ANNETTE CARSON, Complainant
COLUMBIA ST. MARY'S, Respondent
An administrative law judge (ALJ) for the Equal Rights Division of the Department of Workforce Development issued a decision in this matter. A timely petition for review was filed.
The commission has considered the petition and the positions of the parties. Based on its review, and for the reasons stated at more length in the Memorandum Opinion attached hereto, the commission makes the following:
The administrative law judge's order is set aside and this matter is remanded for hearing on the issues, and in the manner, described below.
Initially, a hearing shall be conducted at which the ALJ shall allow both parties to present evidence relevant to the question of whether the complainant's execution of the "Complete And Permanent Release And Confidentiality Agreement" was knowing and voluntary, including but not limited to evidence about the meeting between the complainant and Manuel Lara on February 12, 2009.
If, after concluding such initial hearing and considering the evidence received, the ALJ finds that the complainant's execution of the "Complete And Permanent Release And Confidentiality Agreement" was knowing and voluntary, then the ALJ shall prepare and issue a decision, including findings of fact and conclusions of law with respect to that issue, dismissing the complaint on grounds of settlement and waiver.
If, however, after concluding such initial hearing and considering the evidence received, the ALJ finds that the complainant's execution of the "Complete And Permanent Release And Confidentiality Agreement" on February 23, 2009, was not knowing and voluntary, then the ALJ shall prepare and issue a decision, including findings of fact and conclusions of law with respect to that issue, ordering that the case be set for a further hearing on the merits of the complaint.
Dated and mailed March 12, 2013
carsonannette.rpr : 110 :
BY THE COMMISSION:
/s/ Robert Glaser, Chairperson
/s/ Ann L. Crump, Commissioner
/s/ Laurie R. McCallum, Commissioner
Background facts -- The complainant, Annette Carson ("Carson") worked for the respondent, Columbia St. Mary's ("CSM") as an Insurance Verifier. In early 2009, CSM eliminated its Insurance Verifier positions, including the complainant's. At that time, three new Financial Insurance Specialist positions were created. Four Insurance Verifiers whose positions had been eliminated, including Carson, applied for the open Financial Insurance Specialist positions. Carson was informed on February 11, 2009 that she did not get a Financial Insurance Specialist position. Her employment with CSM thus ended. Either on or prior to February 12, 2009, Carson was given a copy of a settlement agreement document, entitled "Complete And Permanent Release And Confidentiality Agreement," having to do with Carson's relationship with CSM. That agreement contained a paragraph waiving certain claims against CSM. On February 12, 2009, Carson met with Manuel Lara, CSM's Employment Relations Manager, and the settlement agreement was discussed. On February 23, 2009, Carson signed the settlement agreement, and on February 24, 2009, it was signed by a representative of CSM. Thereafter, Carson received the consideration provided for in the settlement agreement, which was payment of 11 weeks of her then-salary, paid out over an 11-week period.
Certain other matters are disputed. These matters include a dispute about what Manuel Lara may have said to Carson in their meeting on February 12, 2009.
Procedural history of the case - On May 19, 2009, Carson filed a complaint against CSM alleging denial of promotion to the position of Financial Insurance Specialist in February 2009, because of race. When the ERD began its investigation of that complaint, CSM asserted among other things that Carson had waived her claims against it by entering into the settlement agreement.
On September 24, 2010, the ERD investigator issued a Preliminary Determination dismissing the complaint on the grounds that Carson had waived her rights to bring such a complaint when she executed the settlement agreement.
Carson filed an appeal of this Preliminary Determination. In this appeal, she asserted among other things that when she met with Lara on February 12, 2009, he had advised her to wait until she received her 11 weeks of severance pay (provided for in the settlement agreement) before filing a discrimination suit, and he had suggested she wait until she received her initial unemployment payment to file charges.
