Federal Employees' Settlement Agreements Can Expire, Court Rules

A federal court ruled in a precedent-setting decision this month the settlements federal employees make with their agencies can expire, including in cases involving whistleblower retaliation. 

In 2001, Jose Sanchez, a urologist at a Veterans Affairs Department facility in Puerto Rico, alleged his reporting of wrongdoing led his managers to take various reprisal actions against him, including a reassignment that would no longer permit him to perform surgery. He filed an appeal to the Merit Systems Protection Board, but he and VA reached a settlement in which he would transfer to a new facility. The department agreed to allow Sanchez to work a compressed schedule of 10 hours per day for four days each week and—because the new facility was far from his original post—that would include three hours of travel per day. 

That arrangement continued for 16 years, but in August 2017 the department informed Sanchez he would have to have to report to the facility from 7:30 a.m. to 4:00 p.m., five days per week. Sanchez appealed to the MSPB and then the U.S. Court of Appeals for the Federal Circuit, claiming his settlement had no end date and therefore VA had violated it. 

The appeals court ruled last week that because the settlement had no set end date, it should last for “a reasonable time.” 

“The background of the agreement here supports the conclusion that 16 years was a reasonable duration,” the court wrote in its decision, agreeing with a previous ruling by an MSPB administrative judge. It said Sanchez no longer faced a hostile work environment for his whistleblowing, meaning he no longer needed special accommodations. “On its face, a 16-year period is a reasonable time for the alleged hostilities against Dr. Sánchez to dissipate.” 

The court also called the arrangement that VA pay for Sanchez’s commuting time “very unusual,” meaning it was likely designed only to be temporary. 

The court’s decision was precedential, meaning all federal employees that previously reached settlement agreements with their agencies could see the terms challenged if a “reasonable time” has passed. The Trump administration is looking to stymie the use of settlement agreements altogether in cases involving employees’ malfeasance or poor performance. In an executive order issued in 2018, Trump prohibited agencies from entering into settlement agreements with employees that wipe disciplinary actions from their personnel records in order to resolve an appeal. A federal judge largely blocked that order from taking effect, but the administration is now looking to implement it after an appeals court last year overruled the judge’s decision on jurisdictional grounds.