Lawsuit for Breach of Employment Law Settlement Agreement Unsuccessful

On March 10, 2021, the 7th Circuit affirmed an order of the district court granting summary judgment in favor of an employer in a lawsuit in which a former employee alleged that the employer breached the confidentiality and non-disparagement provisions of an employment law settlement agreement.  Pack v. Middlebury Community Schools, No. 20-1912 (7th Cir. March 10, 2021).  The plaintiff had filed employment law claims against the employer.  The parties resolved the employment lawsuit by executing an employment law settlement agreement.

The settlement agreement contained confidentiality and non-disparagement provisions.  The plaintiff alleged in his new lawsuit that the employer breached the terms of the settlement agreement by: (i) maintaining a prior press release critical of the plaintiff on its website, (ii) submitting an affidavit critical of the plaintiff in separate litigation, and (iii) making statements to prospective employers beyond the contract's bounds.  The district court granted summary judgment to the employer because it: (i) had no contractual obligation to remove the pre-existing press release from its website, (ii) enjoys absolute privilege for the affidavit submitted in the separate litigation, and (iii) did not disclose contractually forbidden information to "prospective employers" because the callers were not "prospective employers."

The plaintiff had recruited two acquaintances to call the employer and pose as his prospective employers.  During one call, a representative of the employer said that the plaintiff was "terminated" and that the termination was "a matter of public record."  During another call, the representative said that the plaintiff was "terminated" and that the termination was "for cause."  The confidentiality provision of the settlement agreement required the employer to provide "prospective employers" only his "positions held and dates of employment."  However, this contractual provision, commonly referred to as a "neutral reference clause," did not apply because the callers were not prospective employers (they were only individually pretending to be prospective callers).  Therefore, there was no breach of contract.

In addition, the employer had issued the subject press release and put it online before executing the settlement agreement.  The non-disparagement provision of the settlement agreement contained only prospective, forward-looking obligations.  Therefore, the non-disparagement clause did not apply to the pre-existing press release.  The 7th Circuit rejected the plaintiff's argument that each instance when anyone accessed the press release on-line after the date of the settlement agreement constituted a new breach.  The press release is not a new statement each time someone accesses it on the employer's website.  Moreover, the prospective only non-disparagement provision of the settlement agreement did not compel the employer to retract, take down, redact, block, or password-protect the preexisting press release on its website.  Merely maintaining its website with the pre-existing press release did not breach the contract.

Separation agreements, severance agreements, and employment law settlement agreements involve not only money and other employment benefits, but also a whole host of key non-monetary terms, that should be carefully negotiated by the employment attorneys for both the employer and employee.  The neutral reference clause and non-disparagement provision are two of the most important of such non-monetary terms, although there are many other essential non-monetary terms that should be included by the employment lawyers in every separation agreement, severance agreement, and employment litigation settlement agreement.