Agency Made ‘Illusory’ Promise

The Equal Employment Opportunity Commission’s Office of Federal Operations (OFO) recently threw out a settlement agreement between the Social Security Administration (SSA) and complainant George Davidson on the grounds that the settlement was based on a promise by the agency that it knew it couldn’t possibly keep. The 2007 settlement required Davidson to withdraw his complaint, and in exchange the agency promised to give him priority consideration for an ALJ position in the SSA Baltimore hearing office as soon as the agency determined there was a vacancy. The EEOC struck this down because the settlement was based on “a promise the agency would only be optionally required to keep.” George Davidson v. Michael J. Astrue, Commissioner, Social Security Administration, Appeal No. 0120100016 (October 25, 2011).

EEOC settlements are governed by contract law, and a settlement must contain the elements of an enforceable contract. One element of a contract is called “consideration.” If the agency agrees to a settlement term but might never have to perform that term – i.e., the term is “optional,” then the settlement fails for lack of what the law calls “consideration.”

Here, SSA kept full control over determining whether it had a “vacancy” for which it would consider Davidson for priority placement. In the words of the EEOC:

Here, there can be no question that the threshold condition for Complainant’s eligibility to receive priority consideration is, by virtue of the settlement agreement, completely within the Agency’s control. The agreement expressly provides that only the Agency can determine what qualifies as a BHO “vacancy.” Moreover, nothing therein precludes the Agency from making its determination in disregard of commonly understood conceptions of what a vacancy is. Indeed, as the Agency concedes, the agreement permits it to place an individual in an unencumbered ALJ position in the BHO even as it declines to recognize the unencumbered position as a vacancy for purposes of the promises made to Complainant in November 2007. It is difficult to imagine a more classic example of an illusory promise than the one in the instant agreement governing the designation of an ALJ “vacancy” in the Agency’s BHO. Our finding with regard to this threshold requirement for Complainant’s consideration renders the entire agreement void for lack of adequate consideration.

Complainants who are unrepresented in an EEO proceeding may not be aware of this basic element of contract law and therefore might not recognize when a settlement fails for “lack of consideration.” Federal employees who have questions about the wording or enforceability of a proposed settlement should consider seeking legal counsel before signing or entering into a settlement with their agency.