Audit of Settlement Agreements and Confidentiality Clauses Across Multiple State Agencies - Executive Office of Labor and Workforce Development (January 28, 2025)
January 28, 2025 · Executive Office of Labor and Workforce Development · 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
source
“It is clear from our review of the issues examined in our report that the system in place regarding employee settlements in state government is dysfunctional – at best.”
Read the plain-English breakdown
This is a State Auditor performance audit of 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.”
Auditors wanted to know whether agencies properly reported monetary employee settlements to the Comptroller and whether agencies had rules for using confidentiality or nondisclosure language in settlements.
“In this performance audit, we determined the following:”
The report says weak oversight can hide misconduct, misuse taxpayer money, and leave the public unable to see how state workers are treated or how settlements are handled.
“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 and resident, this matters because settlement payments can involve public money, and the public has an interest in knowing whether the state is using that money fairly and transparently.
“During our audit, we identified more than $40.8 million paid by the Commonwealth in employee settlement agreements.”
The audit found five major problems: no documented settlement policies, no documented confidentiality policies, missed reporting to the Comptroller, missing settlement agreements, and missing underlying complaints.
“Agencies did not provide us 78% of the underlying employee complaints for employee settlements that involved confidentiality language.”
The Auditor recommended formal policies, centralized oversight, better public reporting, better records retention, training, and limits on confidentiality language; the Governor's Office said it would take some policy and training steps.
“The Office of the Governor will issue a public Executive Department Settlement Policy applicable to all executive department offices and agencies.”
The audit is significant because it says the state lacked a reliable system to track, preserve, review, and publicly explain employee settlements, including those involving confidentiality clauses.
“The Administration has no apparent standard approach to records retention, no single point of data collection or analysis, and no demonstrable management of agencies’ use of confidentiality agreements.”
A settlement agreement is a written deal used to resolve a claim or dispute, often instead of going to court; confidentiality language can limit what people 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.”
4 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: Settlement agreements may not be handled fairly, legally, consistently, or transparently, and financial reporting errors may occur.
Standard: US Government Accountability Office’s Standards for Internal Control in the Federal Government; Montana Legislative Audit Division best-practice guidance ( 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.agency: agreed
- GOV should establish a public reporting process for 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: "We note that it will be important that GOV ensure proper monitoring of any policy implemented to address these concerns and ensure agencies comply on an ongoing basis."
Why it matters: Confidentiality language could conceal harassment, discrimination, or other unlawful behavior and restrict employees from understanding or exercising disclosure rights.
Standard: Public Records Law guidance; Boston Globe Newspaper Co. v. Executive Office of Administration and Finance; CTR Settlements and Judgments Policy; Speak Out Act ( CTR’s Settlements and Judgments Policy; Public Records Law; Speak Out Act )
4 recommendations
- GOV should establish policies and procedures for the use of confidentiality language and supporting documentation justifying it.agency: partially agreed
- GOV’s policy should weigh employee privacy against the public’s right to know how state funds are spent.agency: partially agreed
- GOV’s policy should not protect an employee with detrimental workplace behavior.agency: partially agreed
- The Governor should consider an executive order limiting 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: Settlement payments may be improperly reported in state accounting systems and tax reporting.
Standard: Section 5.09 of Title 815 of the Code of Massachusetts Regulations; CTR’s Settlements and Judgments Policy ( CTR’s Settlements and Judgments Policy )
3 recommendations
- GOV should establish and implement policies and procedures over reporting employee settlement agreements to CTR.agency: agreed
- All executive office employees should receive training on these policies and procedures.agency: agreed
- GOV should establish monitoring controls to ensure compliance.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: OSA could not test reporting compliance or verify settlement lists, creating risk that settlement agreements were undisclosed or improperly accounted for.
Standard: Massachusetts Statewide Records Retention Schedule; Section 12 of Chapter 11 of the General Laws ( Massachusetts Statewide Records Retention Schedule E05-01; Section 12 of Chapter 11of the General Laws )
1 recommendation
- GOV should ensure agencies comply with public records law and retain employee settlement agreements according to 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: OSA could not assess whether confidentiality language was justified or whether inappropriate behavior was properly addressed.
Standard: Massachusetts Statewide Record Retention Schedule E05-02 ( Massachusetts Statewide Record Retention Schedule E05-02 )
3 recommendations
- GOV should ensure complaints are documented, retained, centrally tracked, and provided to external auditors upon request.agency: agreed
- Agencies should consult the Massachusetts Supervisor of Public Records to classify and retain these records properly.agency: agreed
- Complaints involving substantiated egregious behavior should be permanently retained.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: "Based on its response, GOV intends to address our concerns on this matter."
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