Settlement Agreements: Hidden Traps that Cost Your Career

If you are offered a settlement agreement—whether as part of a removal, reassignment, or dispute resolution—it may seem like the fastest way to move forward. And often it is! 

But signing without understanding the fine print can cost you more than just your current job. It can impact your retirement, rehire eligibility, legal rights, and reputation.

We outline common mistakes employees make, what to watch out for, and what to do before you sign.

What is a Federal Settlement Agreement?

A settlement agreement is a contract between you and your agency, often used to:

• Resolve EEOC, MSPB, or OSC complaints
• Avoid litigation
• Facilitate resignation or early exit
• Set terms for severance, references, or personnel file entries

  📌 They are binding, and in most cases, final—so understanding the implications is essential.

Top Traps to Avoid

1. Waiving Future Employment Opportunities

• Many agreements bar you from future federal employment, or even applying to certain agencies.
• Some restrict you from contracting or consulting with the government later.

 📌 Ask: Are there any explicit or hidden “no-rehire” clauses?

2. Gag Orders & Non-Disparagement Clauses

• These can prevent you from speaking publicly or even privately about the agency or events leading to the agreement.
• They may limit your ability to file additional/related complaints, or defend your reputation.

📌 Ask: Is there a clause that limits your freedom of speech or whistleblower rights?

3. Ambiguous or Incomplete Terms

• Vague language can leave you unprotected or misinformed.
• Example: “In exchange for the employee’s resignation…” without specifying benefits, severance, or clear mutual terms.

📌 Ask: What exactly are you getting—and what are you giving up?

4. Impact on Retirement or Pension

• Some agreements trigger a resignation or removal that may change your annuity, leave payout, or eligibility for early retirement.
• If you’re under FERS or CSRS, this can have long-term financial consequences.

📌 Ask: What are the federal retirement implications of this agreement?

5. Forfeiting Legal Rights Without Realizing It

• Many agreements include broad waivers of future claims, even those you haven’t filed yet.
• Signing may prevent you from bringing future EEO, MSPB, or whistleblower claims.

📌 Ask: Is the waiver overly broad? Are you giving up rights unrelated to this situation?

Real-World Insight

A federal employee at the IRS agreed to a settlement that included a resignation and “non-rehire” language. Months later, a new administration opened opportunities—but she was barred from consideration, even though her skills were needed.

Why? She signed away her right to return—and didn’t realize it at the time.

What You Can Do Before You Sign

• Request a draft copy and review it carefully
• Document your questions and ask for clarification in writing
• Consult with someone who understands the system, even if they’re not acting as your legal representative
• Consider how it affects your short- and long-term career plans, retirement, and reemployment eligibility

📌 Remember: Once it’s signed, it’s enforceable.

Need Help Reviewing a Settlement Agreement?

Join our Career Transition Bootcamp for actionable insights from former federal attorneys and SES leaders who’ve read, negotiated, and written thousands of employment agreements.

We’ll help you protect your rights, options, and future.