Keefe, Campbell & Associates, LLC

Editor’s comment: Sometimes it starts with a small thing. This week, we learned the Illinois PPD maximum rate had been increased on the IWCC website without any prior notice to industry folks like you and me. Actually, one of our sharper clients noticed it before we did. We also got an email from a top-notch defense attorney in Rockford who was advised by his clients of the change. He was nice enough to relay the information so we could update our website and our partner, Shawn Biery’s Illinois WC rate sheets. By the end of the week, an IWCC email update was sent and the change made the IWCC news.

We think the administrators have made a similar mistake to the problems faced with implementation of the 2005 Amendments to the Workers’ Compensation Act—changes to the law are effective as soon as they are made. It is our legal opinion they can’t simply “white-out” the old interim rate as they appear to be trying to do—it isn’t that simple a change. The rate of $643.82 is and remains the effective rate for the period it was posted on the web. We think the IWCC has to put an asterisk or something to let the public know of their claimed error and its purported “correction.” Cases subject to the PPD maximum for dates of loss from July 1, 2008 to March 12, 2009 that were settled or tried during the period from the posting date of the $643.82 number until the posting of the new number and have reached final disposition are set at the $643.82 amount. It is our legal opinion you don’t have to reopen settlement contracts or modify final arbitration decisions from the period of January to March 2009 to send claimants and their attorneys more money now. Yes, we understand this is confusing—we didn’t create the confusion and hope there is no litigation to resolve it.

At present, we want all of our Illinois clients across the country to know you now have to again reset all PPD reserves for all active claims with dates of loss from July 1, 2008 to present. Please don’t shoot the messenger for this comedy of errors. If you don’t understand what you need to do, please send a reply.

Then the wheels started turning. The old max rate was $636.15 and, as we outline above, it was initially increased to $643.82. This was an increase of $7.67 a week which we consider somewhat normal, even understanding 2008 wasn’t a great year, particularly in the second half. The new increase takes the PPD maximum to a whopping $664.72. This is a one-year increase of $28.57 or about 4.5% in one year! Such an amazing leap creates substantial concern by the members of this firm for a number of reasons.

First, what heavy hitter has the political power to “correct” clerical errors of this nature? We have never seen anyone increase the published PPD maximum since we started spiraling our rates in the mid-1980’s. We also point out the new PPD max rate is only good through June 30, 2009—we are nine months into the current amount! We are sorry to report our skeptical view but we simply don’t believe it—we think this was done because the “wise guys” who secretly run the Commission wanted PPD rates higher and assume the masses won’t care or are too stupid to understand their insider actions.

We truly seek a formal inquiry about this late and unnecessary change. We also again ask the Commission itself or our legislature to seriously consider freezing all WC rate increases while Illinois recovers from the worst recession of our lifetimes.

In reviewing what just “hit us,” we are certain the Commission itself didn’t meet to discuss the confusing change and its nuances—they almost never meet. We are also certain the IWCC advisory board didn’t mandate the giant new increase—it wasn’t on their published agenda for any meeting. We feel someone may have secretly put the arm on someone to make this unprecedented change, like all the other secret stuff we see all the time at the IWCC. If we are wrong, we ask for someone to prove us wrong and show us their math.

Second, there is no chance, none that Illinois wages went up 4.5% across the state last year. If anything, wages dropped dramatically by year-end. At a continuous increase of 4.5%, Illinois wages will supposedly double in 16 years. Trust us, wages in this state aren’t doubling every other decade.

Most important, we are now looking at state government raising our income taxes by 50%. The chances of that happening are almost certain—the state is running at an $11.5 billion deficit. We are worried Governor Quinn is living in a fantasy land when he easily tells us we have to live with record high income taxes when some of our sister states have no income taxes. We are also thrilled to hear he wants to cut spending without any defined plan to do so. Trust us, Gov, the workers’ compensation costs in this state for state workers are spiraling wildly out of control. It isn’t hard to check—go to the IWCC call sheets and search “State of Illinois” or “St of IL” and you will find each call has 5-100 claims in litigation by State of Illinois employees. We would estimate the Kankakee call alone has about 500 cases currently pending. We would estimate there are 5-10,000 pending WC claims for Illinois state employees!!! We are also certain the cost to Illinois taxpayers is well into the billions. Well, guess what, they just raised their permanency maximum rate, affecting all of those thousands of claims.

