Employment General Releases are Interconnected to WC Claims

Friday, June 1, 2012 | 0

Over the last three to five years there has been a movement by carriers to disassociate themselves from preparing employer general releases when completing a settlement with a claimant. This is motivated by fear as there was significant litigation by sue-happy claimant’s alleging collusion between their employer and its workers' compensation carrier over employment issues (a baseless charge).  Plus, a W/C carrier does not cover employment claims, those claims are covered by the employment practices liability insurance policy.

Yet, there is no denying the interconnectedness or “yoking” between the employer’s interests and the carrier’s interests when it comes to settlement. After all, when an employer/carrier (E/C) settles a claim it behooves both co-defendants to insure that the claimant resigns from her position to avoid future workers' comp exposure. Plus, an employer is still exposed to the potential workers' comp retaliation claim per Section 440.205, and the possibility of a claim with the American with Disabilities Act. Finally, since almost every W/C claim involves an investigation of past and future wages, every employer is exposed to an overtime or paid-time-off claim which falls under the Fair Labor Standards Act.

In truth, when E/C’s settle their W/C claims, they should look to trying to resolve every aspect of the employee/employer relationship into one nice package. Now, the Florida 1st District Court of Appeals just released an opinion affirming this policy.

In Risco USA Corp. v. Alexander, the claimant suffered a compensable accident in 2005. The employer terminated claimant in 2005. In 2006 he underwent surgery and retained an attorney to represent him.  Later, in 2006, the employer rehired claimant as a manager.

At the conclusion of his second term of employment, the claimant signed an “Exit Interview and Separation of Employment Agreement”  (I assume claimant received a severance package as consideration for signing such an agreement.)  The agreement released the employer from the following:

“<b>from all causes of action,</b> suits, debts, claims and demands whatsoever in law or in equity, which you ever had, now has, or hereafter may have whether known or unknown, or which you or your heirs, executors, or administrators may have, by reason of any matter, cause or thing whatsoever, <b>from the beginning of your employment to the date of this agreement,</b> and particularly, but without limitation of the foregoing general terms, any claims arising from or relating<b> in any way to your employment relationship with Company,</b>the terms and conditions of that employment relationship, and the termination of that employment relationship, <b>... This agreement is effective without regard to the legal nature of the claims raised and without regard to whether any such claims are based in tort, equity, implied or express contract or discrimination of any sort.”</b>

I highlighted the relevant parts.  It is obvious the intent of the agreement was to release the employer from all claims, including the pending W/C claim throughout the time claimant worked for the employer. Claimant ended up filing a new petition for benefits in 2008 and the E/C denied the claim on the grounds of the agreement.

The judge disagreed with the E/C and found that the agreement reflected only the second term of employment between the parties and not the first term when claimant suffered his compensable accident.

On appeal, the 1st DCA reversed on the grounds that the claimant was represented by counsel when he executed the agreement. Per Section 440.20(11)(c) [post 2001], the parties do not submit the settlement to the judge for approval.  The Judge only approves the claimant attorney’s fee and that child support is adequately considered.  Since the judge does not approve a represented claimant’s settlement, the parties settled the claim the second the claimant’s put his pen to paper.

Further, the court reasoned that just because claimant had two periods of employment, he only had “one employment relationship” with the Employer and therefore the intent of the Agreement (which is unambiguous) was to Release the Employer of all claims for all time up until the date of the agreement.

Read the above language again. See how broad it covers the employment and the liability the employer has (“from all causes of action”) this is good stuff and a smart tactic by the employer.  These types of releases–while not produced in the W/C theater–still are effective in stopping liability dead in its tracks.  I do expect the claimant’s bar to be very wary of this case and to likely demand additional compensation for an employment waiver or only allow their clients to execute a release when a total washout number is in writing.

Many carriers are nervous about delving into such releases but from the outcome of this case, the release saved the carrier from spending money a claim. This release benefited the employer and the carrier. I am not saying that a release is for every case but it must be at least considered in every case.

For carriers they are especially important when their coverage of the employer extends beyond the W/C settlement date. In such cases, it is important to view the W/C claim and the employment status (and any other claims) in a holistic approach.

After all, both the employer and the carrier are tied to the hip in all W/C matters.

<i>Michael Rabinowitz is a shareholder at Banker Lopez Gassler, a workers' compensation defense firm in Tampa. This column was reprinted with his permission from his Workers' Comp Corner blog.</i>