The Employer’s Role in Settling Claims In 1996, the Pennsylvania Legislature passed Act 57. The legislation has had a dramatic effect on how workers’ compensation cases are handled. One of the major changes instituted by Act 57 was the ability of the parties to “compromise and release…any and all liability which is claimed to exist” under the Workers’ Compensation Act*. Thus, for the first time, claims could be settled. Settlements are now commonplace. In the nearly fifteen years since passage of Act 57, the number of settlements has grown significantly. Bureau statistics reveal that in 2007 and 2008, workers’ compensation judges approved more than 30,000 Compromise and Release Agreements resulting in payments of nearly $1.8 billion. The settlement “industry” has grown so large that it has even spawned the creation of “Resolution Courts” in Philadelphia and Delaware counties. These “Courts” are devoted exclusively to hearing testimony in support of proposed Compromise and Release Agreements. The lengthy “Resolution Court” hearing lists are clear evidence of the appeal of such agreements. Given the frequency with which workers’ compensation cases settle, it is important that employers understand the role they can play in the process. What follows is a not meant to be an exhaustive study of the issue but, rather, it aims to provide a basic understanding of how employers can assist their counsel in moving cases toward a favorable settlement. A well informed and engaged employer can be a valuable asset to defense counsel and can help the employer curtail its’ litigation expenses. Job Offers Of all the areas where the employer can impact the settling of claims, perhaps none is more influential than in the area of post-injury job offers. The decision whether to offer a job to an injured employee can be a complex one that will likely require the assistance of counsel. It is vital that any job offer be made with a complete knowledge of the law governing such offers. Over the years, case law has developed certain guidelines for post-injury job offers from the pre-injury employer. If done properly, a job offer can change the complexion of a case and place the claimant on the defensive. Most importantly, it can severely curtail the employer’s exposure. Employers are cautioned that the letter should never be sent to the employee without having the offer reviewed by counsel. Faulty job offers can quickly turn a winning situation into a loser. The well constructed job offer can help redefine the case value. Take, for example, the following scenario: an employee with a pre-injury wage of $900 per week has been collecting $600 per week in wage loss benefits for the past year. If the employer can offer a return to work without a wage loss, that is a potential savings of $31,200 per year in workers’ compensation benefits. Even if the proposed job pays just $450 per week for a yearly total of $15,600, the threat of such a job offer should decrease the settlement demand and send the message that the employer intends to take an aggressive approach to the case. Extending the job offer will cause the claimant to reevaluate the settlement demand because now there is a real possibility that future wage loss benefits will be reduced, not only in amount, but also in duration, since partial disability benefits are capped at 500 weeks. It is suggested that the employer discuss the possibility of tendering a job offer with its attorney whenever this tool can be utilized. The employer is cautioned, however, that a return to work is not without its challenges. This, too, should be the subject of a conversation with counsel. In short, the ability to offer employment to an injured employee can help prompt resolution and do so in a way that reduces exposure. Records Keeping One of the best settlement or litigation tools the employer can provide to its attorney is a well-maintained and detailed personnel file. It can be frustrating to defense counsel when their clients provide details of performance and disciplinary issues that are unsupported by company records. Such information can be extremely valuable, but if it is not documented, it diminishes the potential effect of that information. It is far more persuasive to a judge if the employer is able to cast doubt over a claim by providing records showing that the claimant was on the cusp of being fired when he suddenly became involved in an unwitnessed work incident. A personnel file replete with written reprimands and negative performance evaluations will arm counsel with important information that can diminish the case value when negotiating a resolution. Mediation Parties have always been able to mediate claims, but Act 147, passed in 2006, made mediation mandatory in all cases except where the WCJ deems it futile. Mediations are divided into two categories - mandatory (set by the judge) and voluntary- (where the parties agree to proceed on their own). Mandatory mediation only occurs when there is a petition pending, whereas voluntary mediation can be arranged regardless of whether the case is in litigation or not. Before engaging in mediation, the employer must decide if mediation is right. In weighing the decision, it is wise to consult counsel to discuss the timing of a mediation, selection of a mediator (if it will be a voluntary mediation) and