Audit of Settlement Agreements and Confidentiality Clauses Across Multiple State Agencies - Department of Industrial Accidents (January 28, 2025)
January 28, 2025 · Department of Industrial Accidents · Read the full official report on mass.gov ↗
Published January 28, 2025 Audit covers January 1, 2010 – December 31, 2022 Under Diana DiZoglio · 2023–present
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“There exists little more than a haphazard approach to executing settlements, including those containing confidentiality clauses, with an informal, verbal policy that was allegedly promulgated around 2018 regarding non-disclosure language.”
Read the plain-English breakdown
This is a state audit looking at employee settlement agreements and confidentiality clauses across the Governor's Office, the Comptroller's Office, and many executive branch agencies from 2010 through 2022.
“This audit was conducted on the Office of the Governor (GOV) and its subordinate agencies, as well as the Office of the Comptroller of the Commonwealth (CTR), for the period January 1, 2010 through December 31, 2022.”
The audit checked whether agencies properly reported monetary employee settlements to the Comptroller and whether they had rules for using confidentiality language in those agreements.
“In this performance audit, we determined the following:”
These agreements use public money and can affect employees during vulnerable disputes, so weak controls can hide problems, confuse records, and reduce public trust.
“This results in an inconsistent process that is not transparent to the citizens of the Commonwealth regarding how their public employees are treated or how their tax dollars are being spent.”
As a taxpayer, this matters because public dollars may be used in settlements, and the auditor says the public should be able to see enough information to know how money is spent and whether agencies are handling complaints responsibly.
“During our audit, we identified more than $40.8 million paid by the Commonwealth in employee settlement agreements.”
The audit found no documented statewide policies for creating, approving, retaining, or overseeing these settlements, and no documented rules for confidentiality language.
“Executive offices and agencies do not have documented internal policies or procedures on the authorization, development, documentation, and retention of state employee settlement agreements and supporting records.”
The auditor recommends that the Governor's Office create formal policies, central oversight, public reporting, training, and tighter limits on confidentiality clauses; the Governor's Office said it would create a public settlement policy and work with the Comptroller on training and reporting improvements.
“The Office of the Governor will issue a public Executive Department Settlement Policy applicable to all executive department offices and agencies.”
The report is significant because the auditor says missing records, inconsistent reporting, and confidentiality clauses can prevent the public and state leaders from seeing whether taxpayer money is being used properly or whether workplace misconduct is being hidden.
“Our audit identifies areas of financial, legal and ethical risks for the Commonwealth – when our fellow public servants are at their most vulnerable.”
A settlement agreement is a written deal used to resolve a claim or dispute, often without going to court; confidentiality language means terms that limit what people can say about the agreement or the events behind it.
“For the sake of consistency in the audit, we defined a state employee settlement as a settlement resulting from a formal claim3 (union and non-union grievances, complaint, or lawsuit) against a state agency brought by a current or former employee.”
3 figure(s) pending source verification - not shown
What the Auditor checked
- Did not comply Did state agencies report monetary state employee settlement agreement claims to CTR in accordance with Section 5.09 of Title 815 of the Code of Massachusetts Regulation (CMR) and CTR’s Settlements and Judgments Policy?
- Did not comply To what extent, if at all, have agencies developed and implemented policies and procedures regarding the use of confidentiality requests, including nondisclosure language, within the context of state employee settlement agreements?
What the Auditor found
Why it matters: Without policies and procedures, employee settlements may not be handled fairly, ethically, legally, consistently, or transparently, and financial reporting errors may occur.
Standard: US Government Accountability Office’s Standards for Internal Control in the Federal Government, used as a best practice. ( Section 12 of Chapter 11 of the Massachusetts General Laws; US Government Accountability Office’s Standards for Internal Control in the Federal Government )
3 recommendations
- GOV should establish and implement policies and procedures over the authorization, development, documentation, and retention of state employee settlement agreements, and requirements for supporting documentation.agency: agreed
- GOV should provide centralized management and oversight over the use of state employee settlement agreements to ensure that policies and procedures are adhered to and to provide reporting to the public regarding the use of these agreements.agency: agreed
- GOV should establish a public reporting process to ensure sufficient transparency and accountability for the use of state employee settlement agreements.agency: agreed
Agency response & Auditor reply
Agency: "The executive department agrees that documenting policy and procedures can help ensure consistent practice across a broad and wide-ranging government."
Auditor: "It appears a number of agencies did not understand CTR’s policies or regulations, particularly the obligations to report settlement agreements to CTR, regardless of the funding source."
Why it matters: Confidentiality language could be used to cover up harassment, discrimination, unlawful behavior, poor management, or inappropriate conduct, limiting transparency and potentially allowing harm to continue.
