The Nebraska Supreme Court Issues Surprising Ruling on an Employee’s Entitlement to Penalties and Attorney’s Fees After the Employee Signs a Release

by | Jun 30, 2013

Traditionally, settlements of workers’ compensation claims under the Nebraska’s Workers’ Compensation Act required that the Court review lump sum settlement applications and then determine whether the application “conformed” with the Nebraska Workers’ Compensation Act and was in the best interest of the employee. Three years ago, the Nebraska legislature changed the act to allow claims to be settled using a release. If a release is used, there is no need to submit a lump sum settlement application to the Court for its review and ultimately, its approval.

Releases can be used to resolve Nebraska workers’ compensation claims only when the employees are represented by counsel. Neb. Rev. Stat. Section 48-139(3) also provides limitations in the type of cases in which claims can be settled with a release.

Since the statute was amended three years ago, employees’ attorneys have become increasingly insistent that employers and the workers’ compensation insurers use releases to settle claims. Recently, a decision from the Nebraska Supreme Court/Court of Appeals may cause some employees’ attorneys to hesitate when insisting on the use of a release of to consummate the settlement. In Holdsworth v. Greenwood Farmers Cooperative, the Court was presented with a case where a release had been used to settle a claim. 286 Neb. 49 (2013). The insurer had failed to submit payment for the settlement agreement until more than thirty days after the release had been submitted to the Court. Counsel for the employee filed a motion for statutory penalties and attorney fees pursuant to Neb. Rev. Stat. Section 48-125. The Trial Court determined that the benefits should have been paid within thirty days of the release being executed and filed with the Court and awarded penalties at 50% of the total settlement as well as attorney fees.

The release executed and filed in Holdsworth was similar to the release form that was drafted and approved by the Nebraska Workers’ Compensation Court. That form is found on the Court’s website. The form includes language indicating that the employee “waives all rights under the Nebraska Workers’ Compensation Act, including, but not limited to:…the right to ask a judge of the compensation court to decide the parties’ rights and obligations.” The Supreme Court took into consideration that provision in the release and determined that by executing the release, the employee gave up the right to have the Nebraska Workers’ Compensation Court take any action on his behalf. The Court overturned the decision made by the Trial Court and indicated no penalties or fees were due and owing.

Naturally, attorneys representing employees in the Nebraska’s Workers’ Compensation Act were disappointed in the decision. We have heard employees’ attorneys suggest that with the decision in Holdsworth, they will be forced to hold on to the executed release until they have a “check in hand”. We anticipate that, depending on the relationship between the employee’s attorney and the claim handler, extra steps may be required to make sure the settlement check is received promptly. Attorneys who represent employees pushed for the legislation allowing the use of releases in part because of delays that would occur while waiting for approval of lump sum settlement applications. With the decision in Holdsworth, there may be renewed concerns about delays in getting workers’ compensation settlements completed quickly and smoothly.

For more information regarding releases under the Nebraska Workers’ Compensation Act, please contact David Dudley or Robert Seybert at or or (402) 475-1075.