Understanding Settlement Agreements in Staffing Contracts

Staffing and vendor contracts are one area that is always ripe for legal complications. For example, a legal problem in the IT staffing world is how a contractor deals with settlement agreements. When they go wrong, it can be quite a mess.

A federal court judge has the ability to review a settlement between parties and to overturn it if the judge feels that the deal is unjust in some way. In common terms, there are times that people have been coerced into a settlement or failed to understand what they were doing. In essence, if it was a decision made under duress, it can be overturned.

As used in this case, the judge overturned a settlement reached at a mediation that a couple had done to avoid a debt collectors lawsuit. The couple failed to pay the settlement under the terms they agreed to and the company took them to court for the debt. However, the judge decided the agreement should not be upheld because the couple had been pressured into the deal in the first place.

As states law professors, Andrew Schwartz and Jeffrey Stemple: A judge may vacate, or “set aside,” a settlement agreement only where it is found that the agreement is not the product of “voluntary, knowing and intelligent” conduct of the parties or their attorneys. (See Hurd v. Hurd, 549 A.2d 921, 925-926 (N.J. 1988)) The burden of proof for that determination is on the party contesting the validity of the settlement agreement.

The appellate court decision noted that one of the parties had not had an attorney and had been under duress. They also noted that the couple had only been coerced to act out of fear of jail time, and thus the deal should be overturned. The point being that an undue legal influence can be considered significant even in these types of situations.

Sometimes in the staffing business, an IT contractor needs to add or update the language in an agreement to protect themselves from legal action. For example, in this case, the judge overturned the original agreement based on some language that was missing. If the language had been present in the agreement, then the judge may have upheld it and avoided all the trouble facing the couple.

The key to this whole thing being that most contractors don’t have the legal presence to do much in these types of situations. For a business, that can be problematic! Having issues with your IT or helping with a large project? Better to spend the money up front and make sure that your business is protected legally. According to the essential legal insights on how a judge can overturn a settlement agreement, understanding these nuances is crucial.

Note: Most staffing companies hire contractors that are ‘on contract’ for the duration of the project, unless one of the parties to the agreement violates the contractual terms.