Reaching a Settlement: Potential Problems and How to Avoid Regrets
By Phil Varnak
Wednesday, October 22, 2008
Case settlement has become a way of life in the majority of third-party appeal/grievance/complaint activities. The intent of settlement negotiations is to provide the parties with a protected environment in which they can attempt to achieve resolution of the issue being litigated in a manner acceptable to both parties.
When a case goes to third-party for decision, there are three things that can occur: win, lose, or get a split decision. Often split decisions are worse than losing and both parties often view them as undesirable. Accordingly, two out of three options can result in undesirable decisions for both parties. Decisions that provide a winner and a loser are often viewed as ‘Lose-Lose' because of the adverse effect the decision has on the continuing relationships between the parties. Alternative Dispute Resolution (ADR) and negotiated settlements are usually a better, less-costly way of resolving disputes and are now being used more often. Since the parties have control of this process, negotiated settlements can eliminate the possibility of a clear loss for both parties by providing assurance on the outcome of the dispute.
This article covers some of the uses and problems being experienced with negotiated settlements and is an effort to eliminate these problems in future negotiations.
MSPB, FLRA, EEOC, agency grievance examiners, and some arbitrators are favoring settlement negotiations as a better and more cost-effective alternative than having a third-party issue a decision that is binding on all parties.
- In EEOC, some form of ADR must now be offered to all complainants at each step of the process;
- MSPB requires settlement discussions before conducting a hearing; and
- FLRA previously offered mediation before proceeding with a ULP investigation. (Note: although the latest General Counsel of FLRA amended the prior process, Regional Directors are still urged to encourage settlement agreements where possible.)
- Some arbitrators are identified as "mediator-arbitrators" and actually perform as mediators. These individuals attempt to get the mutual agreement of the parties before conducting a hearing and issuing a decision that will be binding on the parties.
Some of the reasons mediation is favored are:
- Eliminate the time and cost of full evidentiary hearings. In addition to the cost which is both in dollars and lost time, the nature of the process polarizes the parties to reduce chances of effective future interactions.
- Provides an opportunity to find "middle-ground" that both parties can live with.
- Provide an opportunity for the parties to remedy the problem and salvage the relationship.
- Reduce the possibility of higher representative fees.
- Reduce the chance of receiving an adverse decision. Any time a complaint is given to a third-party for a decision, the chances of an adverse decision are greater than the chances of winning.
Supervisors should be aware of these interventions and understand that employee grievances and other complaints will probably undergo some type of settlement negotiations. As a supervisor, you must be aware of the possibilities of settlement discussions anytime you initiate action against an employee or the employee files a grievance or other appellate action.
Many first-line supervisors feel as though their judgment is being questioned when disciplinary or adverse actions they have initiated become the subject of settlement negotiations. Supervisors and other managers should understand that settlements are simply the way disputes are handled today in many organizations. The conduct of settlement negotiations is not a personal reflection on the supervisor or an admission the supervisor did something wrong.
Settlement can be accomplished through many forums. If achieved, a case settlement can appear as one of the following:
- Settlement agreement;
- Last-chance agreement;
- Abeyance agreement; or
- Other forms of negotiated settlement documents which may have a variety of titles.
Note: The agency can initiate these types of settlement discussions before a grievance/appeal gets to a third party.
Last Chance Agreement
A last chance agreement is generally an agreement in which the deciding official agrees to hold a decision of management in abeyance while the employee is given one last chance to prove he/she can be a productive employee who follows agency requirements. This type agreement is often called an "abeyance agreement" since the agency is holding a decision in abeyance to give the employee a last chance.
In this type of settlement, it is extremely important that the immediate supervisor be aware of the terms of settlement since that supervisor is generally the person who determines if the employee violates the terms of settlement. The agreement is generally for a set period of time, which would be discussed in the settlement agreement language.
Abeyance Agreement
An abeyance agreement is similar to a last chance agreement. The important thing about an abeyance agreement is that the final decision should be made on the action proposed before the agreement is negotiated. If the agency holds the proposed action in abeyance, they generally gain nothing by the agreement as the decision on the proposed action will still have to be made and that is subject to appeal.