Cook County government is also facing record deficits and we can be sure they will have to find new revenue sources within a year of hitting county residents with the highest sales taxes in the world. Numerous county employees are filing lost time WC claims and we have seen no true efforts at workers’ compensation cost control for the county. Their PPD maximum rate just went up, affecting all of their claims.

The Chicago Public Schools are about $500 million in debt. We applaud new manager Ron Huberman who is trying to hold the line on real estate taxes. He is specifically targeting rising workers’ compensation costs as a management goal. He will also have to deal with higher WC rates that will certainly affect all of his claims.

Finally, the City of Chicago continues to see spiraling WC costs. The City steadfastly refuses to provide light work or to perform surveillance of WC claimants, claiming neither strategy saves costs. Well, we assure the City fathers every other major employer in Illinois uses such concepts and saves millions of dollars doing so. The City of Chicago needs to fund legal “ghost payrollers” because they need 20-30% more workers to staff any position because for every ten city workers, two or three are out on WC benefits at any given time. And now they will have to battle higher max PPD rates.

We continue to hope these government bodies will start to pull out of the rut they clearly are in and not make a bad recession even worse with new record high taxes while Illinoisans try to fight the good fight in the private sector. We seek your thoughts and comments.

Editor’s comment: In Illinois and most states, owners, officers and partners of a company can opt out of workers comp coverage. Section 1(b)(3) of the Illinois Act defines employers and says: “Every sole proprietor and every partner of a business may elect to be covered by this Act.” Case law interprets this to allow partners and owners to avoid ever-increasing workers’ comp premiums.

In some states, they are starting to see charlatans and neer-do-wells try to exploit this otherwise simple exemption into a scheme to avoid paying premiums. The Contractors Asset Protection Association (ConAPA), a company based in California, sought to help companies avoid workers’ comp premiums by designating employees in high rate occupations as “corporate officers.” The ConAPA company website seems to have gone down. The California exemption applies to company officers who are also the sole shareholders of a corporation. So the folks at ConAPA don’t just have employers give high wage workers inflated titles, they issue workers relatively worthless shares of stock. ConAPA focused on industries with high injury rates and expensive comp costs such as roofers, maintenance workers and cooks.

Using their strange business model, a housekeeper might become a “senior vice president, facilities.” A roofer became “VP for environmental protection.” A baker might be the “Vice-President of Dough-Making.”

California Attorney General Edmund G. “Jerry” Brown has filed a lawsuit to stop the Contractors Asset Protection Association, Inc. from engaging in a “sophisticated and fraudulent scheme” to cheat the state workers compensation system. “This company falsely promised its clients that if they gave their employees empty titles and worthless shares of stock they could avoid tens of thousands of dollars in workers compensation premiums,” Attorney General Brown said. “But you can’t simply call a security guard a vice president and avoid complying with the law through a sophisticated and fraudulent scheme.”

This lawsuit seeks a permanent injunction barring Contractors Asset Protection Association, Inc. (ConAPA) and its founder-president from engaging in unfair and deceptive business practices in violation of sections of the California code. The lawsuit also seeks restitution and civil penalties of no less than $300,000. The lawsuit alleges ConAPA sought to exploit a legal exception to the workers compensation law, where directors of a corporation who are also the sole shareholders can exempt themselves from workers’ compensation coverage. Under this scheme, ConAPA marketed and advertised an unlawful business plan urging employers to misclassify rank-and-file employees as “corporate officers” and issue them nominal shares of company stock so as to avoid paying workers’ compensation insurance premiums. Despite the titles, many workers were not assigned any managerial or administrative duties and performed the same rank-and-file duties for the same pay that they performed prior to their “promotion.” ConAPA ensured that its clients were able to prevent their new “officer-shareholders” from gaining control over the business. Employees were also required to sell their shares back to the company if they left the company. ConAPA apparently told its clients this business model was “legal” and implied the program had been scrutinized and approved by several state authorities, which it had not.

