U.S. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION Office of Federal Operations P.O. Box 77960 Washington, DC 20013 Franchesca V.,1 Complainant, v. Dr. David J. Shulkin, Secretary, Department of Veterans Affairs, Agency. Appeal No. 0120170632 Hearing No. 551-2015-00062X Agency Nos. 200P-VI20-2014103307 & 200P-V120-2015102307 DECISION By letter with no postmark received by the Equal Employment Opportunity Commission (EEOC or Commission) on November 16, 2016, Complainant filed a timely appeal from a final Agency determination (FAD) dated October 3, 2016, which she received on October 14, 2016, finding that it was in compliance with the terms of the settlement agreement into which the parties entered. See 29 C.F.R. § 1614.402; 29 C.F.R. § 1614.504(b); and 29 C.F.R. § 1614.405.2 BACKGROUND At the time of events giving rise to this complaint, Complainant worked as a Supervisory Prosthetic Representative, GS-11 at the Agency's VA Medical Center in Portland, Oregon. She retired on March 31, 2015. Complainant filed an equal employment opportunity (EEO) complaint alleging age and reprisal discrimination. On April 14, 2015, Complainant and the Agency entered into a settlement agreement to resolve this complaint, which was at the hearing stage, and a second EEO case alleging age, reprisal, and sex discrimination which was at the informal counseling stage.3 The settlement agreement provided, in pertinent part, that:... 3. [T]he Agency will, within 60 days of execution of this Agreement:... c. Initiate restoration of the necessary amount of sick leave (approximately 606 hours) so Complainant retires with a balance of one year [in addition to her other years of service]....4 11. Complainant acknowledges that if she believes the Agency has not complied with the terms of this Agreement, she must notify the Deputy Assistant Secretary for Resolution Management in writing, pursuant to 29 C.F.R. § 1614.504, within 30 days after the date of the alleged breach. In the event of a finding of breach by ORM [Office of Resolution Management], the Complainant may request... her discrimination Complaints... be reinstated... with the understanding that all parties must return to their status prior to the execution of the Agreement before the Complaints can be reinstated. This means that the Complainant forfeits any and all benefits received under the terms of the Agreement and must return... all money paid to... Complainant to the Agency before ORM will reinstate the Complaints.... 12. Should any part of this Agreement be rendered or declared invalid by a tribunal of competent jurisdiction, the invalidation of that part of the Agreement shall not invalidate the remaining portions of this Agreement, which shall remain in full force and effect.... 14. AGE DISCRIMINATION IN EMPLOYMENT ACT WAIVER...[contained required facial or technical Older Workers Benefit Protection Act (OWBPA) waiver language].... Because Complainant retired, to implement the agreed adjustment to sick leave the Agency contacted its payroll provider, the Defense Finance and Accounting Services (DFAS), a component of the U.S. Department of Defense. DFAS pushed back. For example, in November 2015, DFAS emailed the Agency that the DFAS Office of General Counsel (OGC) advised that crediting Complainant's sick leave beyond what she could have earned while employed would violate 5 C.F.R. § 550.803. In December 2015, the Agency's Human Resources office emailed DFAS to advise that Complainant used 420 hours of sick leave while employed at the Agency, and asked that it credit this amount now while they worked out the difference. The Agency's Human Resources office kept pressing, and in April 2016, DFAS credited the entire leave amount agreed to in the settlement agreement to Complainant - 606 hours. When the Office of Personnel Management (OPM) was notified of the credit, it adjusted Complainant's annuity. A staff attorney with the Agency's OGC who helped negotiate the settlement agreement wrote it was estimated that with a 420 hour sick leave credit, Complainant's monthly annuity would go from $1,785.47 to $1,800.86, and with a 606 hour sick leave credit, it would go to $1,805.99. In August 2016, Complainant wrote the Deputy Assistant Secretary for Resolution Management that the Agency breached the settlement agreement by taking much too long to restore her sick leave, as agreed. As remedy, she asked for an additional year of sick leave. After Complainant submitted her breach claim, ORM (the Agency's EEO component) gathered information from the Agency's Human Resources office and the above Agency OGC staff attorney, much of which is recounted above. Complainant retired with 29 years and 4 months in service. The OGC staff attorney wrote that the