HR Management & Compliance, Recruiting

Unreasonable-Refusal-to-Rehire Claim Barred by 10-Year-Old Compromise Agreement

Wisconsin employers are used to being able to settle and receive a release of claims for known and unknown events that have occurred only in the past. In a recent Labor & Industry Review Commission (LIRC) decision, a full and final compromise agreement entered into between the parties prevented the employee from maintaining an unreasonable-refusal-to-rehire claim against her employer when she was terminated 10 years later.

What Is Unreasonable Refusal to Rehire?

Many Wisconsin employers aren’t familiar with unreasonable-refusal-to-rehire claims. Such claims are brought under Section 102.35(3) of the Wisconsin statutes, which is in the chapter dealing with worker’s compensation claims. This section provides that an employer that refuses without reasonable cause to rehire an employee who suffered a work-related injury or illness, where suitable employment is available within her physical and mental limitations, is exclusively liable to pay her lost wages during the period of refusal, not exceeding one year’s wages.

According to this provision, it’s the employer, not its worker’s comp insurer, that is responsible for a claim, meaning its worker’s comp carrier isn’t responsible to defend the claim or to pay any wages awarded under it. Additionally, if an employee is returned to work but is subsequently discharged by the employer, the discharge is still considered a refusal to rehire the employee.

When an employee has a work-related injury or illness that is settled under the terms of a department-approved compromise agreement, employers should seek to have their worker’s comp carrier include a specific reference to section 102.35(3) as one of the settled and compromised claims. In the past it made good sense to do this when the employee (or applicant in worker’s comp jargon) had been separated from employment with the employer. Based on a recent decision by the LIRC, such a specific reference to 102.35(3) should be insisted upon in all full and final compromise agreements.

Discharged 10 Years After Final Compromise Agreement

Adrian Lawson claimed she injured herself at work on two different occasions, first on May 16, 2006, and again on October 31, 2007. In February 2009, she entered into a “full and final compromise agreement” with her employer and its worker’s comp carrier, which resolved both of her claims. The full and final compromise agreement was approved in March 2009 by an administrative law judge employed by the department. The full and final compromise agreement contained a specific reference to section 102.35(3), in addition to other statutory provisions covered by the agreement.

Ten years later, Lawson was discharged by her employer. She filed a worker’s comp claim (application for hearing) alleging unreasonable refusal to rehire based on her May 16, 2006, injury. The employer argued her claim was barred by the 2009 full and final compromise agreement, even though it had been entered into 10 years before the alleged refusal to rehire.

Lawson argued the full and final compromise agreement didn’t release claims for conduct or actions by the employer that occurred in the future, after entering into the full and final compromise agreement.

LIRC’s Analysis

The administrative law judge agreed with the employer and dismissed the unreasonable-refusal-to-rehire claim, and Lawson appealed the dismissal to LIRC. In analyzing the situation, LIRC noted the Wisconsin Worker’s Compensation Act is statutory and that the commission must grant, deny, or enforce recoveries as provided for in the statutes. It stated that neither the department nor the commission had authority to base decisions on factors beyond those set forth in the relevant statutes.

Specifically, the commission said it had no authority to make public policy determinations in contravention of its duty to apply the statutes to the facts of the case. In distinguishing cases raised by Lawson, the commission noted that in those situations the court chose to invoke public policy concerns of “public welfare” and “good morals.”

It went on to explain that in creating the statutes found in chapter 102, the legislature accounted for the public welfare and any moral concerns it deemed applicable to worker’s comp claims, explaining that one of the statutory provisions gives the parties the ability to fully and finally resolve a disputed claim through compromise. The inability to form a full and final compromise could constitute a strong disincentive to any form of compromise, and a disservice to the parties to a claim.

The commission explained that in the 2009 full and final compromise agreement, Lawson accepted immediate compensation in return for full and final resolution of all issues stemming from her work injuries, including the issue of reasonable refusal to rehire. As a result, it affirmed the decision of the administrative law judge dismissing the claim. Lawson v. G4S Secure Solutions.

Bottom Line

Whenever a full and final compromise agreement is entered into, you are well advised to insist your worker’s comp insurer makes specific reference in the compromise agreement to section 102.35(3). Based on the LIRC decision, any claims for unreasonable refusal to rehire arising out of that particular injury would appear to be barred regardless of when in the future such separation from employment occurs.

Mike Westcott is a partner with Axley Brynelson, LLP, in Madison, Wisconsin. He can be reached at mwestcott@axley.com.