Employment litigation, like most litigation, is fast-moving. Given that the overwhelming majority of cases settle out of court, it is often necessary for plaintiff and defense counsel to negotiate and execute comprehensive settlement agreements in a hurry. The various possible post-settlement tax implications to the client will likely not loom large in the litigator’s mind.
This oversight, while perhaps understandable, can lead to the undertaking of costly risks by both parties, albeit for different reasons. And because settlement agreements, once executed, are unlikely to be amended (particularly if that requires continued cooperation of the parties), it is probably unreasonable to assume that an oversight can be easily corrected after the fact.
