Establishing Credit Rights from Applicant's Third-party Settlement
| Publication year | 2018 |
| Author | GREGORY F. JOHNSEN, ESQ. |
GREGORY F. JOHNSEN, ESQ.
Sherman Oaks, California
So you have participated in a third-party action that has resolved or have learned that the applicant has obtained a settlement, judgment, or award in a third-party action. Now what? What does this information mean for the workers' compensation case?
A recovery by an applicant/claimant in a third-party action will generally afford the employer/workers' compensation carrier credit rights against future compensation obligations.
Labor Code section 3861 provides:
The appeals board is empowered to and shall allow, as a credit to the employer to be applied against his liability for compensation, such amount of any recovery by the employee for his injury, either by settlement or after judgment, as has not theretofore been applied to the payment of attorneys' fees, pursuant to the provisions of Sections 3856, 3858, and 3860 of this code, or has not been applied to reimburse the employer.
It sounds simple and straightforward, and it should be. Unfortunately, that is not always the case.
Labor Code section 3861 creates the employer's statutory right to credit. Credit is allowed and may be applied as to all future workers' compensation obligation.
Credit is allowed to prevent a double recovery by employees who are injured while performing duties arising out of or in the course of their employment. An employer may recover amounts that have already been paid to the employee. Credit applies to the amount the employer still owes or may become obligated to pay.
Credit refers to the extent to which the employer's obligation to pay workers' compensation benefits is reduced by reason of the employee's net recovery from the third party by way of settlement, judgment, or award in a third-party claim or case. If the employer has not participated in the third-party action giving rise to the settlement or judgment, the employer is still entitled to a credit against the employee's recovery for any future compensation obligations. An employer is also entitled to a credit against the employee's recovery when the employer has participated in the third-party action, as its lien for recovery of benefits paid has been satisfied but the employee is seeking further compensation benefits. The employer's right to credit is determined by the Workers' Compensation Appeals Board in the injured employee's compensation proceeding before the Board, not in the third-party civil court proceeding, although in making its determination the WCAB may consider the facts found in the civil court proceeding, such as the amount of the employee's total damages and the respective percentages of fault of the parties. Bonner v. WCAB (1990) 225 Cal.App.3d 1023.
The amount of the employer's credit is calculated by deducting from the employee's gross settlement in the third-party action the...
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