MSPB Settlement Agreements 101
The Merit Systems Protection Board (MSPB) is an independent quasi-judicial body, or "court-like" tribunal, that handles discrimination cases for federal employees. Specifically, the MSPB handles adverse actions (termination, demotion, suspension of longer than 14 days, reduction-in-force and furlough); prohibited personnel practices (whistleblowing); and retirement actions (involuntary retirement, reemployment rights, etc.). All of those actions can create serious financial and employment risks. But, not all employment disputes need to reach the point where a federal employee needs the help of the MSPB, and the MSPB can handle claims relatively quickly. Moreover, through settlement agreements, federal agencies and their employees can come to mutually beneficial terms to end the conflict. The MSPB then are able to post these settlement agreements to announce various settlements and to advise the public of its decision in each case.
What , then, is a settlement agreement? Well, according to the MSPB: "Settlements are a significant part of our adjudication responsibilities and help reduce our case backlog. In addition, the parties gain the benefit of achieving a satisfactory resolution to their issues without the costs associated with a hearing. Public interest is served by allowing the public to review the terms and conditions of settlement agreements so they can make decisions on whether or not to seek similar benefits."
"Any settlement which resolves an appeal before the Board or an adjudicative Officer, Board, or Administrative Judge (AJ) shall be reduced to writing, and shall be signed by the parties. The resolution of a case by settlement agreement does not constitute an expression or admission by the Board or any AJ of any opinion, finding, or conclusion of law, fact, or discretion." 5 C.F.R. § 1201.41(c)(4).
Checklist of Elements Found in MSPB Settlement Agreements
As with most contracts, settlement agreements under the MSPB typically include terms and conditions, in addition to other standard provisions, such as the dispute resolution clause that we discussed above, and a confidentiality provision.
A typical term and condition will reflect the primary basis for the settlement, such as a removal or demotion, without pay, which is what you’re looking for. You want the term and condition to image the penalty you would have received if you had not settled.
You should also be cognizant of any waiver of certain rights that you are making as part of the settlement. In addition to waiving your appeal rights, you may also be waiving the right to sue for back pay. You should also be aware of whether you are waiving your ability to grieve the personnel action to the applicable union or office, to appeal to the MSPB or to negotiate a settlement with the agency and whether the settlement accomplishes these goals for you.
The non-disparagement or confidentiality clause in your settlement agreement is a standard clause that states that you will not disparage the Agency or Management (I think Agency is sufficient), nor should the Agency or Management disparage you. However, it does not prohibit you from disclosing to your spouse, attorney, accountant or tax advisor the terms of your settlement agreement – for example, how much you received and how it will be taxed.
The typical MSPB settlement agreement will state that in consideration of the benefits afforded to you, you agree to waive any claims or grievances which you have against FISCA, or any Federal Agency, office or component thereof, including but not limited to, the employing agency or office, and their respective officials, directors, officers, employees, supervisors, agents, representatives and assigns, resulting from the facts and allegations which are the subject of the appeal or grievance identified in this settlement agreement.
Sample Provisions Found Within MSPB Settlement Agreements
Common Elements
While every MSPB settlement agreement is unique, there are a number of common elements that run throughout MSPB settlement agreements. Some of these elements are required by government-wide regulations and have to be included in any settlement agreement with an agency. Other elements are important but not also required by the regulations.
The following list identifies some of the common elements that you should look for in every MSPB settlement agreement:
Payment of back pay and other forms of damages. A settlement agreement should state the amount of pay due to the employee and when and how it will be paid. It is best to have this language mirror the statutory requirement under 5 U.S.C. § 5596 which governs the payment of back pay.
Federal income taxes. The settlement agreement should indicate how the settlement payment will be taxed. There are specific requirements in the Internal Revenue Code and Internal Revenue Service regulations regarding federal income taxes, back pay and damages for other types of employment discrimination, which settlement or judgment payments are considered to be. Common provisions include an education of the tax treatment of the settlement payment, and a statement that the employee is responsible for paying his or her own federal income taxes.
Statutory Duncan notice. Under 5 U.S.C. § 5596(c)(3), the employee is entitled to a notice that payments made under a settlement agreement are subject to the Federal Employees’ Compensation Act, the Internal Revenue Code, and employment laws.
