Breach of Settlement Agreement Found

The U.S. Court of Appeals for the Federal Circuit recently held that the U.S. Postal Service materially breached a settlement agreement by failing to timely provide documents necessary for the appellant’s disability retirement application. Lary v. U.S. Postal Service, 2006 WL 3742104, Fed. Cir. No. 3050 (12/21/06). Because the appellant had missed the deadline for filing his disability retirement application, rescission of the settlement agreement was not an effective remedy. The court required the Merit Systems Protection Board to order specific performance – i.e., the agency must redo all of the steps contemplated by the settlement agreement.

This case arose when the appellant, who suffered from obstructive sleep apnea, was removed for attendance-related problems. On appeal, the parties entered into a settlement agreement under which the agency agreed to provide all relevant documents for the appellant’s disability retirement application. While the agency did not timely provide the documents, it filed the appellant’s application. However, the application was rejected by the Office of Personnel Management because it was filed more than one year from the effective date of the appellant’s separation.

The appellant then filed a petition for enforcement of the settlement agreement alleging a breach by the USPS. The MSPB administrative judge found that the breach was not material, and the Board affirmed over a dissent.

On appeal, the court vacated the Board’s decision, finding the breach was material because the promised documents were central to the settlement agreement. The court dismissed the Postal Service’s argument that the appellant should have filed an incomplete application because, at best, it would have delayed the receipt of disability benefits. In addition to requiring the agency to clean appellant’s record and to comply with the settlement agreement, the court ordered that the agency should issue a new date of removal which would allow appellant to timely file for disability retirement. Furthermore, the Board was required to award back pay and any other relief because appellant’s previous removals must be expunged.

This case illustrates the importance of properly drafting settlement agreements, which are enforceable contracts. Experienced employment lawyers who concentrate on representing federal employees are best equipped to handle such tasks. The court in this case awarded the appellant the benefits to which he would have been entitled had the agency complied with the original settlement agreement.

This article also appears in FEDweek (www.fedweek.com), a weekly newsletter for federal employees.