We caution the sharks in the insurance industry to stay out of Illinois waters with this silly scheme. We are pretty sure Illinois Attorney General Lisa Madigan would be on it faster than the ink dried on the policy. If you have thoughts or comments, please send a reply.

Editor’s comment: We recently saw an industry article announcing California Insurance Commissioner Steve Poizner, joined by Fresno County District Attorney Elizabeth Egan, announced a $1 million grant for the Fresno County District Attorney’s office to fight workers’ compensation insurance fraud. Commissioner Poizner said:

In this struggling economy, it is more important than ever to help businesses to stay and expand in the state. Because fraud drives up the costs of workers’ compensation insurance, we must continue to be vigilant in our battle with those who dishonestly and illegally take advantage of the system. Fraud is not a victimless crime. It imposes a $500 hidden tax on every man, woman and child in California. I am happy to provide this funding to the Fresno County D.A. which will greatly enhance our effort to stamp out fraud that damages the local economy.

Below is a chart of the funds distributed to Fresno and surrounding counties and areas:

Counties                      Funding 2008-09

Fresno                        $1,096,200

Kings                          $279,108

Madera                        $48,000

Merced                        $144,000

Tulare                          $279,939

California counties must annually apply for these grants. The applications are reviewed by the Workers’ Compensation Grant Review Panel based on a number of criteria, including the previous year’s performance. The panel makes a recommendation to the Insurance Commissioner who can accept or amend the panel’s recommendation. At that point, the Insurance Commissioner’s final decision must be ratified by the Fraud Assessment Commission. The funds are distributed in two installments. The funds stem from an assessment authorized by the legislature.

Commissioner Poizner has worked tirelessly to fight WC insurance fraud. In addition to providing grants to local district attorneys, he oversees 16 CDI Enforcement Branch regional offices throughout the state. Close to 1900 WC insurance fraud-related arrests have been made by the Department of Insurance’s enforcement division since Commissioner Poizner took office in 2007 – more arrests than have been made during any other two year period, under any previous insurance commissioner. In addition, after a meeting of the Advisory Task Force on Insurance Fraud, Blue Ribbon Review Committee last year, Commissioner Poizner announced the implementation of five actions to help reduce fraudulent claims, including the creation of a fusion center for insurance fraud investigations so law enforcement can share information more efficiently and quickly to identify emerging trends and crime patterns.

Additional steps include:

• Better training for the Special Investigation units on the recognition, documentation, and reporting of suspected insurance fraud claims.

• Recognizing insurance companies that go beyond compliance for their greater commitment to fighting fraud.

• Increasing the outreach efforts of CDI about the consequences of fraud, how the public can recognize it and report it.

• Adopting more aggressive recruiting and retention practices, including pay upgrades, so that CDI can recruit and retain qualified investigators.

In contrast, Illinois Workers’ Compensation Commission spends an unknown amount on our WC fraud-busters. They don’t give grants to state’s attorneys to assist in stamping out fraud. No monies were received from miscreants due to fines or restitution orders. We have no idea how many WC fraud by worker arrests may have been made—there is no mention of WC fraud or investigations or arrests in the Commission’s last annual report. In contrast, the annual report does indicate they levied $1.2 million on uninsured employers.

California remains a model for Illinois employers who want to stop WC fraud by workers.  We feel Illinois business has to get representation at the IWCC from individuals who are sensitive to this important issue and are willing to use the assessment on Illinois business for a single issue of importance to the business community. We feel monies should and must be given to state’s attorneys for training and assistance to enable them to address this important issue. Please forward your thoughts and comments.

Editor’s Comment: Understanding we are defense lawyers, we find it hard to disagree with this ruling. We always salute the Illinois courts when they follow the “plain English language” version of our laws and rules. While that sounds unusual to say, trust us, they don’t always follow such construction. If you want examples, send a reply. This case follows the simple meaning of a simple document.