Payment of fees and expenses. To be enforceable, any payment for attorney’s fees and expenses must identify the specific fee being paid, and say for what work. It should also provide that the payment resolves the dispute over the amount of the fees and expenses.
Tax treatment. Be on the lookout for any language indicating that, if the Internal Revenue Service successfully challenges the tax treatment of the settlement payment, you (the claimant) agree to indemnify the respondent (the agency) for any resulting taxes, interest or penalties. This type of provision will put you on the hook for any taxes or penalties owed due to the incorrect tax treatment. Instead, try to get your agreement to handle the taxes correctly from the beginning by identifying the taxes and penalties that may apply and how and when the payment should be handled.
Non-Admission of Liability Clause. Under this type of clause, the agency admits no liability for the claims made by the employee. This clause does not prevent you from waiving the claims you brought against the agency, but it means the agency has not admitted liability for any of your claims. As a default position, an MSPB settlement agreement should contain a non-admission of liability clause.
Release of Claims. This is a key provision of an MSPB settlement agreement and warrants careful review. If the agreement is general, such as the claimant releases all claims that were or could have been brought against the agency, then you need to make sure you have released all claims that you wish to release, including other types of discrimination claims that you may not have raised before the MSPB that could now be barred by the settlement agreement.
No Communications to the Agency. This type of clause requires the employee to agree that he and his family members will make no disparaging comments to the news media regarding the agency and will make no communications to the agency that "have the effect of undermining the required harmonious relationship" between employee and agency. Many agencies have this type of clause, but recent Supreme Court authority has highlighted the fact that the government cannot restrict the employee’s ability to make comments about the settlement of his case.
Other Legal Considerations Associated with MSPB Settlement Agreements
As outlined above, MSPB statute and case law is complex and often requires extensive statutory analysis. It is therefore not uncommon for the parties to agree to a settlement agreement that attempts to bridge the somewhat conflicting and confusing case law. The following four legal considerations are critical to any MSPB settlement:
First Consideration – Statutory Interpretations
The MSPB must comply with the statutory MSPB temporal boundaries. That is, the MSPB only has the authority to assess a notice of appeal if it is filed in accordance with Section 7701, even where the parties agree to consider the appeal a "final order." Thus, although parties may agree to settle a case and have either a neutral maintain jurisdiction over the matter or agree to a different compliance procedure, the MSPB lacks the jurisdictional authority to agree to a settlement agreement that does not comply with the Section 7701 statutory requirements for a "final order." In all instances, the agreement must comply with the provisions of Section 7701.
Second Consideration – Agreement Between the Parties
In addition to the statutory requirements, the MSPB also has the power to enforce or abrogate contracts between the parties. For instance, there is no prohibition that would invalidate a settlement agreement entered into that provides the employee the option to choose return to work or an extended period of leave without pay for the purpose of facilitating a settlement agreement. As with any private contractual agreement between the parties, the MSPB affirms the right of the parties to agree to agreements between themselves.
Third Consideration – Full Settlement
The MSPB is not a party to a settlement agreement reached between a prevailing party and an agency or respondent. As such, the 5 U.S.C. §5596 Settlement Provision applies to any MSPB settlement agreement entered into subsequent to a final order. Therefore, where the parties agree to reimbursement for attorney fees as part of a settlement agreement, a copy of the settlement agreement must be provided to the Office of Personnel Management (OPM) when returned from the parties for approval. In the absence of a copy of the settlement agreement, the MSPB lacks the authority to determine whether the settlement agreement was validly entered into between the parties.
Fourth Consideration – Compliance with Governmental Requirements
Pursuant to 5 U.S.C. § 7701(c)(3), any settlement agreement reached between the parties is also subject to all governmental requirements regarding renewable resources, affirmative action, nondiscrimination, Federal qualifications standards and veterans’ preference laws. In general, these laws establish requirements that Federal agencies must meet, including providing notice and creating reports, to ensure compliance. 29 C.F.R. §1614.203.
A Sample MSPB Settlement Agreement Defined and Analyzed
When confronted with a settlement offer or proposed settlement agreement from your agency, you should first consult with your MSPB attorney to determine if the terms and conditions are fair and reasonable. Under no circumstances should you sign a proposed settlement agreement "as is," without knowing the ramifications of all of the agreement’s terms. Any concession you make could impact your current or future rights or obligations. To illustrate this point, below we will analyze the key provisions in a sample settlement agreement.
