I have a 97 A4 Quattro with the 2.8 and i just had new brake pads and rotors installed and now the passenger side rear brakes are sticking slightly. its not noticeable when driving but you can smell that it is getting hot. What would be causing this issue.

 

Very likely the slide pins are rusty and aren't letting the caliper and pads move back and forth. Those should always be pulled out and regreased with a brake job.

There is also a chance the pads fit too tight to allow them to move away from the rotor. I've seen that with a lot of aftermarket pads. I've had to file some metal off the ends on some to make sure there was some movement.

 

At this point what should I do then? pull them off and file them?

 

I don't know exactly what's causing your problem, I'm just guessing. You need to get back in there and see why the pads don't move back away when the pressure on the caliper is released. Just take the pad carrier off and see if you can move the pins in and out for starters.

 

so crazy. i have a 97 a4 quattro 1.8. just had literally the SAME problem on wednesday. i think i might have had my ebrake engage and then disengage on the highway which might have cause it (long story, im a derp) but then pulling off highway, right rear wheel was billowing smoke. i parked my car, went to feed the koi fish with my girlfriend( where we were going) got back in, and it was fine all the way back home and following days. I know i greased the slide pins, and wire wheel'd the bracket so the pads could move freely.

 

My 85 MB had the same problem. Had to replace the calipers as there was just too much corrosion inside. Easy fix. Audi should be the same and you may even be able to clean them up after a disassembly. Remanned calipers with new pads and hardware fixed the MB though. Audi probably cost about the same as the old MB.
If you go this way, replace the flex lines too.

 

I've had this happen on my 2000 a4 with 187,000 miles, and I've had to bang (with hammer) the emerg brake lever through its entire range of motion while spraying with lube. both rears are starting to need this more often then I like to admit. rebuilt calipers are the next option.