Global Settlements

Global Settlements

In the recent decision Stellar v. Sears, Roebuck and Co., the Second District Court of Appeal ruled that, where the parties to a workers’ compensation and civil lawsuit were in dispute as to whether the settlement reached in the civil matter was intended to be “global”, the WCAB could have final say.

In Stellar, a former employee filed both a workers’ compensation claim for back injuries and a civil suit alleging the employer’s failure to provide reasonable accommodation.  After the parties agreed to a settlement on the record in the civil suit, Sears sought to enforce the settlement in civil court as to the workers’ compensation claim.  The employee argued that the settlement did not encompass the workers’ compensation claim.  The settlement language did not, in and of itself, make clear whether the agreement pertained to both claims.  The lower court ruled that the workers’ compensation claim was intended to be resolved along with the employment law issues but that the WCAB would have to approve the settlement of the workers’ compensation case pursuant to Labor Code §§5001-5002.  The Court of Appeal determined that the solution to the problem was to make the civil settlement contingent upon approval of the settlement of the workers’ compensation case.  The court further stated that if the WCAB did not grant approval, the entire settlement was void.

What this means for you

This ruling can apply in situations where an employer is defending a workers’ compensation claim and an employment lawsuit (most likely, as in Steller, for violating California’s reasonable accommodation and/or interactive process laws) and desires to reach a global settlement with the employee.  The most important factor in these situations is whether the settlement language is clear in that the settlement pertains to both claims.  In many instances, the Compromise & Release documents can be walked though the WCAB without much fanfare, however, without specific language in the civil agreement indicating that the employee agrees to settlement or dismissal of the workers’ compensation action, the global settlement may not be approved or could be delayed.

Practice tip

Because all workers’ compensation settlements must receive WCAB approval but the vast majority of civil settlements can be accomplished without any court review, GMK recommends that all global settlements include a provision that WCAB approval is required before any settlement funds are paid.  GMK also recommends that, where possible, a portion of the settlement funds from the civil case be allocated to the workers’ compensation settlement to encourage WCAB approval.  Finally, as this case clearly illustrates, unless exempted, all California employers must engage in the interactive process and perform a thorough reasonable accommodation analysis. The alleged failure by Sears to do so cost it $95,000.

© Copyright 2010 Goldman, Magdalin & Krikes, LLP. All rights reserved. Reprinted with permission.