When you face multiple employment-related claims brought by the same individual, a “global” settlement of the claims holds obvious appeal. Who wouldn’t want to cap their costs and avoid lengthy litigation?
But when workers’ comp claims are involved, comprehensive settlement might not be as simple as it first seems. We’ll fill you in on one potential hurdle—and how to overcome it.
Employer Offers a Settlement
In April 2008, Wendy Ann Steller filed a lawsuit against her former employer, Sears Holdings Management Company, alleging disability discrimination.
She claimed Sears failed to reinstate her with a reasonable accommodation after she took a workers’ compensation leave of absence because of an alleged back injury. Steller was pursuing a concurrent workers’ compensation claim for the same injury before the Workers’ Compensation Appeals Board (WCAB).
A year later, Sears presented Steller with a settlement offer in the discrimination case that made no mention of the workers’ comp claim. It proposed a $95,000 payment to Steller to satisfy all of her claims in the discrimination case “as well as all demands, actions, liabilities, obligations, damages and/or causes of action arising from this lawsuit” or relating to her employment with Sears.
Questions About What the Settlement Covered
On May 4, 2009, the parties attended a mandatory settlement conference in the trial court that was hearing the discrimination case. Steller accepted the offer, and the matter was settled. The next month, she filed a motion with the court to enter a $95,000 judgment in the discrimination case. Sears filed a similar motion but specified that the offer represented settlement of the discrimination lawsuit and the workers’ comp claim.
After a hearing, the trial court ruled that the settlement unambiguously applied to all claims relating to Steller’s employment, including the workers’ comp claim. In September 2009, the court issued a formal order enforcing the settlement, and Steller appealed.
On appeal, Steller contended that the settlement applied only to the discrimination claim because Section 5001 of the California Labor Code requires WCAB approval of settlements of workers’ comp claims—and the settlement didn’t provide for obtaining such approval. Therefore, she argued, it couldn’t cover the workers’ comp claim.
Language Matters
The Court of Appeals was critical of the settlement agreement’s language and held that the trial court was wrong to rule that the agreement was unambiguous as to whether the settlement encompassed the workers’ comp claim.
The appellate court found the settlement was ambiguous because it:
- didn’t explicitly mention the pending workers’ comp action
- required Steller to “dismiss the above-captioned lawsuit”—which was the discrimination action—but didn’t require her to dismiss the workers’ comp claim
- didn’t explicitly require WCAB approval, even though Section 5001 requires the board’s approval to settle a workers’ comp claim
Nonetheless, the court held that the only “plausible” interpretation of the settlement was that it covered both the discrimination and the workers’ comp claims. But it based this determination on other evidence, not the settlement agreement itself.
Settlement Hinges on WCAB Approval
The Court of Appeals held that when parties seek to settle both a civil action and a related workers’ comp claim, the settlement must be conditional on WCAB approval. It went on to conclude that the trial court’s order “impliedly” declared that the validity of the settlement was conditioned on WCAB approval of the settlement of the workers’ comp claim. If the WCAB doesn’t grant its approval, the settlement agreement would have no effect. In other words, both claims—for discrimination and workers’ comp—would be resurrected.
Cover Your Bases
When settling multiple claims, you need to make sure the settlement unambiguously encompasses all of the claims—because if a court can’t base its decision on unambiguous terms in a settlement agreement, it will turn to additional evidence that could work against you. To avoid costly appeals like Steller’s, settlements that involve workers’ comp claims should specify that payment is conditional on WCAB approval.
Master the California Workers’ Comp Rules
Workers’ comp is one of the few areas of employment law that are almost entirely governed at the state level. And it’s complicated, to say the least:
- What qualifies as a covered injury or illness?
- Should you self-insure?
- Who’s entitled to workers’ comp benefits?
- What do you need to know about the State Compensation Insurance Fund (SCIF)?
- How are premiums calculated—and how can you keep yours as low as possible?
- What should be included in your Injury & Illness Prevention Program (IIPP)?
- What workers’ comp notices must you distribute to employees—and when?
- How do you properly calculate benefits for injured employees?
- What should your return-to-work program look like?
- How does workers’ comp interact with other state and federal leave laws, including FMLA/CFRA and ADA/FEHA?
- What can you do to reduce the risk of workers’ comp disputes—and fraud?
- How should you respond to a workers’ comp-related lawsuit?
Fortunately, answers to all of these questions and more are covered in depth in our comprehensive HR Management & Compliance Report, Workers’ Compensation in California: A Complete Guide for California Employers.
This exclusive report includes everything you need to know for successful management of your company’s workers’ comp program. Order your copy today—your satisfaction is 100 percent guaranteed.
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