Navigating Disclosure Issues in Settlement Agreement Drafting Process
The Fair Employment and Housing Act (Government Code Section 12940 et seq.) permits claims of sexual harassment, sex discrimination, racial discrimination, retaliation and other related assertions arising in the employment setting. When such an action is settled, the tendency of claimant’s counsel may be to view the subsequently prepared written release and settlement agreement, execution of which will almost certainly be a condition of the settlement, to be a mere formality.
However, agreement upon a monetary settlement to resolve the case is, for better or worse, only the beginning of the necessary settlement negotiations between the claimant’s counsel and the employer’s counsel. Matters of importance to the claimant’s vocational, financial and even personal life lurk in the settlement agreement. A number “transactional" issues typically arise in, and become terms of, written settlement agreements in Fair Employment and Housing Act cases.
The employer almost always strives for total confidentiality, from virtually everyone, of everything about the case, including both the underlying assertions and the settlement itself.
Agreements to render a settlement confidential are generally permissible. See Barella v. Exchange Bank, 84 Cal.App.4th 793 (2000). A Claimant’s agreement to confidentiality as “bargaining chip" not readily calculable in monetary terms. Cf. Barella: “ The value of a particular plaintiff of public vindication (or, conversely, the negative value of confidentiality) is so highly subjective and elusive that no court can determine this monetary worth."
An initial question in the usual settlement-agreement negotiation is the proposed scope of confidentiality. Of course, publicly filed court documents (i.e., fillings outside of a protective order) are not confidential, and new rules limit the circumstances under which court documents may be filed under seal.
But as to the details of the settlement itself, which would not generally be disclosed in a public court filing, the employer may seek to confidential not just the terms (the mount paid, the provisions of the settlement agreement, etc.) but also the allegedly actionable conduct that underpinned the claimant’s causes of action.
Some claimants will be unsympathetic to proposed restrictions on their ability to relate to others their account of how they were wronged. Such a restriction has real-world implications to the claimant beyond those of social conversation—for example, when she sis inevitability asked in the future why she left her last job, the answer the claimant is free to give can depend on the language of the settlement agreement.
Another frequently arising issue, where confidentiality in whatever scope has been agreed upon, is whether there are expectations to the obligations of confidence. Typically exceptions to any agreed confidentiality might include permitting claimant’s disclosure to his attorneys, accountants and health care providers (where applicable), and certainly permitting disclosure to a court or administrative agency up on a proper order.
Negotiation may be required, however, as to proposed restrictions concerning the claimant’s disclosure of the settlement amount to his parents, spouse or cohabitant. A typical negotiated resolution of this issue would be identify in the settlement agreement a limited universe of persons (spouse, parents, adult children) with whom the claimant already shares an ongoing financial relationship and to permit disclosure of the amount of settlement, and perhaps also the other terms of the settlement agreement, to such persons. That disclosure might be conditional upon each disclose agreeing, informally, to retain the confidence of the disclosure.
The employer will usually raise the issue of the consequences of breach of confidentiality by the claimant. The employer will frequently suggest a provision incorporating a fixed or “liquidated damages" clause. Such provisions are governed by Civil Code Section 1671 (ed), which provides that liquidated –damages clauses are void unless it would impracticable or extremely difficult to fix the actual damages arising from a breach. A typical form of agreement prepared by employers’ counsel will recite those “magic words/" thereafter setting out a sum of liquidated damages per incident of unauthorized disclosure.
If such a provision is agreed to, there are numerous details for negation and resolution what is the amount of liquidated damages per event of breech? Is there a “cap" as to liquidated damages regardless of the number of breaches? If so, what is that amount? Is the issue of breach to be decided by a court or an arbitrator? Is the obligation bilateral, in that the employer shares an obligation of confidentiality as well? Should the evidentiary standard be altered to “clear and convincing evidence" in recognition of the “he said, she said" nature of the inquiry?While careful efforts to educate the client as to his obligations of confidentiality will hopefully render moot the “real world" consequences of these clauses, these matters must still be carefully negotiated.
Also, to anticipate another common problem, the following clause is often useful: “It is not a violation of confidentiality for claimant to respond to an inquiry concerning the matter that the case was settled or resolved."
As to hypothetical future subpoenas served upon the claimant by other litigants, the agreement should make clear that the claimant is not in breach if she complies with a lawful subpoena or court order or testifies truthfully.
Andy Gillin and the lawyers at GJEL Accident Attorneys represent plaintiffs in employment and personal-injury cases.