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Parting is Such Sweet Sorrow

Robert Gruber

A clincher agreement in workers’ compensation closes out the workers’ compensation claim and shields the employer and their insurance carrier from any further liability – for the workers’ compensation claim. It has absolutely nothing to do with the claimant’s employment relationship with the insured. But oftentimes, insureds would like to obtain a resignation and release of all employment claims at the same time they get a clincher of the workers’ compensation claim. The reasoning is obvious. A previously injured employee is a future liability for the insured, and it makes good economic sense for that insured to entice an employment resignation and release at the end of the workers’ compensation claim.  However, if you want this full and final parting to be more sweet than sorrowful, you should consider a few things before you discuss a resignation and release of the claimant’s employment with that claimant or his lawyer.

First of all, a resignation and release of employment and employment related claims should be discussed and negotiated by the insured’s employment lawyer. Employment laws are numerous, complicated, byzantine and quixotic, and the potential damages for a mistake can be quite high. As workers’ compensation lawyers, we know South Carolina Workers’ Compensation laws, but we are not as familiar with state or federal employment laws and regulations. So if you want a resignation and release, please consult your employment lawyer.

Second of all, the consideration (money paid) for an employment resignation and release must be separate and distinct from the money paid for the workers’ compensation clincher. This means the check for the employment resignation and release should come directly from the employer, and the two agreements should pass like ships in the night. You should also consider that when you negotiate consideration for an employment resignation and release, that consideration is often considered to be future wages for purposes of taxation. This means that if you settle a workers’ compensation claim for $50,000.00, and your employment lawyer negotiates a resignation and release with the employee/claimant for an additional $1,000.00, that $1,000.00 is probably taxable income to the claimant. So the employee/claimant is not going to end up with $1,000.00 in his pocket, and the insured will have to pay its own Social Security withholding on that $1,000.00, just as it would with regular wages. This is an issue that should be spelled out clearly to all parties prior to an agreement and, once again, should be negotiated by an employment lawyer.

Third, mediation provides an excellent venue for discussing clinchers and resignation and releases. This is because parties through a mediation will sign a confidentiality agreement before the mediation starts in which they agree that anything said or discussed during the confines of the mediation is confidential, cannot be brought up in subsequent legal proceedings, and the mediator cannot be called to testify as a witness nor can his or her notes be subpoenaed and used at any subsequent proceeding. It’s sort of like “what happens in Vegas stays in Vegas” and, in the context of making that parting more sweet than sorrowful, it can facilitate useful and productive discussions. But remember, we cannot force a claimant to resign from their employment. So if the employee/claimant is not willing to voluntarily and willfully resign that position, the issue needs to be dropped.

Finally, in case we haven’t said it enough already, let your employment counsel handle all negotiations and preparation of paperwork in connection with an employment resignation and release. If you already have employment counsel, please use them. If you do not have employment counsel, you may contact Brian Quisenberry at Clement Rivers, LLP for your employment needs. He is an excellent attorney who will serve you well.