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In re Martin


May 27, 2009


On appeal from the Department of Personnel, Merit System Board, No. 2007-2128.

Per curiam.


Submitted May 6, 2009

Before Judges Fisher and C.L. Miniman.

In this appeal, we reject appellant Kerry Martin's contention that the back pay due him from the County of Union was settled prior to the Merit System Board's adjudication of the issue. The parties negotiated and even stipulated to salary figures and computations but never reached a binding agreement.

However, because the County's submission to the Board could have reasonably led Martin to believe otherwise, we remand to provide Martin with an opportunity to provide additional evidence on that point.

Many relevant facts are not in dispute. Martin was charged with chronic or excessive absenteeism or lateness, in violation of a November 2002 stipulation of settlement and N.J.A.C. 4A:2-2.3(a)(4), and removed from his employment as a mechanic with the County on May 2, 2003. Martin requested a hearing and the matter was assigned to an administrative law judge, who found that Martin should be reinstated and awarded mitigated back pay, benefits and seniority from the effective date of his removal to the date of actual reinstatement, as well as counsel fees. The Board adopted this determination.

Later, the parties discussed settlement of the amount of back pay due Martin, and they exchanged financial information and salary calculations. On June 16, 2005, the County's counsel wrote to Martin's counsel, indicating that the gross amount of back pay for the period in question was $88,698; counsel indicated that this included 23 vacation days, which could not be carried over, and required deductions for unemployment benefits and other salary collected by Martin during the interim, which reduced the gross amount to $63,769. The County's counsel asserted that the "remaining issue" concerned the County's right to deduct "any salary which Mr. Martin did or could have earned during his hiatus, from a back pay award." Counsel concluded by indicating that "[t]o avoid litigating that issue, the County proposes to settle the back pay matter in the amount of $58,000.00."

A few months later, on September 8, 2005, Martin's counsel wrote to the County's counsel to "confirm our understanding that your office will prepare a settlement document regarding the above-referenced matter, which will memorialize the terms of settlement, as previously agreed upon." A few months after that, on November 17, 2005, Martin's counsel wrote to confirm that the County's counsel had "sent [his] recommendation to the County Manager to pay Mr. Martin the amount owed to him." Martin's counsel requested that he be informed "when Mr. Martin's monies have been approved."

The record next reveals that, on January 17, 2006, Martin's counsel wrote to the Board requesting a hearing; he complained that "[a]s of this date, the County has failed to pay any back pay, [c]counsel fees or benefits." No mention was made of a settlement agreement nor did Martin's counsel demand enforcement of a settlement agreement on any or all of the pending issues counsel referred to in his letter demanding a hearing.

On January 24, 2006, the Board responded that "[it would] decide the amount of back pay due pursuant to the standards set forth in N.J.A.C. 4A:2-2.10." The Board then outlined the materials that the parties were expected to submit.

On February 15, 2006, Martin's counsel wrote to the Board outlining his client's position. He referred to the financial information the parties' had exchanged, and asserted that, according to the County's computations, "the entire amount of back pay is $88,698.00, which includes vacation days unable to be carried over or used," but that Martin was also entitled to fifty-two sick days, thirty-eight vacation days, and three personal days. Martin's brief also outlined the unemployment benefits and other income he received during the interim and concluded that, with appropriate reductions and credits, "the total amount of back pay owed to him would equal to [sic] $63,790.00." Although Martin argued that the employer "verif[ied]" in its counsel's June 16, 2005 letter that Martin was owed $63,769 -- a mischaracterization of that letter*fn1 -- he also acknowledged that the County only "propos[ed] to . . . settle the matter in the amount of $58,000.00." Nowhere in his submission to the Board did Martin argue that he and the County had settled any or all of the disputed issues. Indeed, Martin was content to advocate for a larger award.

The County responded on June 23, 2006, arguing that:

The parties are in agreement as to the amount of . . . back pay which accumulated during the period he was terminated, which includes payment for 23 vacation days. The parties are also in agreement as to the amount of income received by Mr. Martin while terminated, and that said income should reduce Mr. Martin's back pay award.

