What should you know before signing a settlement agreement?
When settling a legal dispute, many people don’t realize just how far-reaching a broad settlement agreement can be. A general release may extend beyond the specific claim at issue and extend to all claims related to a particular relationship or event.
How do courts evaluate settlement agreements?
Courts will uphold a broad release which the parties signed knowingly and voluntarily. Whether there was sufficient time to review the agreement, access to an attorney, and unambiguous language in the agreement are all factors that courts will consider, regardless of what you believed you were agreeing to.
How does this issue arise?
In Crawford V. Magna Seating of America, an employee took medical leave for approximately a year and a half. When the employer requested that she return to work, she sought an accommodation, which was denied. One week later, the employer terminated her employment. She then filed suit alleging violations of the Americans with Disabilities Act (“ADA”) and the Michigan Persons with Disabilities Civil Rights Act (“PWDCRA”) and brought a workers’ compensation claim.
The workers’ compensation claim later settled, and she signed a General Release of Claims and Settlement Agreement discharging the employer from all claims relating to her employment or termination. Although she thought the release only applied to her workers’ compensation claim, the court disagreed and her discrimination case was dismissed entirely.
This kind of situation arises more often than assumed. For example, you may slip and fall at a workplace outside of work hours and settle that claim, only to later discover that the settlement’s broad language also applied to a separate tort claim you intended to pursue. Similarly, you might resolve a discrimination claim against your employer but inadvertently waive a potential claim for unpaid overtime or bonuses. Consider also a medical malpractice claim which you’ve settled without realizing that the settlement also applied to an unresolved billing dispute with your healthcare provider.
What actions should you take before signing?
Before signing any settlement agreement, read each word carefully or have an attorney review it. Pay close attention to blanket terms such as “any and all claims.” If there are other open or potential claims, ensure they are explicitly carved out. Once the agreement is signed, it may be too late to recover those rights.