To: Insurance Carriers and Self-Insured Employers Providing Benefits Under the Workers' Compensation Law; Attorneys and Licensed Representatives Practicing before the Board
Date: September 3, 2003
Section 32 of the Workers' Compensation Law (§ 32) was amended in 1996 to permit parties to enter into an agreement settling any or all issues in a claim for workers' compensation benefits, subject to the Board's approval. Pursuant to WCL § 32(b), the Board is entrusted with the duty of reviewing each settlement agreement and disapproving those agreements which, when viewed in light of the facts and circumstances of that claim, are unfair, unconscionable, improper as a matter of law or were entered into as the result of fraud. Naturally, whether an agreement is unfair to the claimant is of paramount concern to the Board.
In the last few years, the number of § 32 agreements received by the Board has dramatically increased. During that time, settlement agreements have also become increasingly more complex, as the stakeholders in the workers' compensation system become aware of the myriad implications that those agreements may have on the parties involved. At the same time, the Board has attempted to keep pace with the increasing number and growing complexity of § 32 agreements by constantly assessing the effectiveness of its review process and by keeping attuned to recurring issues and relevant trends reflected in those agreements.
It is the Board's goal to review all settlement agreements in a fair, conscientious and expeditious manner. While § 32 agreements are reviewed and assessed by the Board based on the particular facts and circumstances of each claim, it is hoped that to the extent feasible, the Board's review will maintain a level of consistency that will assist the stakeholders in our system when negotiating settlement agreements that will pass scrutiny pursuant to WCL § 32(b).
Towards that end, the purpose of this Subject Number is to make stakeholders aware of a number of recurring issues, how the Board has addressed them in the past and how they may be dealt with in the future. While this list is not exhaustive, it addresses many issues in which stakeholders have expressed interest or that have recurred with some frequency.
The majority of settlement agreements are reviewed and approved by the Board without the need for a meeting with the parties. After reviewing an agreement administratively, the Board may determine that issues exist which warrant a meeting with the parties. However, the parties do not have the right to demand that a meeting be held.
A meeting is always scheduled by the Board in the following circumstances:
Board Rule 300.36 permits a § 32 waiver agreement to be approved by a member of the Board (Commissioner), a Workers' Compensation Law Judge, the Chair or a designee of the Chair (12 NYCRR 300.36[d]). To ensure consistency in the review of waiver agreements, it is the Board's present policy to have all agreements reviewed by a Board Commissioner, either administratively or at a meeting where the parties are present. However, in emergency situations when a Commissioner is not available to preside over a scheduled meeting, a Senior Law Judge may be called upon to preside over the meeting and review an agreement in the Commissioner's stead.
Often it is necessary to obtain the consent of Special Funds to a proposed § 32 waiver agreement between the claimant and the employer/carrier.
WCL § 15(8) - When an employer/carrier has made a claim for reimbursement from Special Funds pursuant to WCL § 15(8), but that issue has not been resolved at the time a § 32 waiver agreement is negotiated, the parties are encouraged to resolve the issue as part of the agreement. If the parties are able to reach agreement on the issue of WCL § 15(8) liability, Special Funds must be a signatory to the resulting waiver agreement.
However, if the employer/carrier and Special Funds are unable to reach agreement with regard to the issue of WCL § 15(8) liability, that issue may be left open and decided by the Board at a later time. If the parties chose to leave the issue WCL § 15(8) open, Special Funds must be a signatory to the resulting waiver agreement. Of course, the employer/carrier may also opt to withdraw their claim for reimbursement pursuant to WCL § 15(8), in which case Special Funds need not be a signatory to the agreement.
WCL § 14(6) - If WCL § 14(6) [concurrent employment] has been established in a claim, Special Funds must be a signatory to any subsequent waiver agreement. If WCL § 14(6) has been raised, but the issue has not been decided by the Board, the claimant, employer/carrier and Special Funds may agree to resolve the issue as part of the waiver agreement and Special Funds must be a signatory to the agreement. Of course, the claimant and employer/carrier may also expressly waive any rights they may have pursuant to WCL § 14(6), in which case Special Funds need not be a signatory to the agreement.
WCL § 32 (a) provides that "[w]henever a claim has been filed, the claimant … and the employer or his carrier may enter into an agreement settling upon and determining the compensation and other benefits due to the claimant ..." Based on the language of WCL § 32 (a), the Board will not permit any claim or potential claim for workers' compensation benefits which has not been filed, indexed by the Board and assigned a WCB Case Number to be closed pursuant to a § 32 waiver agreement.
Language is often included in § 32 waiver agreements approved by the Board concerning the impact that the settlement will have in another area, such as a claim for Social Security or Medicare benefits. Many agreements allocate a portion of the settlement as payment for future medical expenses and a portion for future lost wages, or allocate the settlement over a certain number of weeks, with the hope that these allocations will both preserve claimant's right to Social Security or Medicare benefits and ensure that reimbursement is not later sought from the employer/carrier based on the payment of such benefits.
Agreements approved by the Board also commonly include terms which express the possible ramifications of a waiver agreement to the parties in other areas. For instance, an agreement may state the carrier will no longer be liable for causally related medical treatment, claimant is now responsible for the cost of such treatment, and other third party payors, such as Medicare or claimant's private health insurer, may decline to pay for such treatment.
