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Can Job Termination Agreements Be Negotiated as Part of Workers’ Compensation Settlements in New Jersey?

By on January 25, 2013 in Uncategorized with 0 Comments

There are no published cases dealing with resignation as part of workers’ compensation agreements in New Jersey.  Contrary to other states where such resignation agreements are routine, New Jersey employers and carriers seldom negotiate resignation in connection with a workers’ compensation settlement.  One main reason this practice does not prevail in New Jersey is that our state law focuses on loss of function as opposed to return to work.  Temporary disability benefits end at maximal medical improvement in New Jersey, and most workers’ compensation settlements here involve claimants who are already back to the same or another job by the time of settlement.

That is not the case in other states.  In states like Pennsylvania and Florida, compensation settlement agreements generally include the employee’s resignation.  On occasion employees have challenged these agreements as coercive or contrary to public policy.  In almost all of these challenges around the country, the policy in favor of resignation agreements has been upheld.

One case of interest is Wittig v. Allianz, A.G, Fireman’s Fund, et. al. 145 P.3d 738 (Intermediate Court of Appeals Hawaii 2006). The plaintiff Wittig was injured at work on January 30, 2000.  She was sent for an IME which provided several impairment ratings.  Based on the IME, Fireman’s Fund proposed a settlement of $31,504 for “closure of your entire workers’ compensation claim and request for your resignation with your employer.”

Wittig did not respond to the offer.  Months later she was reexamined to determine any increase in permanent impairment.  She retained counsel who filed a complaint with the Insurance Division of the State Department of Commerce and Consumer Affairs alleging that Fireman’s Fund engaged in unfair settlement practices. Wittig then filed a civil complaint alleging bad faith.  While the suit was pending, Wittig was awarded partial permanent disability benefits of $25,328.52 and temporary disability benefits of $1,410.75.

In her civil suit, Wittig contended that Fireman’s Fund retaliated against her for filing a workers’ compensation claim by seeking her resignation.  The court rejected these arguments and stated, “There is nothing inherently wrong with a voluntary settlement agreement that includes the employee’s resignation as a condition, particularly where the employee is offered additional compensation for resigning.  A settlement on such terms may be attractive to the employee and serve the employee’s interests.”

The court went on to observe that workers’ compensation settlements involving an employee’s resignation are common in many states.  It cited approvals of such resignation agreements in Virginia, District of Columbia, Michigan and Minnesota: “Instead of violating public policy, permitting a settlement offer to include an employee’s resignation expands the opportunity for settlement and advances the public policy favoring dispute resolution through voluntary settlement agreements.”

As for the argument that Fireman’s Fund coerced resignation, the court once again disagreed.  “We fail to see how Fireman’s Fund’s inclusion of the resignation term in its settlement offer was coercive. Wittig was not forced to accept Fireman’s Fund’s offer.  She had the option of declining to accept the offer and pursuing her claim for benefits before the Director of the DLIR.”

Clearly, a New Jersey Judge of Compensation would not have the authority to pass on the validity of such an agreement, nor enforce it at a later date.  Resignation agreements need to be privately negotiated outside workers’ compensation court.  The court in Wittig underscored a key point for employers who wish to make resignation part of a workers’ compensation settlement.  There must be separate consideration or additional compensation for the resignation.  The claimant would need to be represented by competent counsel and understand any waiver of rights, including resignation. The agreement must be truly voluntary with claimant having the option to pursue a full hearing.  Under these circumstances such an agreement would not appear to violate New Jersey public policy.

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This blog article was researched and written by John H. Geaney, a member of the executive committee and equity partner at the law firm of Capehart Scatchard. The content of the this article is intended to provide general information on the topic presented, and is offered with the understanding that the author is not rendering any legal or professional services or advice. This article is not a substitute for legal advice. Should you require such services, retain competent legal counsel.

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John H. Geaney

About the Author

About the Author:

John H. Geaney, an executive committee member and shareholder with Capehart Scatchard, began an email newsletter entitled Currents in Workers’ Compensation, ADA and FMLA in 2001 in order to keep clients and readers informed on leading developments in these three areas of law. Since that time he has written over 500 newsletter updates.

Mr. Geaney is the author of Geaney’s New Jersey Workers’ Compensation Manual for Practitioners, Adjusters & Employers. The manual is distributed by the New Jersey Institute for Continuing Legal Education (NJICLE). He also authored an ADA and FMLA manual as distributed by NJICLE. If you are interested in purchasing the manual, please contact NJICLE at 732-214-8500 or visit their website at www.njicle.com.

Mr. Geaney represents employers in the defense of workers’ compensation, ADA and FMLA matters. He is a Fellow of the College of Workers’ Compensation Lawyers of the American Bar Association and is certified by the Supreme Court of New Jersey as a workers’ compensation law attorney. He is one of two firm representatives to the National Workers’ Compensation Defense Network. He has served on the Executive Committee of Capehart Scatchard for over ten (10) years.

A graduate of Holy Cross College summa cum laude, Mr. Geaney obtained his law degree from Boston College Law School. He has been named a “Super Lawyer” by his peers and Law and Politics. He serves as Vice President of the Friends of MEND, the fundraising arm of a local charitable organization devoted to promoting affordable housing.

Capehart Scatchard is a full service law firm with offices in Mt. Laurel and Trenton, New Jersey. The firm represents employers and businesses in a wide variety of areas, including workers’ compensation, civil litigation, labor, environmental, business, estates and governmental affairs.

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