intent of the sick leave restoration provision was to round up Complainant's service to the next full year for retirement purposes. She wrote that when she negotiated the settlement agreement, she did not know this type of provision was frowned upon and considered an inappropriate use of retirement benefits. The OGC staff attorney wrote that DFAS made it clear that since Complainant never used 606 hours of sick leave, the Agency was asking to credit her more sick leave than she earned, which was not possible. Referring to the settlement negotiations, she wrote that she thought everyone assumed that Complainant would have spoken up if the Agency was offering the "restoration" of leave she never took. After reviewing the above information ORM consulted an Agency Central Office subject matter expert (SME) in the areas of Benefits and Leave Administration to determine whether federal regulations were violated in the formation and implementation of the settlement agreement. The SME advised that after reviewing statutes, the Code of Federal Regulations, and OPM's website, she agreed that the Agency could not credit sick leave in excess to what Complainant would have earned in the course of her career. She added that if Complainant took sick leave that was properly approved, she did not comprehend how the Agency could reverse approved sick leave and provide those hours pursuant to a settlement agreement. The SME wrote that she consulted the Department of Justice, and the information they provided led her to believe the Agency could not provide the sick leave as agreed in the settlement. Referring to OPM guidance, she explained, among other things, as follows: under 5 U.S.C. § 8348(a), the appropriate use of the Retirement Fund is limited to payments and benefits under the express provisions of the Civil Service Retirement System (CSRS) and the Federal Employee Retirement System (FERS), and the costs of administering those systems. Congress did not establish the Retirement Fund to underwrite settlement agreements in cases not specifically involving a determination of retirement rights. To create eligibility for an enhanced annuity for purposes of a settlement, absent a specific statutory authority other than Title 5, United States Code, is inconsistent with the substantive provisions of CRS and FERS. Id. A settlement may not provide retirement benefits beyond what a court or administrative body could order as relief in litigation. For example, while a court or administrative body may order reinstatement with back pay if it determined a discharge was improper, it could not order a two grade level promotion effective three years prior to removal to create a higher annuity by altering the "high-three" average pay used in computing an annuity. In its FAD the Agency found that Complainant failed to timely submit her breach claim because she did not submit it until August 2016, over a year beyond the time limit. But the Agency waived the time limit. It explained that it did so because the settlement agreement provided Complainant a life time retirement benefit that violated federal regulations, and the ramifications of this outweighed her untimeliness. The Agency found that term 3(c) of the settlement agreement violated the law. It reasoned that the Agency's counsel, management, Complainant and her attorney negotiated this term under the erroneous assumption that it was legal to essentially create a fictitious employment service record as a way to enhance Complainant's retirement annuity to settle her EEO complaints. The Agency found that the parties made a mutual mistake in the formation of term 3(c), and found this provision void and unenforceable. The Agency wrote that it would notify Human Resources that in order to rectify the mutual mistake it must retract the 606 hours of sick leave that was restored, that based on this her retirement annuity must be recalculated by OPM, and any excess annuity because of term 3(c) should be recouped. It went on to find that the remainder of the settlement agreement was valid and enforceable. On appeal, referring to the finding that term 3(c) is void, Complainant writes that she does not dispute the Agency's reasoning in the FAD. She argues, however, that the Agency should have been willing to renegotiate a comprise settlement agreement, but would not do so. Complainant writes to resolve the matter she seeks payment of compensatory damages equal to the wages represented by 606 sick leave hours when she retired and additional compensatory damages of $7,000 for her year of mental anguish and frustration with this issue. ANALYSIS EEOC Regulation 29 C.F.R. § 1614.504(a) provides that any settlement agreement knowingly and voluntarily agreed to by the parties, reached