WHEN AGENCIES LIE IN SETTLEMENT TALKS

Here are the facts that MSPB recently faced.  Two employees got into a fight at the workplace and were fired. As their MSPB appeal hearings grew closer, the agency made settlement offers and one employee agreed to drop her appeal and leave if the agency changed her removal to a resignation.  She contends that the agency assured her that it was not (and would not) offer the other employee in the fight reinstatement.  But it turned out that it did reinstate the other employee.  Is the settlement valid?

The cynics among us probably believe the settlement is still enforceable for a variety of reasons.  First, sellers mislead, deceive, and dupe buyers all the time.  That’s life and why “Buyer beware” is such a good piece of advice.  Second, the agency never made a hard formal promise that it would not reinstate the other employee.  Third, if the employee was so concerned with what happened to the other employee she could have made her deal contingent on what the agency did with the other employee.

But that is not how MSPB saw this situation.  It promptly pronounced that “Even if invalidity is not apparent at the time of settlement, the settlement agreement must be set aside if it is subsequently shown, by new evidence, that the agreement is tainted with invalidity by fraud or misrepresentation. Henson v. Department of the Treasury, 86 M.S.P.R. 221, ¶ 7 (2000). A showing that a reasonable person would have been misled by the agency’s statements is sufficient to show misrepresentation.”

On top of “fraud or misrepresentation” it added the requirements that settlements must be “comprehensive, freely made, and fair, and . . . not the result of duress or bad faith on the part of the agency.”  A settlement is ”. . . considered involuntary if it resulted from the employee’s reasonable reliance on the agency’s misleading statements, or from the agency’s failure to provide the employee with adequate information on which to make an informed choice.”

However, it falls to the employee seeking to overturn her settlement to prove that, “. . . the agency representative knew that the agency intended to reinstate or had reinstated the other party to the altercation and stated otherwise to the appellant.”

For a look at the complete decision see Weldon v.  Dept. of Veteran Affairs, 2013 MSPB 39 (May 24, 2013)