Massachusetts Employment Law Letter

Double-dipping in Massachusetts Workers’ Compensation claims

Massachusetts Workers’ Compensation Statute, Mass. Gen. L. ch. 152, intersects with the Commonwealth’s anti-discrimination provision, Mass. Gen. L. ch. 151B, in a couple of different ways. Employees who have sustained work-related injuries are entitled to the protections of ch. 151B. And employees who have lost their jobs because of a work-related injury are entitled to a preferential right of rehire over any other applicants for jobs for which the employee is qualified, so long as the employer has advertised to fill the job outside the company. But there’s another provision of ch. 152 that affects some employers who are defending charges of discrimination, and that provision can create problems if the matter is not handled properly.

Lump Sum Settlements

Under ch. 152, § 48(4), if an employee accepts a lump sum settlement from the employer, either from the employer directly or through the employer’s workers’ compensation carrier, the statute says that the employee is “presumed to be incapacitated” for a specific number of months according to a statutory formula. In order to determine how long this presumption of incapacity is, you need to divide the lump sum settlement amount by $1,500. The quotient (who says that employment lawyers don’t know their math!) represents the number of months of presumed incapacity. So, if the employee accepts a lump sum settlement of $15,000, he or she is presumed to be incapable of returning to work at the employer for 10 months ($15,000 ÷ $1,500 = 10).

The intention of this language in the statute is to prevent an employee from seeking re-employment with the employer the day after he or she has settled his or her workers’ compensation case, the classic “double dip.” Remember that workers’ compensation benefits are intended to replace lost earnings that result from the employee’s inability to work because of a work-related accident. If an employee were actually able to return to work at the time of the lump sum settlement, there would have been no need for the employer to settle the comp claim at all, because the employee could simply have returned to work! The statutory presumption of incapacity does not preclude the employee from working for any other company, just the employer who entered into the lump sum settlement.

“Rebuttable” presumptions

Recent Massachusetts case law has complicated this simple formula, which has been applied in literally thousands of workers’ compensation cases since the amendment was passed at the end of 1991. In Scott v. Encore Images, Inc., the Massachusetts Appeals Court considered whether an employee was a “qualified handicapped individual” under ch. 151B because he had entered into a lump sum settlement agreement with the employer that, under the § 48(4) formula, would have rendered him “incapacitated” for 20 months. The court concluded that the presumption was a “rebuttable” presumption, meaning that the employee could present evidence that he was not, in fact, incapacitated and therefore might be considered a “qualified” handicapped individual. In Encore, however, the Appeals Court did not have to face the question of whether the employer should have re-employed the individual because there was other evidence that the employee was not physically capable of performing the essential functions of the job. So, ultimately, the employee was not qualified, and therefore, the employer did not fail to engage in a productive discussion with him about any accommodations that would have allowed him to return to work.

But what about those cases where the employee and the insurance carrier enter into a lump sum settlement agreement simply to resolve the outstanding comp claim? Many of these agreements contain language that says that the employee has recovered and wants to move on with his or her life. In those cases, what is the employer’s obligation to the employee? Could the employee then apply for work and be entitled to the statutory right of reinstatement? The final sentence of the applicable section of the statute seems to indicate not, because it reads, “No re-employment rights shall inure to such employee under this chapter during any period of presumption of incapacity as herein provided.” Nonetheless, employers defending employment discrimination claims based on handicap/disability should beware: there’s some question as to whether the “qualified” defense to such claims will apply if the only evidence that the employee is not a “qualified handicapped individual” is the lump sum settlement agreement.

The Equal Employment Opportunity Commission considers that the Americans with Disability Act (“ADA”) obligations supersede any conflicting state workers’ compensation statutes. In its Technical Compliance Manual, the EEOC notes that “[a]n employer could not assert, as a defense to a charge of discrimination, that it failed to hire or return to work an individual with a disability because doing so would violate a state workers’ compensation law that required exclusion of this individual.” So it appears that, absent any agreement to the contrary, an employee could enter into a lump sum settlement of his or her workers’ compensation claim and then re-apply for work at the company where he or she was injured. If the employer refused to hire the worker, it could be setting itself up for litigation of an ADA/ch. 151B claim.

Stopping the double dip

To address this concern, employers who are entering into lump sum agreements with injured workers should consider spelling out the assumptions underlying the agreement. The parties can, by contract, agree that the lump sum settlement amount is designed to resolve liability for future benefits by creating the presumption stated in the statute. The lump sum agreement can state that the employee understands this presumption, that he or she has no re-employment rights during the statutory period, and that the payment of the lump sum is in material consideration of the fact that he or she is unable to perform the essential functions of his or her position, with or without a reasonable accommodation. There are other provisions that could offer further protection to the employer, including a right to the return of any lump sum proceeds, and statements that indicate the employee understands that misrepresentation could be a violation of other state laws. This type of language might make it a little more difficult to get the employee to agree to the settlement, but the benefits from this type of language might outweigh the need for a prompt resolution.

Check with counsel

Workers’ compensation counsel are a breed unto themselves. They have a specific area of expertise, and that doesn’t usually extend to defending claims of employment discrimination. Similarly, labor and employment counsel are not typically well-versed in the intricate details of a comp claim. So the best bet, when entering into this type of agreement, is to be sure that the left hand knows what the right hand is doing. A little advance counsel between attorneys can perhaps avoid a discrimination suit down the road. If you have additional questions about this tricky intersection of workers’ compensation with ch. 151B, check with your labor and employment counsel.

Article By: Susan G. Fentin
Reprinted from the March 2013 issue of the  Massachusetts Employment Law Letter.

Susan G. Fentin is a Partner at the firm Skoler, Abbott & Presser, P.C., and Editor of the Massachusetts Employment Law Letter. Susan can be reached at (413) 737-4753 or sfentin@skoler-abbott.com.