at any stage of the complaint process, shall be binding on both parties. Under the general principles of contract law, a party may avoid an otherwise valid contract because of a mistake. One who attacks a settlement agreement bears the burden of showing mutual mistake. The party attempting to avoid the contract must prove that: (1) the mistake related to a basic assumption upon which the contract was made; (2) the mistake had a material effect upon the agreement; and (3) the mistaken parties did not assume or legally bear the risk as to the mistaken fact. Grant v. Department of the Army, EEOC Appeal No. 01931896 (June 18, 1993)(the parties agreed to change the complainant's retirement plan and have the Agency make up the contribution to the complainant's retirement fund for the period covered by the change. After the Agency submitted the necessary paperwork to OPM, it replied that the above agreement would result in the complainant receiving retirement pay during a period when he was not eligible to receive it, in violation of the law. The parties did not know this when they entered into the settlement agreement and made a mutual mistake of a material fact. The settlement agreement is not enforceable). Complainant does not dispute that term 3(c) violates federal law and the parties made a mutual mistake regarding this, and hence this term is unenforceable. For this reason, she does not seek to specifically enforce term 3(c). Given this, and the information in the record, we will not disturb the Agency's finding that term 3(c) is void. The applicable portion of the OWBPA, 29 U.S.C. § 626(f)(2) [Section 7(f)(2)] provides in part that a waiver of age discrimination claims under the ADEA is not considered knowing and voluntary unless, at a minimum, certain facial requirements are met such as the waiver specifically refers to rights or claims under the ADEA, it is clearly written from the viewpoint of the complainant, the complainant is advised in writing to consult an attorney prior to executing the agreement, the complainant does not waive rights or claims that may arise after the waiver is executed, and so forth. Sheehy v. National Security Agency, EEOC Request No. 0520100403 (Feb. 27, 2012). While the Agency in the settlement agreement listed the facial language required by the OWBPA, the OWBPA was violated in two ways. First, the requirement in term 11 that Complainant tender back all benefits and money paid under the terms of the settlement agreement to the Agency before ORM reinstated her complaints violates the OWBPA. 29 C.F.R. § 1625.23(b)(no ADEA waiver agreement may require an employee to tender back consideration received as a condition precedent to challenging the settlement agreement). In commentary on this regulation, the Commission wrote that it believed there was a strong argument that a tender back clause in an ADEA waiver agreement makes the agreement misleading in a material sense and thus violates the OWBPA's requirement that waivers be calculated to be understandable by the individual or by the average individual eligible to participate. 65 FR 77438, 77441 (Dec. 11, 2000). Second, the OWBPA requires that a waiver of age discrimination claims under the ADEA be knowing and voluntary. In its commentary on 29 C.F.R. § 1625.23(b), the Commission determined that: Congress contemplated that the OWBPA's standard for "knowing and voluntary" would incorporate both the enumerated statutory requirements and the requirement that the waivers be adopted "in the absence of fraud, duress, coercion, or mistake of material fact." If the "no tender back" rule is necessary to effectuate the OWBPA's enumerated requirements, then it also must be applicable to enforce the fundamental requirement that OWBPA waivers be free of fraud, duress, coercion, or mistake of material fact. Id. See also, Bennett v. Coors Brewing Company, 189 F.3d 1221, 1229 & 1234 (10th Cir. 1999)(interpreting OWBPA as recounted above). The Commission has explicitly agreed with the interpretation set forth in Bennett. 65 FR 77438, at footnote 24. Depending on the circumstances, the Commission recognizes that an otherwise valid settlement agreement may be void, voidable, or reformable depending on the circumstances. Gorman v. National Science Foundation, EEOC Appeal No. 01932369 (May 26, 1993). For example, the Commission found a settlement agreement void where a material mistake occurred during its formation, making assent to the agreement impossible. Schmidt, Jr. v. Department of the Air Force, EEOC Appeal No. 0120081775 (the parties agreed that the complainant would continue to be a manager who supervised the same people he currently supervised. This was based on the parties assumption that an impending reorganization