Compromise & Release Settlement in PA Workers’ Comp Not Enforceable Until Granted by Workers’ Compensation Judge

When an injured worker in PA wants to settle his or her Pennsylvania workers’ compensation claim in exchange for a lump sum of money, the process generally used is the “Compromise & Release Agreement.” This type of workers’ comp settlement is voluntary between the parties. A Compromise & Release can only take place when agreed to by both the injured worker and the PA workers’ comp insurance carrier.

As we have noted in a previous blog entry, a Compromise & Release Agreement is not final until it is actually approved by a Workers’ Compensation Judge (WCJ). The law requires that a WCJ determine whether the injured worker understands and accepts the terms and conditions of the Compromise & Release Agreement. Until the approval of the WCJ is obtained, either party may back out of the Agreement.

The limits of this theory were recently tested before the Commonwealth Court of Pennsylvania in the case of McKenna v. Workers’ Compensation Appeal Board (SSM Industries, Inc. and Liberty Mutual Insurance Co.). In this case, the parties agreed to settlement terms at a mediation (a settlement conference with a WCJ, usually not the WCJ hearing the case). A Compromise & Release Agreement was signed by both parties.

At the hearing before the WCJ to approve the Compromise & Release Agreement, however, the employer demanded that the injured worker agree never to seek re-employment with employer. The injured worker refused to agree to this new term, and the Compromise & Release Agreement was not approved (since it was no longer agreed to by the parties).

The injured worker then filed a Petition for Penalties, alleging the employer violated the Pennsylvania Workers’ Compensation Act by failing to proceed with a Compromise & Release Agreement once the Agreement was signed and completed. The WCJ granted the Petition for Penalties, but the Workers’ Compensation Appeal Board (WCAB) reversed.

On appeal, Commonwealth Court of PA agreed with the WCAB that the WCJ erred by granting the Petition for Penalties. The Court found that employer did not violate the Pennsylvania Workers’ Compensation Act, since a Compromise & Release Agreement is not final until it is approved by a WCJ, a step missing from the facts in this case. The Court confirmed that until a WCJ approves a Compromise & Release Agreement, either party may withdraw from the agreement without penalty.

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