Employers Need to Proceed Cautiously When Settling Employee Claims

An employee has claimed a work-related injury and the employer would like to settle the claim to include a waiver of employment rights, such as a waiver of reinstatement.  If the employer does not proceed appropriately, the employee may be able to collect money for the settlement while retaining his or her employment rights.


The “run of the mill” worker’s compensation case can be settled when the treating physician issues a permanent partial impairment rating.  In those situations, we prepare a “Stipulated Agreement” encompassing the terms of the payment to be made to the injured worker.   However, such agreements can be reopened if the employee suffers a change in condition, such as when he or she requests additional medical care, as long as the claim is made within two years of the last date for which compensation was paid.

On the other hand, most insurance carriers, third-party administrators and employers would prefer a “full and final” settlement agreement which is not subject to being reopened.  In Indiana, we call it a “Compromise Agreement” or a “Section 15 Agreement” (based on the section of our Worker’s Compensation Act that governs such agreements, Ind. Code § 22-3-2-15(a)).  For such agreements to be used, however, there must be a “legal dispute” in the case.  Resolving the permanent partial impairment rating by itself is not considered a “legal dispute.”  Instead, the parties must be resolving a legal dispute such as: 1) disputed liability for the injury; 2) disputed liability for future medical care; 3) whether temporary disability benefits are owed; or 4) a dispute about the employee’s average weekly wage. As long as a legal dispute exists and the appropriate documents and information are included with the agreement, the Worker’s Compensation Board’s Hearing Members regularly approve such agreements.

In addition to resolving the worker’s compensation case, employers used to be able to provide extra consideration (i.e., “money”) for the employee to waive reinstatement or waive employment rights.  The Board would generally approve such agreements. However, about a year ago, the Board declared that it would no longer consider or approve settlement agreements that included waivers of reinstatement or waiver of employment rights.  As a result, employers can still attempt to negotiate a waiver of reinstatement, but it must be in a separate agreement that is not submitted to the Board for review and approval.  It simply becomes a matter of contract.

Nevertheless, if an employee has filed a charge with the Indiana Civil Rights Commission (“ICRC”) or the Equal Employment Opportunity Commission (“EEOC”), it becomes more difficult to resolve the worker’s compensation case along with resolving employment rights.  Even though there is no statutory requirement that the ICRC or the EEOC be involved in the settlement negotiations, it is our recommendation that the agencies be involved in the resolution of such cases so that the employer does not provide settlement funds to the employee thinking that the ICRC or EEOC will close its file only to learn later that the case remains active.

Employers also need to keep in mind that the Older Workers Benefit Protection Act provides that no waiver of an age claim is valid without advising the employee in writing of his or her right to consult counsel, giving the employee at least 21 days to consider the agreement, and providing seven days to revoke acceptance of the agreement.

If the injured worker has instead filed a complaint with the Wage and Hour Division, it is our experience that the settlement is not as closely scrutinized by the agency; however, we still recommend that the Division be involved if the employer wants to close out the case with finality.

Another scenario involves an injured worker filing a charge with the National Labor Relations Board (“NLRB”).  Although our local NLRB Region (25) generally will permit an employee to withdraw a charge, it is recommended that the NLRB agent responsible for the case be involved in the settlement negotiations.  If a complaint has been issued by the NLRB, the settlement itself must involve the NLRB.

Sometimes, employees also file court cases alleging “wrongful termination.”  Such settlements do not need to be approved by the court and are simply a matter of reaching  an agreement with the employee (or, more accurately, his or her attorney).

In all cases where an employee has filed a worker’s compensation claim, the worker’s compensation settlement must be approved by the Worker’s Compensation Board.  In fact, the statute clearly states that no agreement of settlement is valid without approval by a member of the Board.  Ind. Code § 22-3-2-15(a).   How the employer settles cases where the employee has also made claims with other agencies or in court will depend on what type of complaint is being made.  However, employers need to be aware that a “final” settlement may not be truly “final” if they have not settled in the appropriate manner.


Donald S. Smith

Donald S. Smith


Author Donald S. Smith

Don Smith limits his practice to representing employers and executives in labor and employment matters. He defends employers in cases pending before state and federal courts, the National Labor Relations Board, Equal Employment Opportunity Commission, Indiana Civil Rights Commission, U. S. Dept. of Labor, OSHA, IOSHA, Indiana Dept. of Workforce Development, and Indiana Worker’s Compensation Board. Don advises employers concerning various employment issues such as employee handbooks, employment agreements, severance agreements, covenants not to compete, restrictive covenants, wrongful termination, collective bargaining, labor arbitration, unions, discrimination, harassment, wage and hour matters, unemployment compensation and worker’s compensation.

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Posted on Dec. 3, 2019 by Donald S. Smith