The goal of settlement from a defense perspective is to avoid the risks, disruptions, and expense of further litigation. So what if you, the employer, settle claims with a plaintiff who takes the money but pursues further claims against you. That would be, in technical legal jargon, “really bad.”
One way this could happen is where the settlement attempts to resolve both civil litigation and pending workers’ compensation claims. That was the situation in Steller v. Sears, Roebuck, a recent California Court of Appeal decision. While the settlement purported to resolve all employment-related claims, it didn’t explicitly recognize the differences between resolving civil litigation and a workers’ comp action. A settlement of a civil contract or tort claim is effective when the agreement is signed. But according to California Labor Code sec. 5001, settlement of a workers’ comp claim requires approval by the Workers Compensation Appeals Board (WCAB). Without that approval, the release of a workers’ comp claim is invalid. Here, aside from some additional legal fees, things turned out all right from the employer’s perspective. After considering extrinsic evidence as to the parties’ intent, the court determined that the settlement was intended to resolve the workers’ comp action, too, and that therefore, it was impliedly conditioned on approval from the WCAB.
But this case illustrates that crafting an effective settlement agreement is not simply a matter of changing the names and dollar amounts from the previous settlement agreement — at least not if you want it to actually dispose of all pending litigation.