On January 6, 2011, ALJ Deborah Little Cohn issued a decision reversing the dismissal and remanding for an investigation regarding the circumstances surrounding Carson's signing of the severance agreement. ALJ Cohn found that the severance agreement itself was unambiguous. However, ALJ Cohn expressed concern that there was insufficient information about what was said in the meeting of February 12, 2009, to ascertain whether Carson made a knowing and voluntary waiver of her right to file a complaint. As a result, ALJ Cohn reversed the Preliminary Determination and remanded the matter for an investigation regarding the circumstances surrounding Carson's signing of the agreement.
Another investigation then occurred. This time, the investigator obtained more detailed information from CSM about what it asserted to have happened. This included a written statement from Lara, denying that he had told Carson that she could file a discrimination charge after she received her severance benefits. As for Carson, she reiterated her claim that in the February 12 meeting, Lara told her to wait until she had received her severance before bringing charges against CSM, and that he further stated that if a "charge" came through CSM could stop her severance but that they could not touch her unemployment.
On February 14, 2011, the investigator issued another Preliminary Determination, again dismissing the complaint on the grounds that Carson had waived her rights to bring such a complaint when she executed the settlement agreement.
Carson filed an appeal of this second Preliminary Determination. She stated that she still disputed Lara's version of what happened and believed that there should be testimony under oath about the matter.
The appeal was again assigned to ALJ Cohn. CSM's primary argument was that the investigator had clearly found Lara's version of the meeting to be more credible than Carson's and that this should be affirmed. CSM also argued that Carson should not be heard to challenge the validity of the settlement agreement because she had not returned or offered to return the consideration she received under the settlement agreement (i.e., the 11 weeks of severance pay).
On June 22, 2011, ALJ Cohn issued another decision, again reversing the Preliminary Determination. The ALJ's decision effectively tracked her first decision, adding to it a description of the more recent procedural history and the arguments most recently being made. The ALJ concluded:
The ALJ determines that if Carson is correct, that Mr. Lara advised her that she could file "charges" against the Respondent after she received her severance payment, the cases cited in the Respondent's response to the appeal, are not on point. Assuming that Carson's version of the conversation with Mr. Lara is correct, it is conceivable to the ALJ that his verbal assurance to her could be interpreted to invalidate the waiver of claims contained in the severance agreement. Mr. Lara was an agent of the Respondent at the time with a vested interest in having Carson sign the agreement.
Clearly, this situation boils down to Carson's word against Mr. Lara's. The ALJ finds that it is impossible determine (sic) the credibility of the witnesses on paper, particularly given that both of Carson's co-workers reported that immediately after meeting with Mr. Lara, Carson informed them that he had told her that she could file "charges" after she received the severance payment. Consequently, an Administrative Law Judge should assess the witnesses' credibility under oath at a hearing regarding the conversation between Carson and Mr. Lara in order to determine whether Carson knowingly and voluntarily waived her rights when she signed the severance agreement.
However, while the ALJ thus appeared to recognize the need for a hearing regarding the facts and circumstances involved in the settlement, she did not order a hearing. The ALJ's actual order was that the matter again be remanded to the ERD's investigation bureau, this time "for an investigation of Carson's discrimination complaint."
Pursuant to ALJ Cohn's second decision, another investigation then occurred. This investigation focused on the merits of the complaint. Both parties submitted materials and argument.
On September 9, 2011, the investigator issued an Initial Determination finding probable cause to believe that discrimination had occurred. This determination contained no findings about, or mention of, the settlement issue.
The matter was then certified to hearing before the ERD, and it was assigned to ALJ James A. Schacht.
In May, 2012, CSM filed a motion to dismiss the complaint. This motion asserted two grounds. The first was that Carson had made "misrepresentations" to the ERD when she indicated to the ERD investigator that she was "willing and able" to return the severance payments, and that the complaint should be dismissed as a sanction for this. The second was that Carson had made a knowing and voluntary waiver of her claims.
After a number of written exchanges with counsel - but without conducting any hearing - ALJ Schacht issued an "Order of Dismissal - Valid Release of Claims" which dismissed the complaint with prejudice, on July 6, 2012. The ALJ's rationale was twofold. First, although rejecting CSM's argument that the complaint should be dismissed as a sanction for misrepresentation, the ALJ concluded that the record showed Carson had not made a valid offer to tender back the consideration which had been paid pursuant to the settlement, and that dismissal was required for that reason. Second, the ALJ held that even if Carson's challenge to the settlement was considered, and even if the statements were made by Lara on February 12, 2009 as alleged, Carson must still be found to have voluntarily waived her claims against CSM.