Negotiated Settlement
Generally every agreement is negotiated, but some are referenced as a negotiated settlement. This could be just about anything that achieves settlement of a complaint or grievance without necessitating a third-party decision. Often, the terms of this type agreement are confidential and cannot be discussed with the immediate supervisor without violating the terms of the agreement. EEO settlement agreements often fall within this purview and may be called some other name but the intent and action is the same.
Generally, settlement agreements are negotiated by either the human resource specialist handling the case or the attorneys for the parties, with the consent of the complainant and the manager of the facility. The terms of the agreements do not generally assess who is right or wrong but establish some "middle-ground" that the parties can agree upon. In many cases, the first-line supervisor of the involved employee is not involved in the terms established by the settlement agreement, although that supervisor might be directly involved in implementing the agreement.
Problems and How to Prevent Them:
- When a confidentiality clause is included in the agreement, it primarily has an effect on management. From a management perspective, I recommend including a confidentiality clause only if that issue is a deal-breaker. In that case, the clause must be carefully crafted to identify that the agreement will be provided to all individuals who will be involved in its implementation. This includes the immediate supervisor who will be overseeing the performance/conduct of the employee and determining if the agreement is violated by the employee.
- Also, if a confidentiality clause is used, the document should clearly depict that the agreement will be used for any future appeals of the employee that involve the issue giving rise to the settlement. Many agencies have lost cases on settlement agreements by using the agreement for another complaint of the employee when the original agreement did not provide for such use.
- Another problem routinely occurs when dealing with future references for prospective employers. The agreement should clearly delineate who is going to provide the references and what will be said about the employee. If not crafted correctly, this can become a problem for management and violation of the agreement can occur if this issue is not clearly defined and followed. If someone other than the immediate supervisor will provide the reference, the immediate supervisor must be schooled on how to handle requests that come to him/her.
- I have personally been involved in implementing an agreement negotiated by another mediator that provided the employee would retire on a specific date. When the date came for the retirement, the employee refused to file the application for retirement and OPM would not accept an agency filing even with the settlement agreement included. Optional retirement is "voluntary" and unless the employee volunteers to file for retirement, it will not occur. The employee can withdraw an application for retirement any time before it is effective. Even if a signed retirement application is obtained when the agreement is implemented, it will meet the same fate if the employee withdraws the application before the effective date. This problem could have been prevented before the agreement was finalized if the mediator had obtained clearance from other organizations who would be implementing the agreement.
- Be clear on the performance/conduct that will cause the employee to fail the agreement. This must be clearly delineated to assure both parties are fully aware of this criteria and the immediate supervisor of the employee can adequately police it. Also, be sure the action to be taken as a result of the failure is be stated. If the employee will be removed, state that. If a resignation will be processed, be sure the agreement provides for that action and specifies the employees signature on the agreement is his/her voluntary resignation if the employee fails the agreement. Clearly state the action to be taken if the employee fails the agreement and the action to be taken if the employee is successful.
- If the employee has a representative, provide a space for the representative to sign the agreement in addition to the employee. Having only the representative sign the document can be problematic for the parties if the employee later contests the agreement because he disagrees with it. Obtain all signatures at the time the agreement is negotiated to assure this problem is eliminated.
- Often, the wording of these documents is not reviewed by the implementing organizations before signature. I recommend getting review by Human Resources, EEO, legal counsel, and other offices which will be involved in implementing the decision. If the decision involves back pay, be sure the finance office is involved in review. If the parties involved in implementation of the decision have an opportunity at review the agreement prior to final signature, a lot of opportunities for failure are eliminated before the agreement is finalized.
- Designate one person for management who will be the "process facilitator" for implementation. Having one person responsible provides a designee who will assure the process continues moving to completion. This will prevent an agreement from getting lost in the administrative process used to implement the agreement. I have generally utilized either the Employee Relations or EEO Specialist who was involved in the case as the process facilitator.
- Be clear on the length of the agreement and the actions that will be taken if/when the employee completes the allotted time specified in the agreement. This is often overlooked and causes problems that could have been eliminated when the document was written.
- Although this list is not all inclusive, these are some of the barriers I have observed or read which have prevented successful implementation of a settlement agreement. Experienced mediators and settlement negotiators often have checklists developed to assure many of these issues never occur.
The advice and content of this article is purely the author's and does not represent the views or recommendations of any other party.
© 2009 Phil Varnak. All rights reserved. This article may not be reproduced without express written consent from Phil Varnak.
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