A hospital did not breach its settlement agreement with a former employee when it disclosed to a prospective employer that it reported her to the New Jersey Board of Nursing (the “Nursing Board”), a federal appeals court has ruled. Debra Weisman, et al. v. New Jersey Dept. of Human Servs., et al., No. 13-4656 (3d Cir. Dec. 2, 2014).

The plaintiff was a charge nurse at Ancora Psychiatric Hospital.  When she attempted to return to work following a leave of absence, the psychiatrist conducting her fitness-for-duty examination would not clear her to return to work.  As a result, Ancora suspended, and later terminated, the plaintiff’s employment.  In accordance with New Jersey law, Ancora reported both the suspension of her privileges and the termination of her employment to the Nursing Board. 

The plaintiff’s union challenged the termination in arbitration.  During the arbitration process, the parties reached a settlement in which the plaintiff agreed to waive all claims arising from her employment with Ancora and, in return, Ancora agreed to designate her departure as one based on a “resignation in good standing.”

A month after resigning from Ancora, the plaintiff was offered a job at another hospital.  In response to a questionnaire from this hospital, Ancora reported that the plaintiff resigned her employment voluntarily and that her job performance met Ancora’s patient care standards.  However, in response to whether Ancora had ever reported the plaintiff to a professional review board, Ancora responded that it had, attaching copies of its letters to the Nursing Board.  The hospital subsequently withdrew its offer of employment.

Blaming Ancora for the withdrawal of the job offer, the plaintiff filed suit in federal court alleging breach of contract and violation of federal statutes.  She also sought equitable relief to address Ancora’s alleged failure to properly implement the provisions of the settlement agreement.  The court granted Ancora’s motion for summary judgment as to all counts.  The plaintiff then appealed to the federal appellate court in Philadelphia.

The Third Circuit found the settlement agreement did not require Ancora to revoke its letters to the Nursing Board or to omit reference to the letters upon any inquiry by a prospective employer.  Ancora’s obligation was simply to record the plaintiff’s separation from employment as a resignation in good standing and to report to any interested future employer that she resigned her employment “in good standing.”  Accordingly, the Third Circuit affirmed the lower court’s judgment for Ancora.

This case highlights the importance of healthcare employers understanding their obligations to report to licensing authorities and, where applicable, the National Practitioner Data Bank, certain disciplinary actions taken against licensed staff.  When resolving claims in these situations it is important that all parties understand those obligations and their effect on any settlement.