AN EMPLOYEE’S COMPROMISE SETTLEMENT FUND DOES NOT BAR SUBSEQUENT CLAIMS FOR BENEFITS AGAINST THEIR EMPLOYER

In Milbrandt v. R.R. Donnelly, the Iowa Workers’ Compensation Commissioner reversed the decision of the Deputy Commissioner, and found that a compromise settlement agreement entered into with the Second Injury Fund by an employee does not deprive the agency of jurisdiction over the employee’s subsequent claim for benefits involving her employer.

Section 85.35 of the Iowa Code governs settlements. The section provides for several types, including compromise settlements. Section 85.35(10) states, in pertinent part, that “an approved compromise settlement shall constitute a final bar to any further rights arising under this chapter… regarding the subject matter of the compromise…”

In Milbrandt, the employee entered into a compromise settlement agreement with the Second Injury Fund, as she suffered two previous injuries that triggered the Fund’s liability. The parties agreed, notwithstanding the settlement, that the employee did not compromise or waive her entitlement to benefits against her employer pending before the Workers’ Compensation Division. After reviewing the employee’s claim for benefits, the Deputy Commissioner determined that the employee was seeking benefits for the same injury for which she entered into the settlement with the Fund. Since the same injury was the subject matter of both the compromise settlement and her claim before the Worker’s Compensation Division, the Deputy Commissioner found that the agency was deprived of jurisdiction over the employee’s claim, based on the current language of Section 85.35(10). As such, the employee’s claim was dismissed.

Conducting a de novo review of the record, the Commissioner first looked to the historical foundations of Section 85.35(10). In 2003, the Iowa Supreme Court found in United Fire & Cas. Co v. St. Paul Fire and Marine Ins. Co. that a compromise settlement terminated the Workers’ Compensation Commissioner’s jurisdiction over any claims arising out of a properly approved compromise settlement. When United Fire was decided in 2003, Section 85.35(10) contained broad settlement language, and did not differentiate between settlement types. In response to United Fire, in 2005, the Iowa Legislature amended the statute and added a qualifier to the final bar to claims “regarding the subject matter of the compromise.” The provision has not been amended substantively since.

In Milbrandt, the Deputy Commissioner relied on Ahn v. Key City Transport in determining that the employee’s compromise settlement with the Fund deprived the agency of jurisdiction over her subsequent claim for benefits against her employer. In Ahn, the employee entered into a compromise settlement claim with the Fund, and later filed a petition against his employer seeking benefits for his work-related injury. The agency held that the employee’s claim must be dismissed for lack of jurisdiction under United Fire. However, in Milbrandt, the Commissioner specifically overruled the holding in Ahn concerning the agency’s jurisdiction as it did not discuss the 2005 amendments to Section 85.35(10).

On appeal, the employer in Milbrandt argued that by settling with the Fund with a compromise settlement agreement, the Division was deprived of “subject matter jurisdiction” to hear the workers’ compensation claim against the employer.

Citing Ney v. Ney, the Commissioner explained that subject matter jurisdiction is “the authority of a court to hear and determine cases of the general class to which the proceedings in question belong…”. For example, the Division has subject matter jurisdiction over all workers’ compensation claims in Iowa.

Jurisdiction refers to a court’s “authority to hear the particular case.” Jurisdiction is distinguishable from subject matter jurisdiction because it refers to a specific dispute between two particular parties present before a tribunal.

The distinction is important because the parties can waive a court or agency’s lack of jurisdiction to hear a particular case. Conversely, a court or agency’s lack of subject matter jurisdiction cannot be waived by the parties or the tribunal itself.

The Commissioner found that despite the use of the phrase “subject matter” in the statute, the issue was really one of jurisdiction to hear the particular case, and not an issue of subject matter jurisdiction. As a result, whether the Division is deprived of jurisdiction is dependent on the “subject matter of the compromise” that the employee in Milbrandt entered into with the Second Injury Fund.

Citing the language of Section 85.35(10), the employee argued that the injury she sought benefits for against her employer was not the subject matter of her compromise settlement with the Fund. Her settlement provided that “[t]he subject and nature of the dispute is the applicability of the Second Injury Compensation Act.” In her present claim, the employee sought disability benefits and the reimbursement of her medical bills and costs for her work-related injury from her employer. The employee argued that the two claims were distinguishable.

Ultimately, the Commissioner concluded that a claim brought by an employee against the Fund is distinct from a claim against an employer. Otherwise, the Commissioner reasoned that the language in Section 85.35(10) “regarding the subject matter of the compromise” would discourage parties from settling claims prior to hearing and would render the changes made by the legislature superfluous.

Therefore, the Commissioner held that the employee’s compromise settlement with the Fund did not deprive the agency of jurisdiction over her claim for benefits against her employer. As such, the employee was awarded permanent partial disability benefits, temporary total disability benefits, reimbursement of medical bills, and costs for her work-related injury.

This post was drafted by Faith Kowalski, a law clerk at Baylor Evnen Wolfe & Tannehill. If you have questions regarding settlement agreements in your case, please call Paul Barta or Micah Hawker-Boehnke at 402-475-1075.