The amounts received by Mr. Martin from Unemployment and [other sources] are set forth [in Martin's affidavit]. Again, the parties are in agreement that these amounts total $24,929.00, reducing Mr. Martin's back pay to a total of $63,769.00.

Later in this submission, the County's counsel stated that "the parties are in agreement with the figure of $63,769.00 as representing the back pay plus vacation pay which accrued during Mr. Martin's termination, less the amounts he received in income during that period." And, although the County asserted there should be further reduction "attributable to the period in 2004 when Mr. Martin neither worked no[r] collected unemployment," the County summarized its view of the back pay issue by "request[ing] that the Board set the amount of back pay due Mr. Martin as $58,000.00."

In reviewing the facts, the Board found numerous mistakes in the County's analysis of the amount of salary Martin lost between termination and reinstatement. In addition, the Board found a lack of mitigation for two significant periods of time.

With regard to mitigation, the Board relied on O'Lone v. Dep't of Human Servs., 357 N.J. Super. 170 (App. Div. 2003), which determined that back pay awards should be reduced when an employee fails to obtain substitute employment. We held, in allocating the burden of persuasion in such circumstances, that: the appointing authority may discharge its initial burden by presenting evidence that the employee failed to seek any substitute employment or, alternatively, that suitable substitute employment was available that the employee did not obtain. If the employer makes either of these showings, the burden then shifts to the employee to present evidence that suitable employment was unavailable or that the employee was unable to obtain such employment despite diligent efforts. Based on this evidence, the Board must then determine whether there was suitable substitute employment the employee could have obtained had he or she made a diligent search. If the Board makes this finding, the back pay award should be reduced by the amount the employee could have earned in that employment. [Id. at 181.]

In applying this standard, the Board determined that the County sustained its initial burden of proof that Martin failed to mitigate his damages from May 2, 2003 to July 31, 2003 and from March 1, 2004 to October 31, 2004. The Board also found that although Martin "indicated that he made reasonable efforts to mitigate, he provided no further documentation regarding his efforts." The Board explained the consequence of the lack of substance in Martin's argument:

Where, as here, there is absolutely no evidence to show that the employee made any effort to obtain substitute employment, the Board has no alternative but to deny an award of back pay [during the periods of time mentioned above], due to the employee's utter failure to attempt to mitigate his damages.

Based upon this finding, coupled with its recognition of the County's other miscalculations of the gross pay Martin would have received but for his wrongful termination, the Board concluded Martin was entitled to $17,492.86.*fn2

Martin moved for reconsideration. He argued that the back pay award should have been fixed at $58,000 because, in his view, the parties "settled" that claim in that amount. In support, he cited statements contained in the County's brief on the merits that "[t]he parties are in agreement as to the amount of Kerry Martin's back pay," and that "[t]he County therefore requests that the Board set the amount of back pay due Mr. Martin as $58,000.00." In response to the motion, the County argued that although the parties agreed on "the back pay computations" they had no agreement on Martin's "eligibility for back pay under the law."

The Board denied the motion for reconsideration for reasons contained in a written decision dated November 8, 2007. In responding to Martin's argument that he and the County had settled the back pay issue, the Board found:

Specifically, [Martin] maintains that the Board inappropriately disregarded the back pay amount of $58,000 the parties had agreed upon, when it is the policy of the Board to encourage settlements. While the appellant is correct that the Board favors settlements, in the instant matter there was no settlement agreement. Rather, the parties were involved in settlement negotiations. Moreover, the Board notes that [Martin], in his request for enforcement for back pay, indicated that although he had been involved in discussions with the [County] and was offered $58,000, he was actually entitled to back pay in the amount of $63,769. Therefore, since the parties did not enter into a Stipulation of Settlement, the Board is not bound by an amount discussed between the parties during confidential negotiations.

Martin appealed to this court, arguing:



Although we reject the argument in Point I that the parties entered into a settlement regarding back pay, we conclude a remand is necessary to allow for further amplification of the mitigation issue. As a result of that determination, we need not reach Point II.

