21 Nov 2018

California: Avoiding Unpleasant Surprises: The Story of the “Closed” File

Surprisingly, one of the biggest impediments to settling a workers’ compensation case these days occurs when the settlement is nominal. Cases often settle for a nominal, sometimes called a “nuisance value” amount, because the facts of the case lead both parties have legitimate concerns. Applicant may worry about prevailing at trial. Defendants have issues spending enormous amounts of time and money on a case where risk of liability is minimal. Often, in these circumstances, the parties settle the case for a fair, but nominal amount and a Compromise & Release (C&R) is drafted. However, attorneys, as is their appropriate nature, still worry about “what could possibly go wrong.”

I. Statute Change Bars Settlement of SJDB

These worries have been well-founded in cases where the parties believe they have settled “everything” in the case, but later become liable for Supplemental Job Displacement Benefits (SJDB), which now take the form of Supplemental Job Displacement Vouchers (SJDV). How is that possible if the parties have settled “everything” in the C&R?

It is possible because in 2012, the legislature passed SB863. The legislation amended Labor Code § 4658.7(g) to provide that, for dates of injury on or after 1/1/2013, parties are prohibited from settling or commuting any of the $6,000 supplemental job displacement benefit to which the injured worker might be entitled. (8 Cal. Code Reg. § 10133.31(h) states a similar prohibition.

II. Is a “Thomas Finding” Equivalent to a “Beltran Finding”

Since the SJDB law was revised, judges have routinely refused to sign off on C&Rs that attempt to provide for settlement of the SJDB, much to the chagrin and frustration of the defense bar and their clients. Applicant attorneys and their clients have also been disappointed, because their hopes of a quick settlement (allowing their client to move on with their life) have been dashed. A no-win situation for all.

In the WCAB panel decision of Beltran v. Structural Steel Fabricators, 2016 Cal. Wrk. Comp. P.D. LEXIS 366, defendant argued that an employee, Mr. Beltran, had not reported his injury until after he had been fired. Applicant disputed this assertion. The parties agreed to settle the entire case with a C&R for $12,500, including settlement of any SJDB that Mr. Beltran might be entitled to claim.

The Judge refused to approve the C&R but ultimately signed off on the document after inserting the following language in her Order Approving C&R, “Parties may not settle or commute SJDV per LC §4658.7(g); CCR §10133.31 (h).”

III. WCAB Requirements for a “Beltran Finding”

Defendants filed a Petition for Reconsideration arguing that where there is a good faith dispute regarding viability of the industrial injury, the parties should be allowed to settle the SJDB, as was similarly allowed with settlement of vocational rehabilitation benefits under the WCAB en banc decision of Thomas v. Sports Chalet (1977) 42 Cal. Comp. Cases 625 (Appeals Board en banc).

A panel of three commissioners reviewed defendant’s Petition for Reconsideration in Beltran, supra, and agreed with defendant’s position. As was required for a “Thomas finding,” under the Thomas en banc decision, the WCAB panel in Beltran, supra, mandated that the Workers’ Compensation Judge (WCJ) complete two specific acts in order to validate a settlement of the SJDB:

The WCJ must “thoroughly review the record to determine whether a serious and good faith issue exists to justify such a release;” and
The WCJ must “make an express finding to this effect and must fully discuss the reasons for so finding.”

These two requirements were the same requirements as mandated under the Thomas en banc decision. However, in the past when the parties agreed to settle vocational rehabilitation benefits in a C&R, WCJ’s routinely simply added a one line “Thomas finding” to the Order Approving C&R, whenever both parties agreed to that request. It is not clear whether the WCJ in those cases actually made a “thorough review of the record.” Even more doubtful, there appears to be little evidence of compliance by WCJs of the second requirement, to “make an express finding to this effect” and to “fully discuss the reasons for so finding.” It appears this requirement was never enforced during the “Thomas finding” days. It remains to be seen if these same mandatory requirements will be enforced pursuant to the WCAB panel decision of Beltran.

IV. Beware of Beltran’s Lack of Precedential Authority

And for those WCJs who do follow the holding in Beltran, they should do so with caution. The Beltran case is merely a WCAB panel decision. It was never appealed to the District Court of Appeal, so it has no precedential authority; hence, although persuasive, it does not act as precedent on this issue. This is in contrast with the WCAB Thomas decision which was an en banc decision, and therefore did have precedential value.

V. Salcido Case May Shed Some Light on the Issue

In any event, a recent Noteworthy Panel Decision (NPD), may provide the shadow of a light at the end of the tunnel for parties who wish to resolve these types of cases, without worrying about liability for SJDB in the future. In the case of Salcido v. Option Care Enterprises, 2018 Cal. Wrk. Comp. P.D. LEXIS 135, the applicant, a driver for Option Care Enterprises, settled his case with a C&R for $20,000. An Order approving the C&R issued on 1/5/2017.

After the settlement, Mr. Salcido attempted to obtain a SJDB voucher. This took defendant completely by surprise. The employer claimed that Mr. Salcido had filed his cumulative trauma claim after his employment had been terminated, and was, therefore, by law, not entitled to any workers’ compensation benefits, including the SJDV. Applicant requested permission to do additional discovery, since applicant did not have a medical report in compliance with Labor Code § 4658.7 which might entitle him to a SJDV. The issue went to trial, and the WCJ determined that the parties had settled all issues related to permanent disability. Therefore, Mr. Salcido was not able to perform additional discovery to meet his burden of proving that he was entitled to additional benefits that dealt with this issue, including a SJDV.

Mr. Salcido filed a Petition for Reconsideration, and the WCAB affirmed the trial judge. The WCAB first reviewed the applicable Labor Code § 4658.7 and stated:

“LC §4658.7(b) specifies that an injured worker is entitled to SJDV benefits if the work injury causes permanent disability and the employer doesn't offer regular, modified or alternative work within sixty (60) days of receipt of a report by a primary treating physician, agreed medical evaluator, or a qualified medical evaluator finding that applicant's injury is permanent and stationary and has caused permanent partial disability.”

The parties had settled the case without any medical evidence that would support the provision of a SJDV under Labor Code § 4658.7. As part of the C&R, they settled the issue of nature and extent of permanent disability, even though they had no medical evidence of applicant’s permanent and stationary date, nor any medical evidence of applicant’s level of permanent disability. Therefore, the WCAB held that Mr. Salcido was not permitted to perform additional discovery (at defendant’s expense) after settlement on that issue in order to claim a SJDV.

VI. Conclusion

When drafting settlement documents, it is important to tie up as many loose ends as possible, to insure the all parties can comfortably move on with their lives and not have any surprise liability issues or surprise benefit denials arise after the file has been “closed.”

Any information or opinions contained in this commentary are not necessarily endorsed by LexisNexis® or its affiliates.