Carson then filed a petition for commission review.
Discussion -- In her brief in chief (and reply brief) to LIRC, Carson makes four arguments: (1) the complaint should not have been dismissed without a hearing, because there was a material issue of fact as to whether Carson knowingly and voluntarily signed the release; (2) the settlement agreement only applied to the termination of Carson from her old job, and not to CSM's decision not to employ her in one of the available new jobs; (3) Carson was not required to "tender back" the amount she received from the settlement; and (4) Carson's waiver of rights was neither knowing nor voluntary.
In its brief to LIRC, CSM makes three main arguments in response to Carson's arguments: (1) no hearing is necessary, and applying the applicable standards it should be found that Carson did enter into a knowing and voluntary waiver; (2) Carson was required to but did not make a valid "tender back" of the consideration she received in the settlement; and (3) Carson's "misrepresentations" to the ERD warrant dismissal and imposition of sanctions under Wis. Stat. § 227.483.
The commission believes that some of these issues can be resolved without need for any further argument or hearing.
First, the commission rejects Carson's argument that the settlement agreement only applied to the termination of Carson from her old Insurance Verifier job, and not to CSM's decision not to hire her for one of the available new jobs as a Financial Insurance Specialist. The fact that the settlement agreement starts with the recitation that it "is made as the result of Employee terminating employment with the Hospital as a result of a position elimination on February 13, 2009," does not necessarily define the scope of the waiver in the agreement. Waivers in settlement agreements can and frequently do extend to matters beyond the dispute that the matter initially arose out of. The waiver set out in paragraph F. of the settlement agreement in this case, is very broad. It extends to any and all claims in any way connected with Carson's employment with CSM "or" Carson's separation from employment. Even if Carson's claim in regards to her application to be one of CSM's Financial Insurance Specialist positions is treated as not being related to her separation from employment, it is still clearly a claim that arises out of or is in some way connected with employment with CSM. This waiver clearly covers every possible claim Carson could assert against CSM, except future claims. Thus, the waiver clearly includes Carson's claim that she was discriminated against in not being given a Financial Insurance Specialist position.
Second, the commission rejects CSM's argument that the complaint should be dismissed because Carson was required to but did not make a valid "tender back" of the amounts she received in the settlement, for the following reasons.
Complainants are generally required to tender back any consideration received in exchange for the waiver of their rights to pursue discrimination claims, as a condition precedent to challenging the validity of such waiver. See, Giese & Field v. Wausau Ins. Cos., ERD Case Nos. 8600691, No. 8600731 (LIRC, Oct 25, 1988). However, there is a special circumstance in this case. The settlement agreement contains this provision:
K. In the event that Employee, subsequent to the execution of this Agreement, disregards her obligations under the Agreement and challenges the waiver and/or brings a claim against Hospital (despite the waiver of claims set forth herein) and proves her claim against Hospital, Employee agrees she shall use any and all monetary awards received in such an action to reimburse Hospital all the amounts of compensation and benefits Employee is receiving in this Agreement, plus interest and attorney fees incurred in collecting such reimbursement. This provision is not intended to be a tender back provision prohibited by the Older Worker's Benefit Protection Act and the regulations promulgated thereunder. Instead, reimbursement shall occur if, and only if, Employee receives a judgment against the hospital.
Carson argues that this provision makes the tender-back requirement inapplicable. CSM disputes this argument, claiming that there is a difference between the legal requirement to offer tender-back which Giese & Field and other cases interpret as being implicit in the WFEA, and the requirement of Paragraph K. that if there is a successful challenge to the waiver and an eventual recovery on the underlying discrimination claim, then the consideration must be repaid. However, the commission finds CSM's argument unpersuasive. The two things are different, it is true, but the argument does not take into account the clear language of Paragraph K. that "reimbursement shall occur if, and only if, Employee receives a judgment against the hospital."