(a) COMPLAINTS WITH WHICH THE PARTIES HAVE AGREED TO COMPROMISE
In this section the parties should agree that they have either identified or waived any and all potential complaints and claims against each other and that, by signing the settlement agreement, neither party is agreeing to accept liability for any claim. The waiver of claims should be broad enough to cover all administrative, judicial, regulatory, legislative, or any other type of review, as well as any complaints, allegations, causes of action, or grievances arising out of the employment relationship or prior to the signing of the settlement agreement. To cover the bases and ensure that the other party cannot come back years later claiming that the employee never waived her appeal rights, the waiver should be signed by the employee, the agency, an attorney with authority to bind the agency, and the federal agency that instituted the complaint under review.
(b) PROMOTION ACCORDING TO THE INDICATED TIMELINE
This section includes the actual terms of the settlement agreement, e.g., the specific promotion the agency agrees to giving to the employee on a specific date. The promotion should be described in detail and the time period for carrying out the agreement should be specific.
(c) CONSIDERATION
The section may be heading "concessions" or some other term, but this section outlines the other terms of consideration. For example, in addition to a promotion, the settlement may include monetary compensation, restoration of leave, attending an employee’s organization’s convention, travel costs, moving expenses, etc . If the employee’s EEOC complaint is being settled, the settlement agreement may include the type of relief the employee will receive, such as a promotion, monetary damages, provided that the relief is sufficient to justify the release of claims. Any amounts payable under the agreement may be subject to offset for any amounts that the employee owes to the agency, or to the IRS for that matter.
(d) RE-EMPLOYMENT
In this section, the parties agree that the employee will be rehired in the position referenced in section (b) by a specific date.
(e) SMOKING-FREE WORKPLACE
In many proposed settlement agreements special provisions deal with the employer’s smoking policy in the workplace, in addition to requiring the employee to refrain from smoking. This provision is not required in a MSPB settlement agreement.
(f) WAIVER AND RELEASE
In this block the employee must waive and release any and all claims that they might have against the agency. Since the MSPB has already decided the case, it is particularly important for the employee to understand what rights they are relinquishing as part of the settlement agreement.
(g) NOTICES
Here the employee and the agency provide their addresses where either party can send notices or correspondence to the other party.
(h) AGENCY REVERSION
In most, if not all, MSPB settlement agreements, the agency needs a specific amount of time in which to secure the necessary funds to comply with the terms of the settlement agreement. This block gives the agency a specific amount of time to do so. By providing a specific date, there are no arguments or requests for extensions should the agency forget to get the funds within the time allotted.
(i) BINDING ON SUCCESSORS IN INTEREST
Essentially, this language means that the agreement continues in effect despite changes in the employing agency’s, or your, management structure – i.e., if you are promoted, transferred, or otherwise end employment.
Negotiation Tips for Securing a Favorable MSPB Settlement Agreement
In order to get the best deals from the merger of your MSPB case and your separation (or removal) from federal service, you have to come into settlement talks with the federal agency at the right time and from the right position. The best time to open negotiations on a settlement agreement to resolve all of your MSPB case (including possible reinstatement / reemployment) is after the agency has already determined that an employee misconduct disciplinary action or MSPB appeal does not justify being dealt with in administrative courts and agencies. Hence, the judge did not issue a presiding official decision finding that you should be removed from your job or your case needs to be dealt with in administrative courts and agencies. This means that the agency has concluded that your case can be resolved by a settlement agreement without further legal proceedings. The more likely this is, the better your bargaining position is and your bargaining position is critical to getting a good settlement agreement. The better your bargaining position, the more you can ask for and expect to get from the state and HHS. This means that you need to have done everything possible to convince the MSPB judge before he or she rules that your MSPB case shows that you did nothing wrong, or the federal agency and the MSPB judge should rule that you were laid off through no fault of your own. Anything that demonstrates, supports, and clarifies that point to the federal agency will help you get the best MSPB settlement agreement. A federal employee who does not win their case in a hearing before the MSPB judge set for termination of their employment does not need to bring a favorable outcome to the bargaining table when discussing a settlement agreement with their agency said a seasoned employment attorney with years of experience. Without fail, the agency will always look for a way to blame the employee for whatever has occurred. They will view the MSPB ruling against the employee as supporting that they have to get rid of the federal employee and the lower the amount paid to the employee under the settlement agreement. If you are a federal employee who has an MSPB appeal or proceeding that is going particularly poorly, you still have some options that might work out favorably for you if you know what may be available. The agency may not have gone through the entire administrative process towards removal. This means the time frame for the agency to consider whether to appeal and/or file an opposition brief on your pending case is limited and that might force the agency to settle with you in the end as it cannot prove a stronger case against you or its arguments do not support the costs of pursuing administrative and/or court litigation. The same principles apply if the federal agency is required to engage in alternative dispute resolution (ADR) as a prelude to litigation. If the agency is engaged in settlement negotiations over the administrative proceeding you will have a greater opportunity to negotiate a more favorable settlement agreement deal. If you expect that the federal government agency at the end of the day is going to recover or that you will need a lawyer to litigate the dispute in the long run those are not reasons either to lose hope or to allow the agency to take advantage of you.
