Before you signed that Releases in Settlement and Separation Agreements

Remedies for Breach of Agreement

A prevailing employer may be entitled to certain remedies resulting from the plaintiff's breach of the agreement, in addition to the release providing a complete defense to a plaintiff's claims. Available remedies depend on the parties' agreement and applicable law.

Attorneys' Fees and Costs

Because the primary purpose of entering into a release is to avoid litigation, the damages the employer suffers from a breach are generally the costs and attorneys' fees incurred in defending against the wrongfully brought action. For this reason, most settlement and separation agreements contain an attorneys' fees provision. This provision usually states that if the employee breaches any of the terms of the agreement, the employee is responsible paying all reasonable attorneys' fees and costs the employer incurred in enforcing the agreement (for example, see Standard Documents, Settlement and Release of Claims Agreement: Single Plaintiff Employment Dispute: Attorneys' Fees and Costs and Separation and Release of Claims Agreement: Attorneys' Fees and Costs).

Courts routinely award reasonable attorneys' fees and costs to a prevailing employer incurred in defending a claim barred by a release (for example, see Peddy, , at *4; Velazquez v. Courtyard Mgmt. Corp., , at *3 (D. Or. Mar. 9, 2018), report and recommendation adopted, (D. Or. Apr. 13, 2018)).

However, the enforceability of an attorneys' fees provision in a settlement or separation agreement may depend on state contract law, as well as the fairness of awarding attorneys' fees under the circumstances. For example, a district court in Alabama denied a prevailing employer's request for attorneys' fees based on an attorneys' fees provision in the severance agreement. The court recognized the hardship to employers by allowing a case to proceed through discovery when an employee had signed a release in exchange for valuable consideration. The court still found that enforcing the attorneys' provision in the release "would be incongruous with the policy of Title VII, also a remedial statute designed to protect employees" and, therefore, awarded the employer only its costs. (Daugherty v. MAPCO Exp., Inc., , at *22 (N.D. Ala. June 19, 2012).)

For more information on attorneys' fees and costs, see Practice Note, Employment Litigation: Defending Against Frivolous and Bad Faith Claims: Attorneys' Fees and Costs for a Prevailing Defendant.

Other Damages

Damages beyond attorneys' fees and costs are unlikely. Many settlement and separation agreements contain a liquidated damages clause. These clauses typically require the employee to pay a fixed amount for each material breach or an amount calculated by a defined formula. The enforceability of these provisions depends on applicable state law, but generally must:

• Bear some reasonable relationship to the employer's anticipated or actual damages.
• Not be punitive.

(See Standard Documents, Settlement and Release of Claims Agreement: Single Plaintiff Employment Dispute: Remedies and Enforcement and Separation and Release of Claims Agreement: Remedies.)

Because the employer's attorneys' fees and costs in defending against the action and enforcing the release likely account for most or all the employer's actual damages, a court is unlikely to enforce a liquidated damages clause for an employee's breach of a release provision.