Penney comp settlement gets rehearing after deemed improperly voided

A workers compensation settlement agreement between J.C. Penney Corp. and an employee was improperly voided by the commissioner of the Vermont Department of Labor, the Supreme Court of Vermont said Friday.
Brandy Clayton had worked as a hair stylist for J.C. Penney Corp. for several years when she filed a workers comp claim in February 2011 for a left foot injury that began in March 2010 related to standing all day while working. J.C. Penney accepted the claim as compensable, according to documents in Brandy Clayton v. J.C. Penney Corp.
Ms. Clayton began to see a podiatrist, to whom she reported pain in both feet in 2013. The podiatrist determined that her bilateral foot pain likely resulted from standing all day at work, court records show.
In 2014, Ms. Clayton and J.C. Penney filed a settlement agreement with the Vermont Department of Labor, as required by state workers comp statute, that provided a lump sum payment to fully settle all claims related to the March 2010 injury. A hearing officer of the department sent Ms. Clayton a letter warning her that the settlement removed her right to future action related to her foot injuries. Ms. Clayton signed the letter, and the settlement was approved, court records show.
In 2015, Ms. Clayton filed a new notice of injury alleging an injury to her right foot. J.C. Penney denied the claim, saying it was a pre-existing condition unrelated to employment. Ms. Clayton appealed the denial to the commissioner of the state Department of Labor.
A workers comp specialist of the department found the denial reasonable but questioned the language of the settlement agreement and said it needed to be addressed in a hearing. Both the employer and employee sought summary judgment as to whether the settlement agreement barred a second claim for workers comp benefits.
In August 2016, the commissioner denied both motions and found that the settlement agreement releasing the employer from claims related to the earlier injury was valid and enforceable. However, the commissioner voided parts of the settlement agreement on public policy grounds, saying language that released the employer from any and all claims arising in the normal course of the claimant’s employment was too broad. The decision allowed Ms. Clayton to bring a comp claim for an injury unrelated to her initial injury, according to court documents.
J.C. Penney brought an interlocutory appeal to the Supreme Court of Vermont, seeking an opinion on whether the settlement agreement barred Ms. Clayton from filing a workers comp claim for the 2015 injury. The company argued that the commissioner did not have the authority to invalidate a settlement agreement on public policy grounds, absent a finding of fraud or mutual mistake, when it had already been approved.
A five-judge panel of the state high court agreed that the commissioner lacked authority to void the parties’ settlement agreement, saying the state’s workers comp statute only authorizes the commissioner to approve or reject a settlement agreement at the time it is initially presented.
“Here, the commissioner made no findings of fraud or mutual mistake of fact and was, therefore, not authorized to void the settlement agreement on public policy grounds alone. If the Legislature had intended to allow the commissioner in this setting to reject a compromise agreement on public policy grounds, it could have done so,” the panel said.
The court also decided that the rejection of a previously approved settlement does not promote efficiency and finality in reaching a resolution as envisioned in workers comp law.
“In this case, by invalidating the parties’ settlement agreement after it had been formally approved with notice to claimant of its finality, the commissioner deprived employer of the determinate and final resolution to which it was entitled,” the panel said.
The court reversed the ruling and remanded the case to the commissioner to hold a hearing to determine whether Ms. Clayton’s foot injuries were causally related.
“The Vermont Supreme Court’s decision confirms that once the Department of Labor reviews and approves a settlement, the employer and injured worker alike can take comfort in the finality of that settlement,” said Wesley Lawrence, a Montpelier, Vermont-based attorney with law firm Theriault & Joslin P.C., which represented J.C. Penney in the case.

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