Court Holds That Settlement Agreement Was Broad Enough to Include Title VII Claims

A recent decision, Smith v. JPMorgan Chase, No. 15 CIV. 808 (PAE), 2016 WL 5339548 (S.D.N.Y. Sept. 23, 2016), is instructive on the law governing settlement agreements, including those claimed to bar Title VII discrimination claims.

In this case, the African American plaintiff alleged that she “was terminated after an internal investigation for a violation of Chase’s anti-sexual harassment policy”, that “the purported basis for her termination—that she made sexual comments in the workplace and sent a nude photo to a subordinate—were unsubstantiated and pretextual”, and that the “true reason for her termination, she claims, was that she is African American, and that her branch manager preferred Hispanic employees.”

Plaintiff filed a lawsuit alleging FLSA violations, and entered into a Negotiated Settlement Agreement and General Release which settled “any and all claims” Smith had against Chase in exchange for $24,000. Nearly two years later, plaintiff sued Chase, alleging violations of Title VII.

The court provides the following overview of the relevant law:

Under New York law, a valid release constitutes a complete bar to an action on a claim which is the subject of the release. An employee will be bound by a waiver of her federal discrimination claims “so long as the waiver is made knowingly and voluntarily.

To determine whether a release of Title VII claims was made knowingly and willfully, courts in this Circuit apply a totality of the circumstances test. In Bormann v. AT & T Communications, Inc., 875 F.2d 399 (2d Cir. 1989), the Second Circuit set out seven factors particularly relevant to this inquiry:

  1. the plaintiff’s education and business experience,
  2. the amount of time the plaintiff had possession of or access to the agreement before signing it,
  3. the role of plaintiff in deciding the terms of the agreement,
  4. the clarity of the agreement,
  5. whether the plaintiff was represented by or consulted with an attorney, …
  6. whether the consideration given in exchange for the waiver exceeds employee benefits to which the employee was already entitled by contract or law … [, and]
  7. whether [the] employer encourage[d] or discourage[d] [the] employee to consult an attorney, and whether the employee had a fair opportunity to do so.

However, the “Bormann factors” are neither exhaustive nor must all of the factors be satisfied before a release is enforceable. The essential question is a pragmatic one: whether, in the totality of the circumstances, the individual’s waiver of his right can be characterized as ‘knowing and voluntary. [Paragraphing added.]

The court held that the balance of these factors favored Chase, and dismissed plaintiff’s complaint.

For example, in response to plaintiff’s argument that she was “rushed to sign paperwork [she] was unsure of” and that she did not have “adequate time” to contemplate the Agreement (based on an email stating that Chase was “only keeping this offer on the table for today”), the court noted that the email was sent 32 days before plaintiff signed the agreement, and noted the agreement’s 7-day revocation provision.

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