We also caution all Illinois claims handlers and adjusters against what we consider the very silly claims practice of settling a claim without advice of defense counsel and then having Petitioners’ attorneys draft settlement contracts for you with the assumption Petitioner’s counsel will somehow “protect” you in doing so—their ethical demands are to protect their clients and not you. We assure you all knowledgeable claimant attorneys who are allowed to draft your settlement contracts will now check the “magic box” to insure they can always submit unpaid medical bills to you and claim payment is due.

In Thomas Hagene v Derek Polling Construction, (No. 5-07-0225 February 24, 2009), the Illinois Appellate Court was faced with a claim under Section 19(g) for enforcement of settlement contracts alleged to require payment of substantial medical bills that remained unpaid after settlement. The record indicates some of the bills were not paid and remained in dispute after closure of the claim. It appears the front of the contracts had the box checked to indicate “all medical bills” were paid and the back said the settlement was a compromise of all benefits owed under the Act. In contrast, the claim for TTD said it was disputed on the front and to refer to the reverse of the document for settlement terms.

This case involved an apparent stipulation by Respondent the unpaid medical bills in question were causally related to the work injury. Unfortunately, there was a presumption all medical bills had been forwarded to Respondent for payment by the time of settlement as well.  This decision raises concern for the defense industry that, upon indicating in settlement contracts the employer has paid all medical expenses incurred prior to contract approval, such an indication will include bills not yet submitted for payment as well. In light of this ruling, whether a settlement involves disputed bills or not, we recommend against checking the box to make a blanket statement in approved contracts “Respondent has paid all medical bills.” Respondents simply have no way of knowing the full extent of treatment sought by any given claimant.

The facts of this case are relatively simple. Petitioner settled his claim pro se or without advice of counsel. Respondent’s attorneys drafted the settlement contract. On the reverse page, the terms of the contract state Petitioner would receive $20,036.10, representing only permanency benefits valued at 30% of his injured arm. The first page of the contract indicates Respondent paid all medical bills without further elaboration. Under Terms of Settlement on the second page of the contract, Petitioner accepted $20,036.10 or 30% of the arm as the full measure of compensation for all issues, including TTD and all past, present and future medical expenses. Obviously, the document had conflicting language.

Sometime after settlement Petitioner learned $19,977.25 in medical expenses incurred prior to settlement remained unpaid by Respondent or anyone else. Roughly 18 months after settlement was approved by the Arbitrator, Petitioner brought suit in Circuit Court under Section 19(g) seeking to hold Respondent liable for these unpaid medical bills. Respondent defended on the position Petitioner was barred from seeking payment of medical expenses based on the terms of the settlement. As we indicate above, Respondent apparently raised no defense to causal connection of the medical charges to the work injury, and according to the decision Respondent agreed during oral argument the medical charges incurred and disputed were causally connected to the work injury.

The Circuit Court entered an order dismissing the complaint pursuant to Respondent’s motion, finding Respondent’s obligation had been satisfied through payment of the settlement proceeds. Following denial of Petitioner’s motion to vacate and reconsider, Petitioner appealed to the Appellate Court, Fifth District. Please note this is not the Appellate Court, Workers’ Compensation Division.

On appeal, Petitioner argued

• The settlement did not preclude his 19(g) petition for reimbursement in the amount of the medical bills,
• The contract did not relieve Respondent of its obligation to pay causally related medical expenses, and
• If the contract was deemed ambiguous, such ambiguity weighs in his favor because Respondent drafted the contract.

Respondent defended on the position the settlement contract unambiguously addressed Respondent’s obligation for payment of past, present and future medical benefits and because there was no ambiguity there was no need to resort to the rule of construction holding ambiguities to the detriment of the party which drafted the contract.

In analyzing the arguments of the parties, the Fifth District Appellate Court noted Respondent’s obligation to pay Petitioner’s medical bills stemmed not from the settlement contract but from Section 8 of the Act. Acknowledging parties can and do waive statutory rights in reaching settlement, the Court noted waiver of an important statutory right must be explicit. Respondent argued Petitioner explicitly waived his right to compensation for medical expenses related to the work injury according to the Terms of Settlement provision, agreeing to $20,036.10 as the full measure of compensation for all benefits including past, present and future medical expenses.

