The new era of settlement agreements is unsettling: Giving up your first amendment rights

With the overwhelming majority of disputes resolved using settlement agreements, they have a unique and prominent place in the litigation setting. They are generally anti-climactic. The sparring of litigation is over, and the parties have decided to move on from their dispute. Yet, I’m seeing a new era in settlement agreements in the employee benefits context, and it’s one I find unsettling.

Earlier in my legal career, if a benefit plan wanted to keep the terms of a settlement confidential, that request came with a cost – and rightly so. Each party understood the financial value of non-disclosure, and it was agreed that their extra compensation was the correct approach to cover this new and continuing obligation. It seems almost quaint to reflect on that time when it was chiefly the dollar amount of the settlement that was confidential. For the most part, the fear that the party paying the settlement would open itself up to payment demands by other plan members with similar claims should the amount be disclosed was acknowledged and understood.

An evolution from confidentiality clauses to more expansive settlement language has taken root in recent years, with the releasing party facing not only limits on sharing the settlement amount, but also preventing further discussion of the underlying facts of the case at all. And of course, such restrictions come with no additional compensation – despite the fact that the new and ongoing obligation is now much greater than the monetary restriction alone. So that’s where we are on the settlement continuum; where unless somehow unlawful, no major organization settles cases without them. But it doesn’t end there.

The next frontier in post-settlement contractual obligations is the inclusion of non-disparagement clauses favoring the released party. Early on, these clauses were bargained for and typically resulted in both sides agreeing to refrain from speaking ill of the other. There may have been some need for such a clause stemming from certain aspects of the employment relationship. If such a clause was added to an agreement, the result was the inclusion of a so-called “mutual non-disparagement clause.”

Such mutuality is eroding into a one-way non-disparagement clause heaped on top of a monetary confidentiality clause plus the clause barring of any discussion of the case’s underlying facts. It’s the silence trifecta. But it doesn’t end there, either. A newer, “mega” version of the non-disparagement clause, typically sought by insurance companies, seeks to prevent a settling party from ever criticizing a party with whom it has settled – about anything, no matter how unrelated to the case, now or in the future. Such prohibitions also include social media. These expanded non-disparagement clauses continue with what is a concerning representation: that any breach of this provision is a material breach that would irreparably harm the insurance company.

Such non-disparagement language has a chilling effect, preventing a settling party from ever criticizing the business practices of an insurance company or benefit plan – now or in the future. I know from my work with families who have had insurance claims denied for their children with serious, long-term mental health or substance use disorders requiring residential care, that this language is, in part, speaking directly to them. Not only does it seek to prevent negative online reviews of their insurance companies, it aims to legally disallow parents from participating in online support groups for specific categories of denied claims. Yet, for families seeking help, such groups are a lifeline and a source of some hope. With these non-disparagement clauses, they lose their right to speak freely about their experiences, and perhaps, even their right to associate freely.

Related: Centene agrees to $215M settlement for alleged Medicaid overbilling

A solid settlement agreement is critical to ending a dispute. These latest agreements, and their unfair attempts to restrict a person’s future free speech rights, are in a different category entirely. Perhaps the recent ruling by the NLRB that employer severance agreements cannot include non-disparagement or confidentiality clause will impact other settlement language. Otherwise, unless there is an effort to fight the inclusion of these manifestly unfair clauses, the signed settlement agreement itself may just serve as the basis for the next lawsuit among the parties.

John Joseph “J.J.” Conway is an employee benefits and ERISA attorney and founder of Royal Oak, Michigan-based J.J. Conway Law.