Employee Can Sue for Workplace Harassment Despite Signing a Workers' Comp Release

When employers settle workers' comp claims they frequently attempt to have the employees sign a comprehensive release form that releases "all claims and causes of action."

But can such a release for a single workers' comp injury claim also release any and all claims that fall outside the workers' compensation system? The California State Supreme Court rules an emphatic no, but it does tell employees how to do it correctly- use a separate settlement and release.

From February 1995 until her resignation in September 1997, Carolyn Claxton worked as an office assistant for defendant Pacific Maritime Association. Claxton's supervisor was Ray Waters.

On December 16, 1997, Claxton filed a claim with the Workers' Compensation Appeals Board (WCAB) against Pacific Maritime for an injury to her "left lower extremity and psyche" from a slip and fall on May 7, 1997. On January 16, 1998, Claxton filed a second and separate workers' compensation claim against Pacific Maritime for injury to "psyche due to sexual harassment."

In September 1998, Claxton filed a separate civil action against the association and her supervisor,Waters, claiming sexual harassment in violation of California law. Then, in November 1998, those two defendants filed their answer to the harassment complaint.

Three months later, in February 1999, Claxton and the association settled her workers' compensation claims for $25,000. As part of the settlement, Claxton executed a California-comp-law-required, preprinted compromise and release form. The use of this form is mandatory in California. The form had only the case numbers for Claxton's two claims for workers' compensation; it made no reference to the separate sexual harassment civil action against the association and her supervisor.

In preprinted paragraph 3, the California WCAB form 15 stated: "Upon approval of this compromise agreement by the Workers'Compensation Appeals Board or a workers' compensation judge and payment in accordance with the provisions hereof, said employee releases and forever discharges said employer and insurance carrier from all claims and causes of action,whether now known or ascertained, or which may hereafter arise or develop as a result of said injury, including any and all liability of said employer and said insurance carrier and each of them to the dependents, heirs, executors, representatives, administrators or assigns of said employee."

On March 16, 1999, a workers' compensation judge approved the compromise and release. The order approving the settlement contained the case numbers for both of Claxton's workers' compensation claims, but not the case number for the civil sexual harassment action.

Thereafter, in the civil lawsuit alleging sexual harassment, defendants Pacific Maritime and Waters asked the trial court to allow them to file an amended answer adding, among other things, an affirmative defense that the execution of the workers' compensation compromise and release also extinguished Claxton's claims in her harassment lawsuit. The trial court granted the motion to amend, then ordered dismissal of the employee's separate civil lawsuit, and awarded the employer and supervisor $92,459.75 in attorneys' fees. The California Appeals Court reversed the rulings and the state Supreme Court upheld that reversal, allowing Claxton's sexual harassment claims to continue toward trial.

The Supreme Court's reasoning can be seen in the following case quote:

"To safeguard the injured worker from entering into unfortunate or improvident releases as a result of, for instance, economic pressure or bad advice, the worker's knowledge of and intent to release particular benefits must be established separately from the standard language of the form. Even with respect to claims within the workers' compensation system, execution of the form does not release certain claims unless specific findings are made. (Under California's compensation system prior cases ruled that vocational rehabilitation services cannot be settled without specific findings.) The concerns just discussed are even stronger when the employer seeks to apply the standard preprinted workers' compensation release language to claims outside the workers' compensation scheme...it is highly unlikely that an injured employee's settlement of a workers' compensation claim, by signing the mandatory standard preprinted workers' compensation release form, would alert the worker that the release also applies to claims outside the workers' compensation system."

Can an employer settling a workers' comp claim buy peace from additional claims outside the comp system? Yes, says California's highest state court in the same case of Carolyn Clayton v. Ray Waters, et. al. (decided August 30, 2004):

The court said "it would be a simple matter for parties who have agreed to settle not only workers' compensation claims but also claims outside the workers' compensation system to execute another document expressing that agreement. Thus, execution of the mandatory standard preprinted compromise and release form would only establish settlement of the workers' compensation claims; the intended settlement of claims outside the workers' compensation systems would have to be reflected in a separate document."

According to the State Supreme Court, as is true with settlements in civil actions generally, the separate document need not identify precise claims; it would be sufficient to refer generally to causes of action outside the workers' compensation law "in clear and nontechnical language."

Time to check your comp release forms.