would not impact the positions under the complainant's supervision but it eliminated them, resulting in him becoming non-supervisory. The parties made a material mutual mistake in the formation of the settlement agreement and it was unenforceable based on their erroneous assumption. Because of this mutual mistake, the settlement agreement was void). We find that the parties erroneous assumption that term 3 of the settlement agreement was lawful and enforceable was a mutual mistake in the formation of the settlement agreement. Because this mutual mistake was material and the settlement agreement contained other valuable consideration, we find that the entire settlement agreement is voidable. This will be addressed below. Since the waiver in the settlement agreement violated the OWBPA, if Complainant decides to void the agreement and ask that her complaints be reinstated, the Agency must do so without requiring her to tender back to the Agency the benefits and money she received from the Agency, and the payment of fees her attorney received. This does not include, however, any action OPM may take to recoup overpayments of pension benefits it determines violated the law. If Complainant decides that she wants to void the settlement agreement and eventually prevails on her ADEA or Title VII claims, the Agency may seek to reduce her award by the benefits she received under the settlement agreement. Sheehy. ORDER The Agency is directed to provide Complainant with a notice of her option to choose between (1) acceptance of the settlement agreement, without the provision of sick leave and related increase in her pension, or (2) to void the entire settlement agreement and request that her complaints be reinstated from the point processing ceased. If Complainant chooses the second option, the Agency shall promptly make a request for hearing on Complainant's behalf to the appropriate EEOC Hearings Unit on complaint 200P-V120-2014103307,5 and resume the processing of complaint 200P-VI20-2015102307 from the point processing ceased.6 The Agency shall notify Complainant in writing within 30 calendar days of the date of this decision. A copy of the option letter to Complainant and other evidence of compliance must be sent to the Compliance Officer as referenced below. IMPLEMENTATION OF THE COMMISSION'S DECISION (K0610) Compliance with the Commission's corrective action is mandatory. The Agency shall submit its compliance report within thirty (30) calendar days of the completion of all ordered corrective action. The report shall be submitted to the Compliance Officer, Office of Federal Operations, Equal Employment Opportunity Commission, P.O. Box 77960, Washington, DC 20013. The Agency's report must contain supporting documentation, and the Agency must send a copy of all submissions to the Complainant. If the Agency does not comply with the Commission's order, the Complainant may petition the Commission for enforcement of the order. 29 C.F.R. § 1614.503(a). The Complainant also has the right to file a civil action to enforce compliance with the Commission's order prior to or following an administrative petition for enforcement. See 29 C.F.R. §§ 1614.407, 1614.408, and 29 C.F.R. § 1614.503(g). Alternatively, the Complainant has the right to file a civil action on the underlying complaint in accordance with the paragraph below entitled "Right to File a Civil Action." 29 C.F.R. §§ 1614.407 and 1614.408. A civil action for enforcement or a civil action on the underlying complaint is subject to the deadline stated in 42 U.S.C. 2000e-16(c) (1994 & Supp. IV 1999). If the Complainant files a civil action, the administrative processing of the complaint, including any petition for enforcement, will be terminated. See 29 C.F.R. § 1614.409. STATEMENT OF RIGHTS - ON APPEAL RECONSIDERATION (M0416) The Commission may, in its discretion, reconsider the decision in this case if the Complainant or the Agency submits a written request containing arguments or evidence which tend to establish that: 1. The appellate decision involved a clearly erroneous interpretation of material fact or law; or 2. The appellate decision will have a substantial impact on the policies, practices, or operations of the Agency. Requests to reconsider, with supporting statement or brief, must be filed with the Office of Federal Operations (OFO) within thirty (30) calendar days of receipt of this decision or within twenty (20) calendar days of receipt of another party's timely request for reconsideration. See 29 C.F.R. § 1614.405; Equal Employment Opportunity Management Directive for 29 C.F.R. Part 1614 (EEO MD-110), at Chap. 9 § VII.B (Aug. 5, 2015). All requests and arguments must be submitted to the Director, Office of Federal Operations, Equal