State of Wisconsin
Labor and Industry Review Commission
|
|
|
|
Fair Employment Decision |
|
|
Complainant |
|
|
|
|
|
|
|
|
Respondent |
Dated and Mailed: |
|
|
|
|
ERD Case No. CR201301600 |
June 4, 2018 |
|
|
|
The decision of the administrative law judge issued in the above-captioned matter on May 4, 2018, is hereby set aside, and the matter is remanded to the Equal Rights Division for further action in conformance with this decision.
|
By the Commission: |
|
|
|
|
|
|
Georgia E. Maxwell, Chairperson |
|
|
|
|
|
|
|
|
/s/ |
|
|
Laurie R. McCallum, Commissioner
|
|
|
|
|
|
|
|
|
David B. Falstad, Commissioner |
Procedural History
This litigation centers around a separation agreement signed by the complainant which, in exchange for a payment of $3,634.62, required him to waive his right to file certain types of legal action against the respondent. The complainant argued, however, that under the terms of the contract he retained the right to go forward with a complaint before the Equal Rights Division (hereinafter “Division”), notwithstanding the waiver provision.
On July 13, 2016, an administrative law judge (hereinafter “ALJ”) for the Division, John Gelhard, sent a letter to both parties explaining that, if the complainant wished to challenge the validity of the waiver and release he had signed, he needed to return to the respondent the severance pay he had received in consideration for signing such waiver and release. ALJ Gelhard explained that the respondent would put the severance pay into its attorney’s trust account, and that if it was found that the complainant signed a knowing and voluntary waiver, the severance pay would be returned to him and the matter would be dismissed. ALJ Gelhard reiterated this process in a second letter to both parties dated July 26, 2016. On or about October 18, 2016, the complainant sent a letter to the ALJ, with a copy to the respondent, indicating that he had tendered the consideration. In his letter the complainant restated ALJ Gelhard’s instruction that, if it was determined that the waiver was entered into freely, knowingly, and voluntarily, the monies would be returned to him, and indicated that if the respondent failed to do so he would be filing a complaint against the respondent’s attorney with the State Bar of Wisconsin. The complainant stated that he knew the ALJ’s instructions were self-explanatory, but that he felt the need to protect himself should the respondent fail to abide by them. The respondent filed no response to the complainant’s letter and made no objection to the procedure outlined by the ALJ with respect to the handling of the severance pay.
On April 7, 2017, ALJ Gelhard issued a decision finding that the complainant had signed a knowing and voluntary waiver of his right to file an Equal Rights complaint. He therefore dismissed the complainant’s complaint and ordered the respondent to return the complainant’s consideration to him. The complainant filed a timely petition for commission review of that decision.
On October 24, 2017, the commission issued a decision in which it found that the settlement agreement signed by the complainant, although containing a general waiver of his right to take certain legal action, included a clause which preserved his right to file a claim with the Division. The commission therefore ordered that the matter be remanded for an investigation by the Division. The commission further noted that, since the agreement remained in effect, the respondent was required to return to the complainant the consideration he had remitted to it pending a decision on that point.
Subsequent to issuing the decision referenced above, the commission issued a decision in a separate matter, Ionetz v. Menard, Inc., ERD Case No. CR201700593 (LIRC March 13, 2018), in which it concluded that, contrary to the holding in the instant case, a so-called “agency rights” clause contained in a mandatory arbitration agreement did not preserve the complainant’s right to commence separate proceedings before the Division. In Ionetz, the commission specifically revisited its analysis in the complainant’s case and concluded that, insofar as it suggested that the Division had the authority to proceed with the complainant’s complaint notwithstanding the waiver he had signed, that decision was overruled. Based upon the commission’s decision in Ionetz, an equal rights officer for the Division issued a preliminary determination on March 22, 2018, which dismissed the instant complaint for lack of jurisdiction. The preliminary determination was silent on the question of the return of the complainant’s severance pay.
The complainant filed an appeal of the preliminary determination. In his appeal, the complainant specified that he was not challenging the dismissal of his claim on jurisdictional grounds, but was appealing because the equal rights officer had failed to make any reference to the requirement that the respondent return the complainant’s consideration to him. The matter was referred to a new administrative law judge, ALJ James Schacht.
Prior to any action by the ALJ, the respondent sent an email to the Division in which it argued that it was legally entitled to keep the complainant’s severance pay pursuant to a provision in the settlement agreement. The respondent also maintained that the Division lacked authority to decide contract issues and therefore could not order it to return the severance payments.
On May 4, 2018, ALJ Schacht issued a decision in which he found that the Division “lacks the authority to determine the relative financial liabilities of the parties” and dismissed the complaint without ordering the repayment of the complainant’s consideration. The complainant has filed a timely petition for commission review of that decision.