which terms are negotiable and which are critical. A mediation conference can be useful if the claimant has an unrealistic opinion of the case value. It may help such a claimant to hear from an authoritative and neutral third party (the mediating judge) that his or her evaluation is not realistic. Even if the employer is participating in a mandatory mediation that it considers unlikely to produce a settlement, the mediation can still be used to solicit the claimant’s “bottom line” demand. This will give the employer something to think about as the case unfolds – especially if the employer believes that the prospects for victory have diminished since the time of mediation. It is highly recommended that all Employers attend at least one mediation conference. Attendance at a mediation conference will help the employer better understand the process. Furthermore, attendance will send a message to the participants that this case is important to the employer. By attending the mediation, the employer also allows the mediating judge to put a face to the name. A professional, friendly and reasonable company representative will likely leave the judge with a favorable impression of the employer. Such “face time” with the judge can pay dividends down the road. Attending the mediation conference will also provide the employer with first-hand knowledge of what the judge thinks of the case. Finally, by attending the conference, the employer will be able to take measure of the claimant, claimant’s counsel and even its own counsel. Issues to Consider Once an employee has decided that it wants to resolve a claim, there are a number of issues it needs to consider before a Compromise and Release Agreement can be drafted. First, the employer should determine whether it wants to continue the employment relationship with the claimant. Depending on the nature of the work-related injury and the relationship it has with the employee, the employer may want to obtain a resignation as part of the settlement. It is strongly recommended that employers decide if a resignation is necessary before they commence settlement negotiations. Resignation from employment is a major component of many settlement negotiations and it can significantly alter the settlement value. As a result, where a resignation is required, that fact should be conveyed to the claimant and counsel at the beginning of the negotiations. If the employer seeks a resignation, the question arises as to whether it should obtain a simple, one paragraph resignation or whether it should insist upon a Separation Agreement and General Release. A simple resignation usually can be obtained without increasing the settlement offer. Separation Agreement and General Releases call for the release of any and all claims an employee can file against the company. Separation Agreements and General Releases extend beyond the world of workers’ compensation and can involve, among other things, a release of all age, gender and racial discrimination claims. Workers’ compensation attorneys often have access to such Agreements, but it would be wise to either retain counsel whose office specializes in both workers’ compensation and employment law, or to retain the services of two separate firms specializing in these areas. Employers are reminded that any resignation agreement, regardless of whether it is a simple, one paragraph document or is a complex General Release and Separation Agreement, must include some form of meaningful consideration (i.e. payment). Another important issue employers must tackle is the question of Medicare’s potential interest in settling claims. Most employers (and counsel) cringe at the mere specter of contacting the Centers for Medicare Services (CMS). Many times parties choose to dismiss Medicare’s interest by contending that, absent a settlement exceeding $250,000 where the claimant is reasonably expected to become a Medicare beneficiary within thirty months of the settlement, there is no need to be concerned with Medicare. Such reasoning is flawed and can pave the way to bigger problems down the road. The fact of the matter is Medicare’s interest must be considered in all cases – regardless of the amount. This does not mean, however, that approval needs to be obtained from CMS for every case. The issue of settling future medicals and the ramifications it can have involve complex matters that require knowledgeable legal counsel. Conclusion Workers’ compensation settlement have become commonplace in the industry. In order to be well positioned when approaching settlement negotiations, the employer should do its best to be informed about, and engaged in, the process. Retaining experienced counsel is important and can make a significant difference. It is also important to remember that employers can begin to channel a case toward a favorable resolution long before the settlement negations start by maintaining a thorough personnel file, making appropriate job offers to injured employees and having a clear vision of what they need out of any settlement. Finally, it is extremely important that the employer develop and maintain a strong line of communication with its attorney since it is the attorney who serves as the employer’s mouthpiece throughout the legal process. * 77 P.S.§1000.5 of the Pennsylvania Workers’ Compensation Act.