Refusing to consider the Terms of Settlement without consideration of all relevant contract language, the Court found the parties did not intend to discharge Respondent’s statutory obligation to pay Petitioner’s past medical expenses, as Petitioner accepted $20,036.10 as the full measure of compensation for all benefits under the presumption Respondent had already paid all past medical expenses incurred. Noting Petitioner’s agreement to settle his case for $20,036.10 was premised upon his belief Respondent had already paid all past medical expenses incurred, the Court stated relieving Respondent of its statutory obligation to pay the medical expenses it claimed it already paid would result in a windfall to Respondent by absolving Respondent of its Section 8 obligation without any consideration to Petitioner; terms to which Petitioner had not agreed nor had the parties intended. The Fifth District Appellate Court reversed the Circuit Court and remanded the case to the Circuit Court for entry of an order consistent with its ruling. We have to assume the defense firm now may face legal malpractice concerns for their drafting gaffe.

One can only wonder what would have happened if boxes on the front of the settlement contracts that mention medical bill payment had been left blank or said “disputed” see reverse. However, we suggest the better path to avoid this confusion would be to leave the boxes blank and put “disputed, see reverse” in that part of the contracts. In the alternative, the Terms of Settlement should clearly state, all medical bills submitted have been paid and any other medical bills are fully disputed, denied and will not be paid. The more certainty you can provide on the front and back of the contracts, the better chance the courts will apply the contracts as approved.

In handling/drafting lump sum settlement contracts, we suggest one of two approaches be taken. The easiest approach is to say on the front and the back of the document, all medical bills are disputed and denied and the settlement is a compromise to produce peace. If the Arbitrator approves such a contract, we feel the courts would enforce them.

The more complex issue is to close medical rights by agreeing to pay the applicable medical fee schedule amount of all reasonable, necessary and related medical bills submitted prior to settlement or of which Respondent or its insurance carrier/TPA has notice at or prior to settlement. This language, if approved by the Arbitrator, should protect both sides. Petitioner simply has to be sure Respondent is aware of medical care and billing; the employer or its representatives should be protected from “surprise” bills for care it was not given notice.

This article was written by Joseph R. Needham, J.D. We would appreciate your thoughts and comments about this new ruling and handling of medical bills at the time of settlement.

Editor’s comment: We recently saw an article where a Chicago law firm requested $1,100 as an hourly defense rate in a bankruptcy claim. The federal bankruptcy court judge in Wilmington, Del., said he wouldn’t okay the fee requested in a newspaper company’s bankruptcy claim. However, he approved a top hourly fee of $925 in the bankruptcy. The billable rates charged by the Chicago-based firm in the case start at $575 for some attorneys, according to a filing requesting court approval of legal fees and billing rates. By the by, $925 per hour is more than $15 every minute. We also understand bankruptcy lawyers get to bill for creating their bills to present and get paid upon approval of the courts.

The $1,100 rate requested is higher than any in a database kept by Lynn LoPucki, who teaches bankruptcy law at the University of California at Los Angeles. However, it was just a bit less than the $1,110 requested last month by a different Chicago-based firm in a corporate bankruptcy case. There’s no word yet on whether that fee request was approved. One has to wonder what miracle of legal work justifies such billing rates.

However, these rates pale in comparison to the highest legal rate ever recorded when a southern Illinois judge approved a fee bill of $1.15 billion for legal work performed on the tobacco litigation. For reference, if the firm put 100,000 hours into the case, their legal fees would still be over $10,000 per hour!! Thankfully, the Illinois Supreme Court knocked it all out.

Please do not hesitate to send your thoughts and comments.

Editor’s comment: One of the tried and true axioms for students of Illinois workers’ compensation to learn is the City of Springfield always fights their workers’ compensation claims to the highest level and seemingly always loses. In most instances, our state capitol city continues to set tough precedents for the rest of the employers in this state. We tip our hats to their grit and hope some day to see some of these outcomes turned around.

Among other things, sexual harassment “became” a compensable accident and therefore a workers’ compensation claim because the City of Springfield fought a claim to the Appellate Court level and lost. The City of Springfield fought a claim involving an attack by a stray dog all the way to the Appellate Court and lost—if there is a better example of a “risk common to the public” that shouldn’t be compensable, this would be it but they still lost. Along with other unsuccessful efforts, hypertension became a compensable accidental disease when the City of Springfield fought another losing battle involving a police officer.