Memorandum Opinion
In its decision dated October 24, 2017, the commission explicitly ordered the respondent to repay the complainant’s consideration under the severance agreement which he had tendered back to the respondent in order to challenge the validity of the agreement. The commission contemplated that the respondent would do so immediately, but evidently it did not. Thus, as of March 22, 2018, when the Division concluded that it lacked jurisdiction over this matter, the respondent-- inexplicably, and contrary to the commission’s decision--had still not returned the complainant’s consideration to him. The commission’s order that the respondent return the consideration to the complainant was contingent upon nothing but the validity of the underlying separation agreement, which the commission affirmed in its decision and nothing in the commission’s Ionetz decision, or the Division’s resulting dismissal of the complaint for lack of jurisdiction--a result with which the commission agrees--undermines in any respect that aspect of the commission’s order. Consequently, the respondent should have returned the complainant’s consideration to him, and the ALJ should have found that the respondent had an obligation to do so.
ALJ Schacht’s decision indicates that he believes the Division and the commission lack the authority to order the respondent to return the consideration to the complainant, and suggests that the commission’s order represented an expansion of its authority beyond its statutory role. While ALJ Schacht’s assertion that neither the Division nor the commission are empowered to address contract disputes is accurate, his application of that principle in this instance is precisely backwards: It is well settled law that, where a party signs an agreement releasing another from certain claims, then wants to set that release aside and make a claim against the other which had been released by the agreement, the party must tender back the consideration he or she received in the release agreement as a condition to attempting to set aside the release. See, Dotz v. Johnsonville Sausage LLC, ERD Case No. CR20120149 (LIRC Nov. 30, 2015), and cases cited therein. In accordance with that rule, ALJ Gelhard notified the complainant that, if he wished to challenge the validity of the waiver and release he had signed, he needed to return to the respondent the severance pay he received in consideration for signing such waiver and release. The administrative law judge clearly and repeatedly explained to both parties that the respondent would put the severance pay into its attorney’s trust account and that, if it was found that the complainant signed a knowing and voluntary waiver, the severance pay would be returned to him. Had the ALJ concluded that the complainant did not enter into the severance agreement knowingly or voluntarily, the agreement would have been deemed invalid and the complainant would have lost the benefit of the severance pay he received for signing it. However, once the ALJ concluded that the severance agreement was still in effect, the complainant was entitled to a return of the consideration he received in exchange for his consent to that agreement. Both parties understood and agreed to this procedure.
Given the above, the commission’s order simply gave effect to the agreement reached by the parties by returning them to their status quo based on the conclusion that the severance agreement is valid. By disclaiming the obligation to return the severance benefits to the complainant, the respondent has not only reneged on its agreement with the complainant and the ALJ, but has placed the validity of the separation agreement in jeopardy. As the complainant rightly points out in his petition, consideration is required in order for a contract to be enforceable. The commission’s order implicitly recognized this fact and was intended to preserve the existing agreement.
Rather ironically, ALJ Schacht’s decision shows that, notwithstanding his disclaimer of any authority to address contract claims, that is precisely what he is doing. Specifically, ALJ Schacht found that the respondent was fully warranted in keeping the tendered-back severance benefits to compensate it for the lost benefit of the bargain it made with the complainant, in that his actions defeated the effort to avoid litigation. While this reasoning may reflect the ALJ’s personal opinion of the equities of the situation, there is no legal authority permitting him to impose what essentially amounts to contract damages arising from an alleged breach by the complainant. Indeed, the respondent may have a valid claim for contract breach; the commission asserts no opinion in that regard. However, if the respondent believes the complainant acted in violation of the agreement, its remedy is not to ask the ALJ to permit it to disregard the commission’s order that it return the funds to the complainant, but instead to seek relief in a civil action. Moreover, the commission notes that the respondent’s request that the Division enforce a contractual penalty provision is, like the ALJ’s decision, inconsistent with its argument that the Division cannot decide contract issues and therefore lacks the authority to require it to return the severance pay.
This matter is remanded to the Division. The respondent has 10 calendar days from the date of this decision to (1) remit to the complainant a check in the amount of $3,634.62 (the consideration it offered him in exchange for his consent to the separation agreement), and (2) provide the Division with a copy of the check made out to the complainant, along with proof of mailing to his current address, establishing that it has complied with this requirement. The complainant will then have an additional 10 calendar days in which to notify the Division of any issues that may arise regarding the receipt of the consideration. After it is determined that the complainant has received the amount ordered herein, the Division is directed to issue an order dismissing the complaint with prejudice. If the Division does not receive the information required from the respondent within 10 days of the date of this decision, it is directed to declare the severance agreement invalid for want of consideration and to immediately proceed to investigation of the underlying discrimination issues raised by the complaint.