Typical Trouble with MSPB Settlement Agreements to Avoid at All Costs
In our experience, the majority of MSPB settlement cases, even if negotiated by attorneys, have some flaw or another in them. Typically, the flaw takes the form of an inconsistency, lack of clarity, or some other barrier to enforceability. Examples include improperly recorded dates, vague language, improper waivers, failure to incorporate all provisions into the agreement, internal inconsistencies, contradictions with the various complainants, or more technical issues.
The first flaw that usually appears is a failure to properly incorporate the complaint referenced in the agreement. When you settle a case, you must refer to the entire complaint that you are intending to resolve. If you are settling one or more complaints, you must name each one explicitly. This means that you must also name all of the underlying complaints being referenced. For example, you may be including a previous grievance in a settlement agreement to resolve an EEO complaint as well. If you only reference the EEO complaint, you have failed to resolve the grievance (or vice versa). This exacerbates the problem if the grievance went to the MSPB previously, because you may lose the right to refile at the MSPB.
Inside the text of the agreement, you must make sure that all of the various provisions are clearly set forth. For example, if you are receiving a lump sum award and then receiving the payment in install, you must have that order of succession clearly laid out. If your agreement says you will receive a lump sum award, but only pays you in installments, this could be a problem. Conversely, if it says you’ll receive payment in installments, but you receive your full award in a lump sum, this could also be problematic.
Many common mistakes are simply typos, such as misstated dates, names, incomplete exhibits, and so on. Again, if the complaint is not fully incorporated, this mistake is compounded. You should also avoid using any baseless abbreviations or symbols that are not commonly known outside of your office. We saw one attempts to have a percent reduction in a settlement made up by several abbreviations for percent, effectively driving home that the settlement was being paid for via salary deductions.
If you fail to make any corrections to the proposed settlement agreement before it becomes final, you will lose rights to contest or void the settlement agreement later. It’s best to be certain before signing anything that every single word in a settlement agreement is exactly as you believe it should be. If you change your mind later, even in a fundamental way, the written settlement agreement controls and you will be bound.
Conclusion
In the complex world of employment law, the concept of a MSPB Settlement Agreement can often seem like an insurmountable mountain. However, as we have seen in this article, understanding the nature of these agreements, as well as the importance of careful negotiation and preparation, is essential for those involved in federal employment disputes. The evidence we’ve examined makes it clear that a successful resolution of a case is based on a thorough understanding and analysis of the particular facts at hand, as well as how these circumstances will be viewed in comparison to the determination of whether an unfair labor practice has been committed.
There is no denying that MSPB Settlement Agreements are a vital tool for the resolution of disputes between federal employees and government agencies . However, as with all types of contracts, these agreements should be approached with a critical eye and an understanding of the risks and benefits they entail. By following the guidance and information we have provided throughout this article, you can arrive at an outcome that is favorable to your interests, while avoiding the pitfalls that can come with ill-prepared negotiations.
MSPB Settlement Agreements are a valuable tool for resolving disputes between federal employees and government agencies, but they require careful planning, negotiation, and drafting to ensure that they meet all necessary legal requirements and adequately protect your interests. By taking the time to thoroughly understand the process and terms of these agreements, you can arrive at an outcome that is favorable to your interests without the need for additional dispute resolution.