bar of California.
Justin C. Lowenthal, Esq.
Disclaimer: The content of this response has been prepared for informational purposes only and should not be construed as legal advice. The material presented is not intended to create, and receipt of it does not constitute, an attorney-client relationship, and readers should not act upon it without seeking the advice of independent professional counsel.