Employee Lawsuits: Settlement Using Preprinted Workers’ Comp Release Form Doesn’t Cover Other Claims; Drafting Points

Carolyn Claxton was an office assistant for Pacific Maritime Corp. She filed workers’ comp claims against Pacific Maritime for a slip-and-fall injury and for an injury to her “psyche due to sexual harassment.” She then filed a sexual harassment lawsuit against Pacific Maritime and manager Ray Waters.

A few months later, Claxton and Pacific Maritime settled her workers’ comp claims for $25,000 by signing a standard preprinted workers’ compensation compromise and release form, which is mandatory for comp settlements. The form had only the case numbers for Claxton’s workers’ compensation claims and didn’t refer to her pending sex harassment lawsuit.

Employer Says Harassment Case Settled, Too

Pacific Maritime later argued that the settlement also covered Claxton’s sexual harassment civil action, and it asked the court to dismiss Claxton’s case. It pointed to language in the preprinted form stating that Claxton released all claims arising out of her injuries.

Claxton contended that the release pertained only to her injuries and didn’t extinguish her claim for damages in her sex harassment lawsuit. She also said that she never authorized settlement of anything other than her workers’ comp claims.

Release Limited to Comp Claims

The California Supreme Court took up the case and sided with Claxton. The court ruled that claims outside the workers’ compensation system—such as claims filed under the antibias and harassment laws—aren’t barred by a workers’ comp settlement that is executed on a preprinted compromise and release form, even if those claims relate to or arise out of the industrial injury. The sole exception is when you attach to the form a clear statement that the parties intend to also settle claims outside the workers’ compensation system. However, in this case, there was no such attachment, only the preprinted form itself.

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Additionally, an employer may not introduce other evidence—such as discussions between the parties or the lawyers—to establish that the standard preprinted form was meant to cover non-workers’ comp claims. According to the court, allowing such “extrinsic” evidence would force trial courts to expend scarce resources to determine the parties’ intentions in signing a standard preprinted workers’ compensation compromise and release.

Drafting Points

Draft workers’ comp releases carefully if you want them to cover non-comp claims as well. Here are some tips:

 

1. Add an attachment. As the court made clear, you must include an attachment along with the standard workers’ compensation compromise and release form. Specify that the release covers all claims the worker may have against you—and spell out particular claims you believe may arise or that have been filed. Indicate that it covers any unknown claims resulting from the same injury.

    

2. Alert lawyers to all claims. If an employee has a pending civil lawsuit and workers’ comp claim, your employment counsel and workers’ comp counsel must be in contact with each other and coordinate their efforts.

    

3. Advise employees to review the release and consult an attorney. To avoid claims that the employee didn’t know what they were releasing, it’s wise to encourage workers to consult with an attorney before signing.