Massachusetts Convention Center Authority - Finding 7

The Massachusetts Convention Center Authority Did Not Have a Transparent or Accountable Process Related to Non-Union Employee Settlement Agreements, Including Those Containing Non-Disclosure, Non Disparagement, or Similarly Restrictive Clauses.

Overview

MCCA did not have a documented process for reviewing, entering into, and finalizing its non-union employee settlement agreements during the extended audit period (January 1, 2018 through December 31, 2022). MCCA also did not obtain approval from its board of directors about these employee settlement agreements. The table below summarizes the dates, amounts, and payment methods of the five non-union employee settlement agreements MCCA entered into during our audit period.

Were Allegations Specified in the Settlement?*	Date Signed	Amount	Method of Payment	Did the Settlement Include NDA or Other Restrictive Language? **	Was the Settlement Approved by the Board?
No	March 26, 2019	$7,500	Payroll	Yes	No
Yes†	November 29, 2019	$1,200,000	Insurance‡	Yes	No
No	April 5, 2020	$9,000	$5,883.83 vendor payment to claimant; $3,116.17 paid to claimant’s attorney to distribute to the claimant	Yes	No
No allegations§	July 23, 2021	$844	Payroll	Yes	No
No	December 15, 2021	$12,500	$5,000 through payroll; $5,000 taxable 1099 payment to claimant and $2,500 paid to claimant’s attorney to distribute	Yes	No

*      For each “No” answer in this column, the court cases or administrative actions that precipitated the settlement were referenced, but no reasons for the settlement were included in the settlement itself.

**    In this instance, “restrictive language” includes non-disclosure, non-disparagement, confidentiality, or similar clauses.

†      The allegations associated with this settlement were for claims of alleged racial discrimination and retaliation.

‡      MCCA pays an insurance premium in exchange for coverage that guarantees financial compensation for the damages or losses it incurs. MCCA spent $353,484 in public liability insurance premiums for the policies that covered the audit period. In this instance, MCCA’s insurance paid the settlement amount.

§      There were no allegations associated with this settlement. The employee chose to separate from MCCA in lieu of receiving discipline.

If MCCA does not have a transparent and accountable process to handle employee settlement agreements, especially with those containing non-disclosure, non-disparagement, confidentiality, or similar clauses, it cannot ensure that employee settlements are handled in an ethical, legal, or appropriate manner. If the MCCA board of directors does not ensure appropriate oversight regarding employee settlements, the well-being and financial stability of MCCA and its employees may be negatively impacted. Furthermore, public dollars could be abused to cover up harassment, discrimination, and other forms of misconduct, while protecting perpetrators of abuse in MCCA.

Authoritative Guidance

Section 5.09 of Title 815 of the Code of Massachusetts Regulations states:

(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 [Office of the Comptroller of the Commonwealth] within the time frames set forth in [Section 5.09(2) of Title 815 of the Code of Massachusetts Regulations]. . . .

(2)  Time for preparation of reports. The report . . . shall be sent by the agency attorney to the General Counsel of the Comptroller:

1. if based on a settlement agreement, within 15 days of signing of the final settlement papers; or
2. if based on a judgment against the Commonwealth or any agency, within fifteen days of the Commonwealth’s decision not to appeal; or
3. if based on a judgment against the Commonwealth or an agency, where the Commonwealth decides to take an appeal from the judgment, within fifteen days of any final order on appeal or in remand proceedings, if such remand proceedings are ordered.

We consider this to be a best practice, since this regulation outlines the procedures required by the Office of the Comptroller of the Commonwealth for executive branch agencies.¹⁵

Reasons for Issue

MCCA officials stated that non-union employee settlements were infrequent, varying in nature, and handled on a case-by-case basis.

Recommendations

1. MCCA should develop, document, and implement a policy related to employee settlement agreements.
2. To help increase transparency and accountability, MCCA should track and document all complaints that result in payments and the use of non-disclosure, non-disparagement, or similarly restrictive clauses in employee settlement agreements. This should be done both within respective personnel files and a centralized list.
3. To help increase accountability, MCCA should assign an agency attorney or staff member to handle and monitor claims and employee settlement agreements.
4. To help increase transparency and accountability, MCCA should seek and obtain approval from its board of directors prior to executing employee settlement agreements and any non-disclosure, non-disparagement, or similarly restrictive clauses in its agreements.
5. As a best practice, MCCA should file all monetary employee settlement agreements with the Office of the Comptroller of the Commonwealth, in accordance with Section 5.00 of Title 815 of the Code of Massachusetts Regulations. 

Auditee’s Response

The MCCA is currently developing a new policy for non-union employee settlements, which will implement appropriate legal and non-legal review and approval processes for such settlements. The MCCA is also working to implement new processes for tracking non-union employee settlements. The MCCA notes that the [Office of the Comptroller of the Commonwealth] regulations cited by the [Office of the State Auditor], [Section 5.00 of Title 815 of the Code of Massachusetts Regulations], do not apply to the MCCA.

Auditor’s Reply

Based on its response, MCCA is taking measures to address our concerns in this area. We will review progress on this issue in our post-audit review in six months. Considering the challenges we identified during the audit period, we strongly recommend that the MCCA follow Section 5.00 of Title 815 of the Code of Massachusetts Regulations in order to increase accountability and transparency, while helping to ensure future issues do not arise in these areas again. 

15.    In Section 5.02 of Title 815 of the Code of Massachusetts Regulations, an agency is defined as “any agency, department, office, commission, committee, council, board, division, bureau, institution (including institutions of higher education), office or section within any executive or legislative department of the Commonwealth. Authorities established by statute such as the Massachusetts Bay Transportation Authority, the Massachusetts Turnpike Authority, the Massachusetts Water Resources Authority, the Massachusetts Port Authority and local housing authorities are not included within the definition of agency.”

Date published:	August 19, 2024