Standard: Public Records Law guidance, the 2013 Superior Court decision in Boston Globe Newspaper Co. v. Executive Office of Administration and Finance, CTR’s Settlements and Judgments Policy, and internal-control best practices. ( Boston Globe Newspaper Co. v. Exec. Office of Admin. and Finance, Suffolk Sup. No. 11-01184-A; CTR’s Settlements and Judgments Policy; Speak Out Act; Massachusetts Senate rule 11G )
4 recommendations
- GOV should establish and implement policies and procedures regarding the use of confidentiality language in state employee settlement agreements and the required supporting documentation justifying its inclusion.agency: partially agreed
- GOV’s policy on the use of confidentiality language in an employee settlement agreement should weigh the employee’s right to privacy versus the public’s right to know how state funds are spent.agency: partially agreed
- GOV’s policy on the use of confidentiality language in a settlement agreement should not protect an employee with detrimental behavior (e.g., harassment or abuse) in the workplace.agency: partially agreed
- The Governor should consider implementing an executive order to limit the use of confidentiality language in employee settlement agreements.agency: partially agreed
Agency response & Auditor reply
Agency: "The executive department cannot concur with Audit Finding 2 to the extent that it appears to overlook the Comptroller’s Settlement and Judgments Policy which explains that “confidentiality language mandating that a settlement or settlement terms be kept confidential may not be enforceable”; that “[c]onfidentiality provisions will not create protections that do not already exist under the Public Records Law or other statutory bar to disclosure”; and that “the name of a recipient payee of a settlement or judgment payment made from the settlement and judgment account is considered a public record.”"
Auditor: "We again note here that CTR’s policy and regulations are not enforceable policy by the employer—they do not bind an agency in an executive office to any particular course of action related to settlement agreements."
Why it matters: Failure to report settlement agreements may cause improper accounting and tax reporting and violates CTR regulation and policy.
Standard: CTR’s Settlements and Judgments Policy and Section 5.09 of Title 815 of the Code of Massachusetts Regulations. ( Section 5.09 of Title 815 of the Code of Massachusetts Regulations; CTR’s Settlements and Judgments Policy )
3 recommendations
- GOV should establish and implement policies and procedures over the reporting of state employee settlement agreements to CTR.agency: agreed
- All executive office employees should receive training on these policies and procedures.agency: agreed
- GOV should establish sufficient monitoring controls to ensure compliance and the appropriate management of this issue.agency: agreed
Agency response & Auditor reply
Agency: "We agree that offices and agencies must follow the Comptroller’s reporting requirements, even when the settlement at issue requires no disbursement from the settlements and judgments fund."
Auditor: "Based on its response, GOV plans to take some measures to address our concerns in this area."
Why it matters: The missing agreements prevented the auditors from testing reporting compliance and data accuracy and raised concern that information may be unlawfully withheld.
Standard: Massachusetts Statewide Records Retention Schedule and Section 12 of Chapter 11 of the General Laws. ( Massachusetts Statewide Records Retention Schedule; Section 12 of Chapter 11 of the General Laws )
1 recommendation
- GOV should ensure that state agencies comply with public records law and should develop policies and procedures to ensure that state employee settlement agreements are retained in accordance with the Massachusetts Statewide Record Retention Schedule.agency: disagreed
Agency response & Auditor reply
Agency: "We respectfully disagree with the report’s assertion that “57 executed settlement agreements” requested by OSA “were not provided.”"
Auditor: "We revisited the responses from the agencies that came in late and after our requested timelines and revised the figure, which still shows 47 settlements agreements were not provided to us in order for us to conduct our tests."
Why it matters: Without complaint records, inappropriate behavior may not be identified or corrected, and auditors could not assess the reasons for confidentiality language.
Standard: Massachusetts Statewide Record Retention Schedule for employee grievance and complaint records. ( Massachusetts Statewide Record Retention Schedule; Section 12 of Chapter 11 of the General Laws )
3 recommendations
- GOV should develop policies and procedures to ensure that complaints are first documented and then retained in accordance with the Massachusetts Statewide Records Retention Schedule and are provided to external auditors upon their request.agency: agreed
- Agencies should consult with the Massachusetts Supervisor of Public Records to ensure that they accurately classify these records and should then ensure that they retain them according to the requirements of the Massachusetts Statewide Records Retention Schedule.agency: agreed
- If complaints arise out of substantiated egregious behavior, such as illegal or harmful acts, these records should be retained permanently to ensure that this behavior can be tracked across state government.agency: agreed
Agency response & Auditor reply
Agency: "Regardless of the numbers, we agree that the report has identified historical record-keeping issues requiring attention."
Auditor: "What we know for certain is that we did not receive 124 of the 159, or 78% of, requested copies of the original claim, complaint, or grievance."
More audits of this entity
Other Office of the State Auditor reports on Department of Industrial Accidents .
- Audit of the Department of Industrial AccidentsState Agency / Office · March 23, 2021
- Department of Industrial Accidents (DIA)-Review of Certain Aspects of the Workers' Compensation SystemState Agency / Office · August 21, 2014