Board Requires Affidavit of No Separate Agreements with Section 32s
Earlier this month, the Board announced a new policy, effective 12/6/21, that will require the person signing a Section 32 agreement on behalf of a carrier/self-insured employer or third-party administrator to also sign an affidavit attesting that there are no separate agreements between the parties not reflected in the Section 32 agreement and that the claimant was not required, as a condition to entering into the Section 32 agreement, to enter into a separate agreement or contract in the future. The Board is concerned about employers that require claimants to sign a separate release of liability or other contract, the terms of which are not included in the Section 32 agreement submitted to the Board. The Board’s stated reason for the Board’s concern is that it is not able to determine whether a Section 32 agreement is “unfair, unconscionable, improper as a matter of law or was the result of an intentional misrepresentation of material fact” if all of the terms and conditions between the parties are not written in the Section 32 settlement agreement.
One important issue overlooked by the Board is that, generally, Section 32 settlement agreements are signed by the carrier, third-party administrator, or defense counsel for one of those entities. The agreements that the Board is concerned with are between the employer and the claimant. This will, in most cases, put the person who has historically signed the agreement, usually an adjuster or attorney for the carrier, to have to attest under the penalty of perjury to the non-existence of an agreement between the claimant and the employer even though that adjuster or attorney might not be aware of such an agreement. We submit that the claimant would have direct knowledge as to any side agreement and the ability to affirm that no such side agreements exist beyond those cited in the Section 32. As of this moment, however, the Board has not adopted a form affidavit for signature by the claimant to so attest.
The Board said that it would not approve any Section 32 agreement conditioned upon the claimant signing a separate agreement or contract that contains terms which are not included in the Section 32 agreement submitted to the Board. That said, the Board noted that a Section 32 agreement which included terms providing that a claimant would release an employer from liability would not necessarily be invalid. However, the Board would give “significant scrutiny” to such terms due to what the Board called the “disparity in bargaining power and financial resources between individual claimants and insurance carriers/self-insured employers.” The Board previously used such language in prohibiting provisions of a Section 32 agreement that require the claimant to indemnify and hold the carrier harmless for any payment made by Medicare for treatment of claimant’s work-related injuries prior to the execution of the Section 32 Waiver Agreement. See, Subject Number 046-372 (3/2/2020).
Although the Board appears to be allowing employers and carriers to include release language in the Section 32 agreement (notwithstanding the Board’s extra scrutiny of such language), it remains to be seen whether the Board will allow or require separate contracts to be appended to the Section 32 agreement as an exhibit. Our expectation is that the Board will not allow this as the Board’s announcement was written with the intent of curtailing such language by allowing release language only within the Section 32 agreement and, even then, giving strict scrutiny to such language when included.
Employers that wish to continue to use side agreements and general releases in conjunction with Section 32 settlement will need to be prepared to have the language of these agreements reviewed by the Board and consider whether they will be willing to proceed with a Section 32 agreement in the event that the Board invalidates the release language as “unfair, unconscionable, improper as a matter of law.”
Additionally, coordination with the claimant's attorney before the Section 32 hearing will be needed in order to prepare the claimant to answer the Law Judge’s questions about any side agreements. If the claimant testifies that he or she understands the side agreement, wants the Section 32 agreement to be approved, and believes the overall deal is fair, we think that it would be difficult for a Law Judge to find the agreement unfair or unconscionable. The Law Judge's refusal to approve a Section 32 agreement despite such testimony may provide a good basis for an appeal.
Please do not hesitate to contact any of our attorneys with questions about this new policy.