Overview
HCSO should have had a documented process for handling employee settlement agreements during the extended audit period of July 1, 2019 through June 30, 2024. We consider written policies to be best practice. We believe such policies and procedures should apply to the review, approval, processing, and reporting of employee settlement agreements, including the use of any non-disclosure, non-disparagement, or similarly restrictive clauses. No settlement agreements executed during the audit period utilized non-disclosure, non-disparagement, or similarly restrictive clauses.
A documented, written process to handle employee settlement agreements, especially for those containing non-disclosure, non-disparagement, or similarly restrictive clauses, can help ensure that employee settlements are handled in an ethical, legal, and appropriate manner.
Authoritative Guidance
According to 815 CMR 5.09,
(1) Responsibility of assigned attorney or staff person: Preparation of Reports. When litigation involving a monetary claim against the Commonwealth covered by these regulation terminates in a final Settlement or judgment with regard to such a claim, the agency attorney or staff person assigned to handle or monitor the claim shall do the following:
(a) Prepare a report indicating:
1. the principal amount of the settlement or judgment;
2. the amount of any attorney’s fee award;
3. the amount of any interest award or accrued, and whether the interest continues to accrue post-judgment;
4. a request for payment of the amount;
5. a description of the basis for the request, (e.g., Court order or settlement agreement); and
6. whether the assigned attorney desires to award the payment check to the claimant;
(b) Forward the report with a copy of the settlement or judgment just described to the General Counsel of the Comptroller within the time frames set forth in 815 CMR5.09(2). . . .
(2) Time for preparation of reports. The report . . . shall be sent by the agency attorney to the General Counsel of the Comptroller:
(a) if based on a settlement agreement, within 15 days of signing of the final settlement papers.
Reasons for Issue
During an interview, HCSO’s general counsel stated that HCSO does not have a written policy regarding the use of non-disclosure, non-disparagement, or similarly restrictive clauses as a part of any settlement, as it is agency practice not to use these types of clauses.
Recommendation
HCSO should develop, document, and implement a written policy related to employee settlement agreements, including prohibiting the use of non-disclosure, non-disparagement, or similarly restrictive clauses in its agreements, as recommended in the Governor’s “Executive Department Settlement Policy,” issued January 27, 2025.
Auditee’s Response
Following the recommendation of the SAO, the HCSO has developed and implemented a policy titled, ”1.2.8 Judgments and Settlements” to include all language recommended in the Governor’s “Executive Department Settlement Policy” issued in January 27th, 2025.
Auditor’s Reply
In response to our audit report, HCSO provided a copy of its newly implemented policy “1.2.8 judgments and Settlements.” This new policy contains detailed protocols for the HSCO staff members responsible for the authorization and processing of state employee settlements, including the reporting of and the language used within any employee settlement.
Based on its response, HCSO has taken measures to address our concerns regarding this matter. As part of our post-audit review process, we will follow up on this matter in approximately six months.
| Date published: | November 25, 2025 |
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