Employment Opportunity Commission. The requests may be submitted via regular mail to P.O. Box 77960, Washington, DC 20013, or by certified mail to 131 M Street, NE, Washington, DC 20507. In the absence of a legible postmark, the request to reconsider shall be deemed timely filed if it is received by mail within five days of the expiration of the applicable filing period. See 29 C.F.R. § 1614.604. The request or opposition must also include proof of service on the other party. Failure to file within the time period will result in dismissal of your request for reconsideration as untimely, unless extenuating circumstances prevented the timely filing of the request. Any supporting documentation must be submitted with your request for reconsideration. The Commission will consider requests for reconsideration filed after the deadline only in very limited circumstances. See 29 C.F.R. § 1614.604(c). COMPLAINANT'S RIGHT TO FILE A CIVIL ACTION (S0610) You have the right to file a civil action in an appropriate United States District Court within ninety (90) calendar days from the date that you receive this decision. If you file a civil action, you must name as the defendant in the complaint the person who is the official Agency head or department head, identifying that person by his or her full name and official title. Failure to do so may result in the dismissal of your case in court. "Agency" or "department" means the national organization, and not the local office, facility or department in which you work. If you file a request to reconsider and also file a civil action, filing a civil action will terminate the administrative processing of your complaint. RIGHT TO REQUEST COUNSEL (Z0815) If you want to file a civil action but cannot pay the fees, costs, or security to do so, you may request permission from the court to proceed with the civil action without paying these fees or costs. Similarly, if you cannot afford an attorney to represent you in the civil action, you may request the court to appoint an attorney for you. You must submit the requests for waiver of court costs or appointment of an attorney directly to the court, not the Commission. The court has the sole discretion to grant or deny these types of requests. Such requests do not alter the time limits for filing a civil action (please read the paragraph titled Complainant's Right to File a Civil Action for the specific time limits). FOR THE COMMISSION: ______________________________ Carlton M. Hadden's signature Carlton M. Hadden, Director Office of Federal Operations March 23, 2017 __________________ Date 1 This case has been randomly assigned a pseudonym which will replace Complainant's name when the decision is published to non-parties and the Commission's website. 2 In opposition to Complainant's appeal, the Agency argues that she untimely filed her appeal. We disagree. A document shall be deemed timely if, in the absence of a legible postmark, it is received by the Commission by mail within five days of the expiration of the applicable filing period. 29 C.F.R. § 1614.604(b). Such is the case here. 3 Complainant brought her age claim under the Age Discrimination in Employment Act of 1967 (ADEA), as amended, 29 U.S.C. § 621 et seq. and her sex claim under Title VII of the Civil Rights Act of 1964 (Title VII), as amended, 42 U.S.C. § 2000e et seq. 4 The settlement agreement contained other consideration for Complainant - payment of $7,500 (comprised of $7,060 in compensatory damages and $440 in expenses) and payment of $3,000 for attorney fees. 5 In making the request, if Complainant chooses the second option, the Agency shall include a brief cover letter explaining the reason for the request, and include a copy of this decision. 6 The settlement agreement contained global clauses where Complainant waived and released all claims that she has alleged or could have alleged against the Agency, including complaints, appeals, and grievances. If Complainant decides to void the settlement agreement, these clauses would no longer be enforceable in the EEO administrative process. Further, Complainant waived her "right to file or pursue any complaint, claim, lawsuit, grievance, or appeal at any time in the future against the Agency." To the extent this waiver includes matters which occurred after the execution of the settlement agreement (prospective waiver), it is invalid in the EEO process for being violative of public policy. Lusardi v. Department of the Army, EEOC Appeal No. 0120133395 (Apr. 1, 2015). Also, prospective waivers are facially prohibited by the OWBPA. --------------- ------------------------------------------------------------ --------------- ------------------------------------------------------------ 2 0120170632 9 0120170632