CSM may be understood as arguing that there is a distinction between actually reimbursing the consideration and making a genuine offer to do so, that Paragraph K. does not impair the obligation to make the offer, and that Carson cannot be deemed to have done so here because she admitted in her discovery responses that she did not have the money. However, this again ignores the provisions of Paragraph K., which anticipate that any return of the consideration will come out of a recovery on the underlying discrimination claim. This means there is no need for Carson to actually have the money at hand before that occurs.
None of the cases in which the commission has recognized an obligation to tender back (or offer to tender back) consideration as a condition of challenging a waiver in a settlement agreement, have involved settlement agreements with a provision like this one, which expressly states that reimbursement of consideration is not necessary unless and until there is an eventual recovery. The commission concludes that the tender-back requirement recognized in Giese & Field does not apply where the settlement agreement contains a provision such as Paragraph K. of the settlement agreement in this case.
Third, the commission rejects CSM's argument that Carson's alleged "misrepresentations" to the ERD warrant dismissal and imposition of sanctions under Wis. Stat. § 227.483. That statute provides authority only for the imposition of costs and fees as a sanction for commencing or continuing a frivolous claim or defense. It provides no authority for using dismissal as a sanction. For this reason it is clear that CSM's argument lacks support.
This leaves the issue of whether Carson's waiver of rights was knowing and voluntary. The commission has held that the "totality of the circumstances" test should be used in determining whether there has been a knowing and voluntary waiver of rights under the WFEA. Grahl v. Mercury Marine, ERD Case No. 8902050 (LIRC, 12/04/92), Lynch v. Zalk Joseph's Fabricators Inc., ERD Case No. 9401181 (LIRC, July 17, 1996).
Carson's argument is that her waiver was not knowing and voluntary because of the effect of the statements she alleges Manuel Lara made to her about the settlement agreement. She argues that she must at a minimum be given an opportunity for hearing on the issue of whether Lara in fact made those statements.
CSM relies on two different arguments in opposition to Carson's argument that the agreement to the settlement was not knowing and voluntary.
First, CSM argues that LIRC has been consistent in upholding settlement agreements containing full releases, even in the face of a complainant receiving poor advice from the complainant's own attorney. However, Carson is not claiming that she was given inaccurate information about the settlement agreement by her own attorney. She is claiming that she was given inaccurate information about the settlement agreement by a responsible agent of CSM. Lara was CSM's Employment Relations Manager. If he indeed communicated to Carson, prior to the time that she signed the settlement, that she could sign that agreement and still then bring a discrimination claim against CSM, this would be a basis for finding that Carson's subsequent execution of the settlement agreement was not knowing and voluntary because it was based on misinformation given to the complainant by the respondent. This is a different situation than those involved in the cases relied on by the respondent.
Second, CSM argues that the parol evidence rule precludes Carson from relying on a claim that oral statements by Lara altered the terms of the written settlement agreement subsequently entered into. However, in the circumstances here the commission does not agree that the parol evidence rule applies.
The parol evidence rule is a rule of substantive contract law. It provides that when the parties to a contract embody their agreement in writing and intend the writing to be the final expression of their agreement, the terms of the writing may not be varied or contradicted by evidence of any prior written or oral agreement in the absence of fraud, duress, or mutual mistake. Town Bank v. City Real Estate Dev., LLC, 2010 WI 134, 36, 330 Wis. 2d 340, 357-58; 793 N.W.2d 476.
The real question when a party invokes the parol evidence rule is whether the parties intended the written contract to be the final and complete expression of their agreement. Id. at 157. A contract that represents the final and complete expression of the parties' agreement is considered to be fully "integrated." If the contract is integrated, absent the existence of fraud, duress, or mutual mistake, the court construing the contract may not consider evidence of any prior or contemporaneous oral or written agreement between the parties. If the contract is not integrated, then the parol evidence rule is inapplicable. Ibid, ? 37.