In the current case reports, we found the City of Springfield locked in battle with an electrician with sore hands and arms. If you are a regular reader of this Update, we call these sorts of claims, the “tunnels of Illinois” because we are unaware of any other state in the United States that so strongly encourages carpal and cubital tunnel surgeries and provides enormous awards for those willing to undergo expensive surgical care. Some workers will receive more than $50K when they undergo both carpal and cubital tunnel surgery to one arm!

If you globally search reported workers’ compensation claims in this state, there are 433 reported Illinois Workers’ Compensation Commission rulings dealing with the otherwise extraordinarily rare cubital tunnel syndrome surgery. There are a number of wealthy and successful hand/wrist/elbow surgeons and neurologists in the greater Springfield area. For all those reasons, we don’t think there is a higher incidence of cubital tunnel surgery anywhere else in the civilized world.

In City of Springfield v. Illinois Workers’ Compensation Commission, (No. 4-08-0170 WC, Feb. 11, 2009), claimant was a construction electrician claiming he suffered from bilateral carpal tunnel, bilateral cubital tunnel and bilateral pronator syndromes (whatever that is). The Commission found all of the conditions were related to tying wire and using hand tools. In an unusual step, the Commission was asked to answer questions about medical care and causal connection consistent with Section 19(e) of the Act which they refused to answer. The matter went up the Circuit Court who sent the claim back to the Commission to answer the questions. As you can imagine, the Commission then answered the questions and the whole thing then went back to the Circuit Court and then to the Appellate Court.

Five years later, the City of Springfield has a monster loss and will now have to certify and pay for all the surgeries previously requested. They will also probably have to pay as much as five years of benefits for a worker who may be sitting around doing nothing, waiting for appeals to run. Ah, what a country.

If you have thoughts or comments, please send a reply.

Editor’s comment: We keep getting asked so we want to outline the legal issues relating to general release/resignations in Illinois. Some of this advice will relate to workers’ compensation claims and the rest will relate to employment practices liability.

Definitions:

1. Release: To give up a right as releasing one from his/her obligation to perform under a contract, or to relinquish a right;
2. Resignation: An oral or written statement that one is resigning a position.

Of great concern to the human resources professional is getting all mutual rights and responsibilities to end when the worker leaves your place of employment. Illinois generally remains an “at-will” state which means an employer can arguably terminate an employee for any reason and at any time, so long as there is no discriminatory action. Conversely, the typical employee can leave employment at any time and for any reason, be it personal or professional. To avoid or greatly minimize litigation, whenever and wherever you see trouble brewing when you are trying to get rid of a nettlesome worker, consider a written general release/resignation signed by the employee. If you need a sample form, we are happy to share ours, so simply send a reply requesting one and we will email it back.

In the workers’ compensation area, there are various concerns about the legal effect of resolution of the workers’ compensation claim when the employee simultaneously resigns at the time the workers’ compensation claim settlement is approved by an Arbitrator or Commissioner. Coincidental resignation by an employee can occur as a combination of a multitude of factors including a personal decision not to return to work, the lingering physical or social effects of the workers’ comp injury, labor disputes with the employer, problems with fellow employees or the union and loss of job due to plant or company closing.

A prudent workers’ compensation professional must understand workers’ compensation benefits are only one of a variety of benefits or claims which an employee might receive at the end of the employment relationship. If one resolves only the worker’s compensation claim, you may be leaving all employee’s other employment rights, benefits or claims ‘unresolved.’ As attorneys we always seek certainty in an uncertain world. An excellent example of this concept occurs when an employee resigns as ‘part’ of the settlement of a work injury claim. Your concern is the employee might later claim they were ‘coerced’ into the resignation to receive any workers’ compensation settlement at all. While we have not yet seen a reported workers’ compensation case on a claim for retaliatory discharge as a result of a coincidental resignation, your organization does not want to have to litigate the issue as a matter of first impression in the Illinois courts.

