How to Navigate Workers' Compensation Settlements With Voluntary Resignations

After a work-related injury occurs and the injured worker’s condition is medically stationary, you may want to pursue a voluntary resignation along with the settlement of the workers’ compensation (WC) claim.

In some cases, employers will pursue a signed voluntary resignation from the employee when a full and final settlement is being pursued and other adverse employment circumstances exist. This type of settlement resolves all issues of the claim, including permanent disability/impairment, future medical care, lost wages, the right to reopen, and any disputed body parts. This article will examine what employers need to know about full and final settlements with a voluntary resignation.

What are Voluntary Resignations and Can They be a Condition of the Settlement?

An employer cannot terminate an employee for filing a WC claim, nor can the resignation be a condition of the settlement. Instead, the employer can ask the employee to voluntarily resign at the time the WC claim is being negotiated. The voluntary resignation can be a simple hand-written document from the employee stating they voluntarily resign from their position.

This document will be separate from the official settlement paperwork and will only be provided to the employer for their file. If an employer terminates or discriminates against an employee because they have a WC claim, the employee can file a wrongful termination allegation. In California, this allegation is known as a Labor Code 132a violation and is not a covered cause of loss by the WC policy.

Of course, a voluntary resignation does not come into play if an employee has already resigned or been terminated.

An example of when an employer may want an employee to resign voluntarily is in the case where the injured employee has not returned to work as a result of the injury but is still considered an active employee.

How to Navigate a Voluntary Resignation

Not all insurance carriers will agree to handle voluntary resignations on behalf of the employer because they consider it to be more of an employment issue and not part of the WC claim. While WC adjusters are specialists in the legalities of WC, they are not employment law experts, and the two operate under different jurisdictions.

If the carrier is unwilling to address the voluntary resignation with the applicant's attorney, the employer and their defense counsel can pursue one directly with the employee or their attorney. This communication would normally take place in tandem with the insurance carrier negotiating the full and final settlement. In this case, the employer would need to pay for any and all consideration given toward the settlement, which would need to be negotiated with the employee and their attorney.

If the carrier is willing to broach the voluntary resignation with the applicant's attorney, the adjuster or defense counsel will coordinate the process on the employer’s behalf. More often than not, the employee drafts the document. However, if it involves a more complicated case, the employer may want their employment attorney to draft the document for the employee to sign.

Does a Resignation Protect an Employer?

If a resignation does not include appropriate language or is not executed properly, it may not prevent an employee from trying to get their job back at a future date or apply for another position in the future. It also may not protect an employer from the employee filing a claim under ADA or FEHA.

Just as there could be problems with WC settlements, the resignation might not hold up in an employment lawsuit if an employee believes they were explicitly or implicitly forced to sign a resignation. Therefore, you should consult your employment attorney before pursuing a voluntary resignation to confirm both the interactive process and resignation piece are handled correctly.

While a resignation can require that an employee waive their right to the employment development department and unemployment benefits, it cannot waive an employee’s accrued and vested benefits, such as sick, holiday and vacation pay, and retirement benefits.

General and civil releases also can be negotiated separately from voluntary resignations. Such releases may shield employers from other future employment claims, such as wrongful termination.

Finally, if the injured employee is non-English speaking, the resignation should be explained to the employee by an interpreter in their language. The form should indicate this step was taken.

What if an Employee Won’t Resign?

Is a full and final settlement still an option if an employee won’t resign, especially if they are still actively working for the pre-injury employer? Maybe.

There are circumstances when a full and final settlement still may be the best strategy when the benefits outweigh the risks of leaving the claim open.

There is always some risk involved in every aspect of handling WC claims. As in all other employment matters, when it comes to resignations, it is important to examine the least risky and the most cost-effective strategies. We encourage employers to weigh all their options carefully and to consult their employment attorney when considering a voluntary resignation, even if the insurance carrier agrees to administer the process.

If you have any questions about this topic or WC claims, benefits, and other insurance services Woodruff Sawyer offers, please contact a Woodruff Sawyer representative and let us know how we can help you.

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