Costco and its former employee Susanna Villalobos reached a tentative settlement to end her federal lawsuit alleging workplace sexual harassment by a male colleague who allegedly asked her out on dates repeatedly. Although details of the settlement have not been publicized, it calls attention to the importance of a properly drafted settlement agreement.
In Villalobos v. Costco Wholesale Corp. et al., Villalobos alleged that a colleague verbally cursed and threatened her when she rebuffed his advances and that Costco failed to act after she reported his conduct. The suit further alleged that Costco conducted a sham investigation and failed to accommodate her hereditary angioedema.
At their core, settlement agreements are contracts where one party gives up legal claims and the other provides some form of consideration in exchange. An enforceable settlement agreement is critical because it is binding on the parties and can determine whether a dispute is resolved or may be relitigated. And if a party is required to seek enforcement for a breach, a settlement agreement that will be deemed enforceable by a court in the applicable jurisdiction is necessary.
Settlement agreements should be drafted clearly with unambiguous terms, as courts cannot enforce vague obligations or performance duties. This includes any payment schedules or the respective consideration duties between the parties.
States may also have their own requirements for specific language to include for a valid release. Under California law, Civil Code section 1542 requires precise wording to waive unknown claims. In the context of an employment dispute resolution, it is also prudent to include a provision that the plaintiff employee agrees they have been paid all wages and have otherwise received all leave and forms of compensation to which they would be entitled.
There are additional terms that should be included as part of a settlement agreement for an employer, including a statement of no admission of liability – indeed, a settlement does not indicate that one party has liability for the other’s claims. Equally important are a non-disparagement agreement and confidentiality provision, as one of the benefits of resolving an action outside the courtroom is the ability to keep the terms of the agreement between the parties and select individuals, such as their counsel and tax advisors. A strong settlement agreement will also have the plaintiff or claimant confirm that they do not have any other outstanding claims or know of any such claims, as the general purpose of the settlement agreement is to finally resolve all disputes in every forum. It is further important to specify the governing law should the agreement need to be enforced, as well as if the parties are entitled to recover attorney’s fees and costs for seeking enforcement.
A settlement agreement that does not contemplate these issues can leave key terms unenforceable, fail to release unintended claims or spur subsequent litigation over interpretation of the agreement. Ambiguity in an agreement is likely to be construed against the drafter, so it is important to have experienced counsel who will draft enforceable obligations that buy the parties peace of mind in knowing that a settlement does in fact resolve all claims in their entirety.
Costco Wholesale Corporation has agreed to settle a worker's suit claiming the company retaliated against her after she reported that a male colleague harassed her by repeatedly asking her out on dates and reacting angrily when she denied him.