To support his argument in Point I, Martin trumpets the public policy in favor of settlements. There is no question our courts favor settlements, Nolan v. Lee Ho, 120 N.J. 465, 472 (1990), but that policy does not extend to enforcing settlement agreements that do not exist, Isetts v. Borough of Roseland, 364 N.J. Super. 247, 254 (App. Div. 2003). The issue here is not whether settlement agreements should be enforced but whether the parties entered into a settlement agreement.

In determining whether a claim has been settled, we apply contract principles. Thompson v. City of Atlantic City, 190 N.J. 359, 379 (2007); New Jersey Mfrs. v. O'Connell, 300 N.J. Super. 1, 7 (App. Div.), certif. denied, 151 N.J. 75 (1997). Those principles require that there be a meeting of the minds. Here, the record discloses, as the Board held, that the parties engaged in settlement discussions. But the existence of a binding settlement agreement has never been demonstrated. Although the parties' correspondence, quoted earlier, suggests that counsel may have neared an understanding, the November 17, 2005 letter of Martin's counsel acknowledged that the County's approval was required and the record fails to demonstrate that the County ever gave that approval. Absent the County's consent, there could be no binding settlement agreement.

The record not only fails to reveal a binding agreement, it also reveals the parties acted in a manner inconsistent with the existence of a binding agreement. For example, if the parties understood that the back pay issue had been resolved, why did Martin later request that the Board schedule a hearing? Why would the parties brief and present that issue for the Board's decision if they had reached a binding agreement on that point? And, if the purported settlement agreement called for the County's payment of $58,000 in back pay, why did Martin argue to the Board, in contravention of that alleged settlement, that he was entitled to $63,769? Further still, if the parties had reached a binding settlement agreement, why did Martin not seek enforcement of that agreement prior to the Board's decision on the merits?

The record raises further questions. What consideration did the County receive for agreeing to pay $58,000? A settlement of litigation normally involves a payment by one party in exchange for the termination of litigation. Thompson, supra, 190 N.J. at 379. Here, according to Martin, the County agreed to pay $58,000 but still faced the risk of a larger award. That is, Martin's position suggests the County promised to pay at least $58,000 without obtaining a termination of the claim, and then left itself open to an even larger award if Martin was able to so convince the Board. Although parties are free to agree to settle portions of a claim in this fashion, such an agreement has not been proven. In addition, we question whether the public policy in favor of settlements has quite the force argued here when the purported settlement does not relieve the adjudicating body of the time and expense of resolving the dispute.

We also reject Martin's right to argue the existence of a settlement agreement at such a late date. If Martin truly believed the matter had been settled, he was obligated to seek its enforcement. Instead, he sought the Board's adjudication of the appropriate level of back pay and then, upon receiving an unsatisfactory award, for the first time claimed a settlement had previously been reached. Although it did not consider notions of judicial estoppel in rejecting Martin's argument, the Board certainly could have rejected Martin's tardy claim to a settlement in light of his fast-and-loose approach to his obligation of candor to the tribunal.

These circumstances demonstrate that the parties did not reach a settlement agreement. Instead, the record shows only that the parties may have come close to an understanding. There is no doubt that the County agreed to the accuracy of the salary computations reflected in the record, but the parties did not enter into a settlement agreement.

Although we reject Martin's claim that the back pay issue was conclusively settled, we do find that the interests of justice require a remand on the mitigation issue. Martin is undoubtedly correct that some of the County's statements in the brief it submitted to the Board could have led a reasonable reader to assume the County was not urging Martin's failure to mitigate damages during the periods of time cited by the Board. As a result, Martin may have felt it unnecessary to present further evidence or argument on that point.

Simple fairness requires that we remand to the Board and allow Martin the opportunity to provide evidence on mitigation for the time periods in question and for further consideration by the Board on that point. As a result, at this time we need not reach the arguments raised by Martin in Point II.

Remanded for further proceedings in conformity with this opinion. We do not retain jurisdiction.

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