Second, an employee may have labor disputes pending. These disputes might be pending at the local grievance level or at a national level as a result of an appeal of local determination. Obviously, a resignation as part of a workers’ compensation settlement leaves such labor disputes ‘pending’ without a proper resolution.

Also, it is important to recognize workers’ compensation benefits arise from state statutes. The settlement of a state workers’ compensation claim has no direct impact on the employee’s federal rights. There is a plethora of federal statutes which impact on an employee’s rights while working and the employee’s rights at the time of termination and resignation. These include the American with Disabilities Act, Title VII of the Civil Rights Act, the Fair Labor Standards Act, the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, the Employment Retirement Income Security Act and the National Labor Relations Act, to name a few.

The obvious response of the HR or claims professional when presented the above list is to remark, “What does that have to do with my claims?” The reply has to be your organization pays you to recognize and anticipate claim-related problems and to forestall them, if at all possible. Therefore, it is our recommendation that you do not ignore an employee’s claim or rights with regard to any common law or statutory claim whether it is a federal or state statute. In an appropriate claim, when the employee resigns, we recommend that you obtain a common law release as part of that resignation which specifically outlines both federal and state rights and ‘terminates’ (or in some instances, reserves) rights at the time of resignation/settlement. Use your knowledge and expertise to control the situation as much as possible.

An appropriately drafted general release, based upon appropriate consideration (in lay terms, usually money), should effectively defeat or block an employee from maintaining any suit or claim following resignation. We do not feel that you are sufficiently protected in obtaining a resignation with a general release if it is not supported by consideration paid by the employer.

A. There may be rights which you want to survive the resignation

At the time that the employee resigns, there are major issues which you should certainly address as you may want to work with the employee and not extinguish all of the employee’s rights when he or she resigns. The most important of these rights are pension benefits. An employee may be part of a pension or profit sharing plan which he or she should certainly be entitled to due to contributions by your organization and the employee. We have generally advised there is a west coast decision which ruled a general release blocked an employee’s pension claim–a result which may have been unintended by either employee or employer and which would certainly result in a fountain of litigation. Where an employee has pension rights or benefits available, it would seem appropriate to preserve such rights at the time of resignation. The general release should be tailored to cover the possibility.

A second concern is COBRA—you are going to have to allow the employee to maintain health care coverage if such coverage was afforded while the worker was employed. A general release/resignation should cover this federal requirement.

A third and more delicate issue is unemployment benefits. With the recent changes in this law, such benefits may provide substantial benefit to an employee who has left employment. However, such benefits allow the employer to dispute such a claim following application by the employee. If you are willing to allow the employee to make such a claim and not contest the question of resignation versus termination, you may be placing your organization in a contradictory position. If you want the employee’s unemployment benefits to be treated as if he or she resigned and thereby render the employee unable to obtain benefits until after the waiting period for a resignation, it should be clearly outlined in the general release. Therefore, it is our suggestion that such a determination be made in conjunction with counsel and all matters should be covered in settlement negotiations. Be certain to confirm the final decision on unemployment benefits is up to the applicable state agency.

B. When should a general release/resignation be utilized?

Any time an employee is leaving your employ for any reason and is simultaneously entering into a workers’ compensation settlement, we recommend that a combined general release/resignation strategy be considered. As a workers’ compensation professional, even if you settle a “small” claim where a petitioner is changing jobs, it is a prudent idea to consider obtaining a common law release and resignation. The worst nightmare of any workers’ compensation professional would have to be resolving a total and permanent disability claim with a coincidental resignation. Immediately following completion and payment of the settlement, petitioner indicates they are withdrawing the resignation and seeks accommodation consistent with the Americans with Disabilities Act, claiming to be unaware of their disabled status and the requirement the employer accommodates the worker. Even worse would be a claim the employer coerced the resignation as part of settlement to take advantage of the disabled status and thereby retaliatorily discharged them.=

These are just two of the examples which might conceivably occur. There are a variety of other potential scenarios which could just as easily develop which might leave the workers’ compensation professional in an embarrassing or annoying position. Your highest priority must be to insure that once you have settled the workers’ compensation claim with a coincidental resignation, every effort is made to insure the resignation ‘sticks.’ You do not want petitioner to return with any sort of litigation or benefit claim which you have not contemplated and have ‘allowed’ him or her to make (such as the claim for pension benefits outlined above). Every possibility should be considered as part of settlement negotiations. It is our recommendation the only way to insure this has taken place is to obtain a written general release/resignation with appropriate consideration to support same.

