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Appellate Division Reverses Judge of Compensation’s Decision That Employment Separation Agreement Constituted a Payment for a Disputed Workers’ Compensation Claim

By on July 15, 2022 in Court Rulings with 0 Comments

The case of Donald Servais v. Ocean Wholesale Nursery, LLC., A-2988-20, (App. Div. July 14, 2022) presents an unusual legal issue in workers’ compensation.  The case involved a dispute about an employment separation agreement and whether that agreement could have been construed to constitute a payment of workers’ compensation benefits, thereby tolling the statute of limitations.

Mr. Servais suffered an amputation of three fingers of his right hand on January 26, 2016.  No claim petition was ever filed within the two-year statutory period, and respondent never paid any workers’ compensation benefits to Mr. Servais, believing that the injury occurred at petitioner’s home and that petitioner was not an employee.  Respondent hired petitioner as a consultant and not as an employee, although petitioner contended that over the course of five years his relationship with Ocean Wholesale Nursery, LLC changed to that of an employee.  Petitioner ultimately filed a formal claim petition on October 26, 2018, well past the two year statute of limitations.

Respondent, as insured by Farm Family Insurance Company and administered by ESIS, filed a motion to dismiss the claim petition under the two year statute of limitations.  Petitioner countered by raising an argument regarding an employment separation agreement signed on January 31, 2017 by both parties by which terms respondent paid $5,000 to petitioner to resolve their business relationship.  Petitioner argued that the employment separation agreement was ambiguous and could have led petitioner to believe that the $5,000 payment was in part a payment for the loss of his fingers. Petitioner argued that the claim petition was filed within two years of the date of signing the employment agreement and was therefore timely filed.

The parties agreed to try the issue of the statute of limitations separately and then reserve for a later trial all other issues, such as compensability and employment.  The judge heard testimony from petitioner, the Nursery’s owner, and the Nursery’s former general manager.  The judge reviewed the terms of the employment separation agreement and found Section 7 of the Agreement to be confusing. That section excluded from the Agreement “claims that may arise after the date (petitioner) signs this agreement.”  The judge thought that this language might lead petitioner to believe that any incidents that arose before he signed this Agreement were included.   The judge also found paragraph seven to be ambiguous because it excluded “(petitioner’s) rights to receive benefits for occupational injury or illness under the workers’ compensation law” but did not specifically mention a “traumatic injury.”  The judge acknowledged that there was no mention anywhere in the agreement of an injury to petitioner’s fingers but criticized the agreement for not informing petitioner of his right to file a workers’ compensation claim.

Based on his interpretation of the separation agreement the judge concluded that the separation agreement included any and all claims, including the loss of fingers.  The judge also found that petitioner was an employee and was injured during the course of employment, although the judge previously agreed that these issues would be held for a later hearing.  Finally, the judge apportioned $1,000 of the $5,000 paid under the separation agreement to the petitioner’s injury to his fingers.

Farm Family appealed the decision to the Appellate Division, which reversed in favor of Farm Family and vacated the substantial award to petitioner.  The Court said, “Reviewing the Agreement de novo, we perceive no ambiguity.  The plain language of the Agreement expressly excluded petitioner’s workers’ compensation claim.” The Court added:

Contrary to petitioner’s argument, paragraphs five and six of the Agreement would not reasonably lead a person to believe that the $5,000 payment under the Agreement was also a partial payment for his work-related injury because paragraph seven of the Agreement, clearly entitled in bold ‘Exceptions,’ expressly stated that the release in the Agreement did not ‘affect or limit’ his right to receive benefits for occupational injury under the Workers’ Compensation Law.

In the end, the Appellate Division held that petitioner failed to file his claim petition in time. The Court also added that the Judge of Compensation had no right to apportion $1,000 of the $5,000 payment under the separation agreement to the loss of petitioner’s fingers.  The Court said:

The judge’s finding that $1,000 of the $5,000 payment of the agreement was payment for petitioner’s loss of fingers has no basis in the record evidence. The judge faulted the agreement for not addressing petitioner’s loss of his fingers and for failing to inform petitioner of ‘his right to file a workers’ compensation claim and his inability to waive same.’ Yet, in the Agreement, petitioner did not waive his right to file a workers’ compensation claim. To the contrary, in the Agreement, petitioner expressly reserved his right to file a workers’ compensation claim.  He just didn’t do so timely.

The Court concluded by reversing the order denying respondent’s motion to dismiss and vacated the final judgment.  The Court did not reach respondent’s argument regarding denial of due process given the decision to dismiss the case on the statute of limitations.

This trial and legal brief in this case were handled by former Capehart attorney Dana Gayeski, Esq. and the appeal was argued by John Geaney, Esq.

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About the Author

About the Author:

John H. Geaney, a shareholder and co-chair of Capehart Scatchard's Workers' Compensation department, 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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