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Jean Murray, MBA, Ph.D., is an experienced business writer and teacher. She has taught at business and professional schools for over 35 years.
Updated on 09/25/20Consent decrees seem to be more common today, but maybe it's because they are being used often in police use of violence matters, as in recent instances in Chicago and Baltimore.
They've been around since Medieval times, and they have been used in antitrust cases, civil rights violations, Americans with Disabilities Act (ADA) violations, employment discrimination, and environmental law. But don't assume that consent decrees only affect big businesses or governmental entities. They also can be used in other cases against smaller businesses.
A consent decree is a formal agreement (contract) created to resolve a dispute between parties without either party admitting blame. The decree document is a court order that establishes an enforceable plan for some kind of reform. The decree usually includes specific requirements for the organization and deadlines for action.
It's a way to come to an agreement, signed by the two parties that has the force of legal approval instead of having a lengthy and costly trial. Of course, the consent decree can't be given unless the parties can agree. Think of it this way: A consent decree is no more than a settlement that contains an injunction (a court order to stop doing something).
In private sector situations, consent decrees are sometimes called consent judgments; they work the same way.
Consent decrees are binding on both parties because they agreed to it. That means the decree can't be appealed unless there was fraud by one party, a mutual mistake, or if the court doesn't have jurisdiction over the case.
Once the consent decree has been signed by everyone, the plan goes into place, often with an independent monitor approved by a federal judge. The monitor measures progress by requesting periodic reports to make sure that the party under decree is doing what they promised.
These decrees can be brought against government bodies (like the police forces in Chicago and Baltimore) or against businesses, large and small, who violate a law or regulatory code.
The process of a court order can begin in two ways:
Some consent decrees come with a time period or a deadline. In the case of the decree for the Baltimore Police, there was a one-year deadline with a timeline for specific plans.
ERISA Violation. A violation of the Employee Income Retirement Security (ERISA) laws canbe brought against a company that has retirement benefits for its employees. The Secretary of Labor filed a case against the fiduciaries of a company's ESOP (stock ownership plan) for violations of the law. The consent decree prohibited the defendants from acting as fiduciaries and they paid a civil penalty.
Online Business. In another case, the Federal Trade Commission (FTC) signed a consent decree with a mobile app company for violations of the Children's Online Privacy Protection Act (COPPA). The app company had been illegally collecting and disclosing personal information from children under 13 without getting parental consent. In the settlement, the company paid a $50,000 penalty and was required to delete all personal information they had collected that violated the rule.
Debt Collections. A nationwide debt collection bureau signed a consent agreement with the FTC agreeing to pay a civil fine of more than $1 million for violating the Fair Debt Collection Practices Act (FDCPA.) The debt collector illegally tried to collect consumer debts even though the consumers told them the debt had been repaid or didn't belong to the consumer.
A consent decree and a consent agreement are not the same. In both cases, there is an initial agreement between the parties, but the consent decree is presented to a judge, whose decision is final and enforceable by law. A consent agreement, on the other hand, may not be taken to court.
Consent agreements are common in uncontested divorce cases, and a court can issue a binding divorce decree based on the agreement and the circumstances.
An agreement in mediation is similar to a consent decree agreement, mostly in when the agreement is taken to court. In mediation, the parties work with a trained mediator to try to resolve their dispute. if they can reach an agreement and put it in writing, the agreement may be filed with a court immediately. The agreement may also be formalized as a contract, which can be taken to court if there is a dispute.
The arbitration process is a separate private process that is directed by an arbitrator, who hears the case and makes a decision. In non-binding arbitration, the decision of the arbitrator is final, but there may be some room for appeal, depending on the language of the agreement. if the arbitration is termed binding, the decision of the arbitrator is enforceable under law.
A confession of judgment is a clause in a business loan document that allows the lender to recover the amount of a loan (and more) if they can convince a court that the loan is past due. It's not the same thing as a consent judgment or consent decree.
