A new published case from the Washington Court of Appeals addresses the proper remedy when an employer fails to pay under a settlement agreement. The case is Rosen v. Ascentry Technologies, Inc. and can be found here.
In this case, Rosen sued Ascentry for breach of contract and unpaid wages. Ascentry agreed to settle the case for $50,000. For some reason, Ascentry did not pay Rosen. One year later, Rosen sent a letter revoking the settlement agreement. The issue for the court was whether Rosen was limited to suing for the promised $50,000 or whether he could pursue the original wage claims. The court held that the failure to pay was a material breach of the agreement and therefore Ascentry had no right to force Rosen to dismiss his lawsuit. In other words, because the employer failed to pay, Rosen could sue on his wage claims. Ascentry tried to argue that Rosen agreed to dismiss his lawsuit for Ascentry’s promise to pay $50,000, and that Rosen could sue only to enforce the promise to pay, not on the original claims. The court rejected this argument because in Washington a settlement agreement is presumed to be an “executory accord” and not a “substitute contract” unless the agreement clearly and unequivocally states that the remedy for breach is enforcement of the promise.
The lesson here is that, when settling a case, pay the agreed amount! Alternatively, defendants’ attorneys may want to include a settlement agreement provision stating very clearly that the remedy for breach of the contract is judgment for the amount promised and not revival of the claims that were settled in the agreement.