Whether a contract is "integrated" is usually determined by the presence or absence of an "integration" clause in the contract. Such a clause typically provides something to the effect that the contract is intended by the parties to be the final, full and complete expression of their agreement and that the parties exclude from their final agreement any understanding or agreement not contained therein. In this case, language indicating that the agreement was "integrated" would have made it clear that any prior oral statement (such as the statements alleged to have been made by Lara) were not part of the parties' agreement and could not be relied upon.
The settlement agreement in this case does not have an integration clause. It does not contain a clear statement that indicates that the contract is intended to be the final, full and complete expression of the parties' agreement, and that it excludes any understanding or agreement from some other source which is not contained within the agreement. The commission concludes that the settlement agreement here is not "integrated" for purpose of applying the parol evidence rule.
As the Town Bank decision indicated, if the contract is not integrated, then the parol evidence rule is inapplicable. Thus, Carson's allegations as to statements made to her by Lara may be considered for purposes of deciding whether her entry into the settlement agreement was knowing and voluntary. The problem, of course, is that there is a dispute of fact as to what was said by and between Lara and Carson in their meeting.
As noted above, one rationale relied on by ALJ Schacht was his conclusion that even if Carson's factual allegations were taken as true, they would not raise a legal question regarding whether the agreement was knowingly and voluntarily entered into. In part, he appears to have based that conclusion on application of the parol evidence rule. (1) To that extent, the commission disagrees because it concludes that the agreement in this case was not integrated for purposes of application of the parol evidence rule. In part, the ALJ relied on a theory that the most reasonable interpretation of Lara's comments for a person in Carson's position would have been that they had to do with paragraph G. of the settlement agreement, a paragraph which provided that the employee agreed that she had not filed any complaints, charges, lawsuits, etc., against CSM. The commission does not agree with the ALJ that this represents the most reasonable interpretation of Lara's comments for a person in Carson's position.
More important, though, the commission simply does not believe that an approach such as ALJ Schacht took here is the best one for a situation such as this. The commission agrees with the view expressed by ALJ Cohn in her second decision in this matter, that determination of whether Carson knowingly and voluntarily waived her rights when she signed the severance agreement should be made based on assessment of credibility of testimony given at a hearing.
Instructions regarding remand hearing - For the reasons stated above, the commission concludes that the complainant must be provided an opportunity to present evidence at a hearing on the issue of whether her execution of the "Complete And Permanent Release And Confidentiality Agreement" on February 23, 2009, was knowing and voluntary. This would include not only evidence on the question of what was said in the meeting between Carson and Lara on February 12, 2009, but any other evidence that is relevant to application of the "totality of the circumstances" test which should be used in determining whether there has been a knowing and voluntary waiver of rights under the WFEA.
The commission wishes to emphasize here, that at such hearing, all evidence relevant to that issue should be allowed. The commission has cautioned against "excessively restrictive" and "heavy hand[ed]" rulings regarding the admission of evidence, see, Fauteck v. Sinai Samaritan Medical Center and Allen, ERD Case Nos. 199703785, 199801157 (LIRC, November 9, 2000), and Roberge v. Dept. of Ag., Trade and Consumer Protection, ERD Case No. CR200303360 (LIRC, May 31, 2005). It has also cautioned against beginning hearings with sweeping rulings about what evidence will be considered "relevant" to the case. Burton v. United Government Services, ERD Case No. 200303077 (LIRC, Mar. 2, 2010). It repeats these cautions here. Evidence is relevant if it has any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence. Wis. Stat. § 904.01. The question is not whether a fact would in and of itself be conclusive on a question at issue; it is simply whether the evidence would have been relevant enough to the issues presented to justify allowing a party to present it. Burton, supra. Evidence about what an individual might have believed about the effect of a settlement or withdrawal and what may have caused such beliefs, may not ultimately be conclusive in a particular case, but such evidence is surely of sufficient potential relevance that preemptively excluding it in categorical fashion would be unreasonable. Burton, supra. The commission expects these principles to guide the hearing on remand which is ordered in this case.
cc:
Elizabeth J. Brodek, Attorney for Complainant
Jill Pedigo Hall, Attorney for Respondent
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