However, the Board will not approve any agreement which contains language suggesting a conclusive determination regarding an issue that is the jurisdiction of a third-party who has not reviewed and assented to the terms of the agreement. For instance, an agreement may not state that Medicare/Medicaid will not pay for the cost of causally related treatment upon the approval of the waiver agreement, unless the agency ultimately responsible for making that determination has reviewed the proposed agreement and assented in writing to the accuracy of the statement.
The Board will also not approve any waiver agreement in which the claimant waives his or her rights in another forum, such as claims pursuant to Federal Equal Employment Opportunity Laws, the Americans with Disabilities Act, or State or Federal Labor Laws. Such claims are outside the Board's jurisdiction and a waiver of those claims should not be included in a § 32 waiver agreement.
The Board will not approve a § 32 agreement when there is an unresolved allegation that WCL §114-a has been violated. The rationale underlying this policy is the concern that the employer/carrier may have raised the issue of fraud to put pressure on the claimant to enter into a waiver agreement. To avoid the possibility of coercion, the fraud allegation must either be fully resolved on the merits by the Board, or withdrawn with prejudice by the carrier before the proposed agreement will be considered.
When determining whether a proposed waiver agreement is unfair, unconscionable, or improper as a matter of law [WCL § 32(b)], the Board takes into consideration a claimant's financial obligations, including whether he or she is making child support payments. The Board will not approve a § 32 waiver agreement in a case involving a claimant who is in arrears in making child support payments and/or is subject to an income execution to enforce an order of child support, unless documentation is submitted to the Board that is no more than 30 days old (from the date of the Board's review) from the Social Service agency responsible for collecting the arrears and enforcing the income execution, indicating their approval of the agreement.
In many claims, disputes arise regarding medical bills and the carrier files Form C-8.1 The Board will not approve any agreement which fails to resolve all outstanding disputes regarding medical bills (C-8.1s).
If the issue of wage expectancy [WCL § 14(5)] has been raised by the claimant, but has not been decided by the Board, a § 32 waiver agreement settling the claim should specifically address the issue, so that it is clear to the Board that the issue was considered by the parties when negotiating the agreement.
The Board will not approve any agreement which provides that a claim is 'disallowed' by stipulation of the parties. Such language is inappropriate for inclusion in a § 32 waiver agreement because it implies a finding on the part of the Board, when that is not in fact the case. If a claim has not yet been established, the agreement can, however, indicate that the claim is being 'withdrawn' by the claimant.
When a § 32 waiver agreement addresses multiple claims involving more than one carrier, each carrier must be a signatory to the agreement.
WCL § 120 makes it "unlawful for any employer or his or her duly authorized agent to discharge or in any other manner discriminate against an employee as to his or her employment because such employee has claimed or attempted to claim compensation from such employer…" WCL § 125 makes it "unlawful for any employer to inquire into, or to consider for the purpose of assessing fitness or capability for employment," or to "discriminate against a job applicant with regard to employment on the basis of that claimant having filed for or received" workers' compensation benefits.
WCL §§ 120 and 125 are evidence of a strong public policy against discrimination towards injured workers for availing themselves of their rights under the workers' compensation laws. The Board will not approve any § 32 waiver agreement which violates that public policy.
Waiver agreements sometimes provide that the claimant will resign from his or employment. While a legitimate reason may exist for the parties to agree that claimant will resign his or her employment, such agreements are given close scrutiny by the Board.
However, the Board will not approve any waiver agreement which provides that claimant will never reapply for a job with the employer. Such a provision would, if enforceable, limit an injured worker's ability to seek gainful employment far into the future, and violate the public policy underlying WCL §§ 120 and 125.
Often as part of a § 32 settlement, a carrier agrees to purchase an annuity from a third-party annuity issuer, who will make periodic payments to claimant. The purchase of an annuity, rather than a single lump-sum payment, offers benefits to both claimants and employer/carriers. It also creates a unique set of issues and concerns for the Board when reviewing a waiver agreement.
The annuity payments to which claimant is entitled and any terms and conditions affecting those payments should be clearly described in the waiver agreement. Also, it must be clear that sufficient assurances are in place that the payment obligations provided for in the agreement will be met. However, it is not necessary to provide the Board with a copy of the annuity contract between the employer/carrier and the annuity issuer, and the Board will not review an annuity contract that is submitted. It is up to the parties to review the annuity contract and assess the risks, benefits and responsibilities attendant to that contract.
Each waiver agreement is reviewed based on the particular facts and circumstances of the underlying claim. However, when an agreement provides for the purchase of an annuity, the Board has identified several minimum requirements which must be met. The Board will not approve a § 32 waiver agreement which provides for the purchase of an annuity from an annuity issuer, unless the following minimum requirements are met:
Be aware that the Board has no jurisdiction over the annuity issuer contracted by the employer/carrier and no authority to enforce periodic payments required pursuant to the waiver agreement, absent an express guaranty by the employer/workers' compensation carrier. Should the annuity issuer become insolvent, the Life Insurance Company Guaranty Corporation of New York (N. Y. Ins. Law Article 77) may provide coverage for unpaid annuity benefits, up to $500,000.
Jeffrey R. Sweet