C. One caveat: workers’ compensation lawyers may not be well-versed in employment law

One interesting aspect of utilizing a general release in conjunction with a workers’ compensation settlement is the workers’ compensation attorney is not typically retained to provide advice with regard to the wider range of employment law issues and may be ill-informed with regard to same. Illinois workers’ comp attorneys are retained by their clients pursuant to a specific statutory language on a Commission approved form. This form sets out the narrow scope of the attorney’s retention and limits the fee to the workers’ comp claim only. It is an open question as to the amount of the fee the attorney might receive on monies paid to support the general release/resignation.

Many workers’ compensation lawyers will balk at being asked to review the broader employment law issues if you tender a general release and resignation at the time of the worker’s compensation settlement. It becomes incumbent upon you to insist the attorney provide the client/employee with appropriate legal advice or refer the matter to an employment lawyer competent to advise the employee.

Remember the workers’ compensation lawyer when settling a total and permanent disability claim typically receives a hefty fee. As part of the services which earn the fee, the lawyer should be equipped to fully and properly advise the client with regard to the bundle of rights which may be affected by the settlement of the workers’ compensation claim along with relinquishment of employment coincidental thereto. If the attorney gives you any indication they are unable or unwilling to properly advise the client, you should insist it is their responsibility to do so to avoid any claim by the employee they did not receive effective representation by counsel. Do not allow the workers’ compensation lawyer to claim ignorance or apathy and utilize it to the benefit of the client. You have to insist and insure the attorney has fully advised petitioner of the rights being preserved or being given up to avoid later confusion or litigation.

Please also remember the workers’ compensation hearing officer in Illinois and most states will not consider, review nor approve a release/resignation—it is outside their statutory authority. Trust us; they have enough headaches in dealing with the many forces that pull on them from every direction. They don’t need to be involved in general employment law concerns.

D. A note of caution in setting up the settlement with a release/resignation

When you present the settlement to opposing counsel, it is our suggestion you do so by first splitting the workers’ compensation settlement and monies reserved to support the general release. For example, if it is your intention to settle the case for a total of $150,000 to include monies to support the release/resignation, present the settlement to counsel by indicating you will pay $145,000 to settle the workers’ compensation case. You should also indicate you will provide an additional $5,000 to support the coincidental general release and resignation.

The purpose of bifurcating the finds in advance is to avoid the suggestion you are intimidating or coercing the employee to settle the worker’s compensation case and part of the plan was you would not pay any monies in settlement unless petitioner was forced to resign. You want the monies that legal effect to the resignation and release to be “fresh money.”

E. Do you need two defense lawyers to effectuate a general release/resignation?

There is a major U.S. insurer that requires its accounts to hire separate defense counsel when they are seeking a general release/resignation. For our clients who require it, we are happy to participate. But in all candor, we consider it a complete waste of time and money. The problem is workers’ compensation insurers aren’t paid to resolve general employment rights but when they hire defense counsel to represent you, the attorney’s responsibility is to ethically protect you in every way possible. If that ethical responsibility includes spending some time covering your employment liability, so be it.

F. Your overall goal in obtaining a release/resignation.

The goal of the workers’ compensation professional in settling a claim where petitioner has left employ is to be certain the employee does not come back or cost you thousands after they leave. You also want to be similarly satisfied you have no exposure to litigation or administrative claims subsequent to the resolution of the employment status. We strongly suggest you consider a strategy employing a coincidental general release/resignation in conjunction with the workers’ compensation settlement to insure this necessary result. We also strongly caution that you should always discuss this with counsel whether petitioner is represented by an attorney or not.

If you have questions or concerns about handling a general release/resignation or if you want our form, please send a reply or forward your comments and concerns.