Finish Your Mediation with an Enforceable Settlement Agreement

by | April 2023

Michael Ludwig outside smiling

Concluding a mediation with an enforceable settlement agreement cements the fruits of the hard work put in by everyone at the mediation, and it avoids the discomfort of one or more parties experiencing buyers’ remorse or getting cold feet afterward.

To be sure, many attorneys have relationships of trust with their clients and with each other, such that if a settlement amount is agreed-upon at a mediation, everyone is confident it can be memorialized in an enforceable settlement agreement in the ensuing days. When that works, everyone is happy. When it does not work, there can be heartache, second-guessing, and an erosion of trust in the underlying relationships.

You can prevent this by entering into an enforceable settlement agreement before you leave the mediation.

Prepare Your Settlement Agreement Before the Mediation

After a long day of negotiation, and the catharsis that comes from agreeing on a settlement amount, it can be a significant undertaking to start drafting a long-form settlement from scratch the same day. Even conforming a template settlement agreement to the terms of a specific case takes time, and, while an agreement may seem standard to one side, the other side will need sufficient time to review a lengthy document that they are seeing for the first time. Attorneys or parties may have a preferred form of a settlement agreement they are comfortable using. And while many settlement terms may be seen as standard in employment cases, there are inevitable nuances in the wording of a settlement agreement.

A better practice is to draft and exchange the settlement agreement before the mediation so the mediation session can focus on negotiating the settlement amount and any other unique terms. This way, issues with the language of the agreement, mutuality, confidentiality, non-disparagement, liquidated damages, and the like, can be ironed out ahead of time and will not be an impediment to finalizing the agreement at the mediation. With the agreement ready to go, it should be quite easy to get the parties to sign or e-sign before they leave the mediation session. And remember that settlement agreements entered into during a mediation should include language that they are binding, enforceable, and admissible, or words to that effect, to overcome any issues with mediation confidentiality.

Use A Short-form Settlement Agreement or MOU When Necessary

Sometimes it simply is not practical to finalize and have the parties execute a long-form settlement agreement at the conclusion of a mediation session. This is always the case with wage and hour class actions, but it also happens with single-plaintiff cases. In such cases, it is common to use a short-form agreement or a memorandum of understanding (MOU) that is enforceable, even though it contemplates the subsequent preparation of a long-form agreement.

For the short-form agreement or MOU to be enforceable, it should be signed by the parties, and it also should include language confirming that it is binding, enforceable, and admissible, or words to that effect, even in the absence of a subsequent long-form agreement. In litigated cases, language invoking Code of Civil Procedure Section 664.6 should accomplish this. A vulnerability of the short-form agreement or MOU is that it may not include sufficient material terms to be subsequently enforced. The parties can work to avoid this by anticipating and addressing material terms, albeit in abbreviated fashion.

An Accepted Mediator’s Proposal Can Be an Enforceable Settlement Agreement (But Usually Is Not)

A mediator’s proposal can result in an enforceable settlement agreement if it includes the material terms of the settlement, provides that it is intended to be binding, enforceable and admissible, and is signed by all parties. Indeed, acceptance of the proposal by the parties’ attorneys may be enough to create an enforceable agreement in some cases. But more often in employment cases, the mediator’s proposal is a means to resolve the most heavily contested terms, and in particular to obtain agreement among the parties on a settlement amount. When a mediator’s proposal to settle a case for a specific amount is accepted by all parties, attorneys usually can successfully negotiate the terms of an enforceable, long-form settlement agreement.

Most employment disputes can, should and will be settled. To that end, it pays to be mindful of when in the negotiation process an enforceable settlement agreement is created.

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Hi I’m Mike Ludwig

I committed myself to honing my craft as a mediator and relentlessly learning everything I could about dispute resolution. I will endeavor to share thoughts and insights about some facet of mediation, negotiation, and dispute resolution, and other information that could be helpful or interesting to you.