Workers’ Comp Settlements in California
Settling your workers’ comp case is one of the biggest decisions you’ll make in your claim, and in most cases it can’t be undone. Here’s how California workers’ comp settlements work, how the two main options compare, and what to check before you sign.
When Do Workers' Comp Cases Settle?
A workers' comp case can settle at any time, however most California workers' comp cases settle after your medical condition becomes "permanent and stationary," meaning it has stabilized and a doctor has rated any lasting impairment. Settling before that point is possible, but it's risky: until your doctors know how much permanent disability you have and what future care you'll need, it's hard to know what your claim is really worth.
Every workers' comp settlement must be approved by a workers' compensation judge. The judge reviews the agreement to make sure it's adequate before it is formally approved by a court order.
The Two Main Types of Settlement
California has two main ways to settle a workers' comp case: Stipulations with Request for Award ("Stips") and a Compromise and Release ("C&R"). The right choice depends on your injury, your future medical needs, your finances, and your plans.
| Stipulations with Request for Award | Compromise and Release | |
|---|---|---|
| How you're paid | Permanent disability paid every two weeks, based on your rating | One lump sum |
| Future medical care | Generally stays open for the work injury | Usually closed: you receive money in place of future treatment |
| Reopening the case | Can generally be reopened for new and further disability within five years of the date of injury | Generally final once approved |
| Disputed issues | Works best when both sides agree on the main facts | Can resolve disputes, such as contested body parts, by compromise |
| Best suited for | Workers who need ongoing treatment, or who want long-term medical coverage for the injury | Workers who want a clean break, have other medical coverage, or have strong reasons to want the money now |
Stipulations with Request for Award
With Stips, you and the insurance company agree on your permanent disability rating and other key facts, and the judge issues an award based on that agreement. Your permanent disability is paid over time, and your right to future medical care for the injury generally stays open. That can matter a great deal if you'll need surgery, injections, medication, or therapy years from now.
The tradeoff is that you keep dealing with the insurance company for future treatment, including utilization review and treatment disputes.
Compromise and Release (C&R)
A C&R resolves the case for a lump sum. In exchange, you usually give up the right to future medical care for the injury, along with most other claims in the case. For some workers, that clean break is worth it, especially if they have good health insurance, are changing careers, or want to stop dealing with the insurer.
The key question in any C&R is whether the lump sum fairly accounts for what you're giving up, particularly the cost of future medical care. Once a C&R is approved, it's very difficult to undo, so it's worth getting advice before you sign one.
What Affects the Value of a Settlement?
There's no "average" workers' comp settlement, because every case is built from different pieces. The main factors are:
- Your permanent disability rating, and whether it was calculated correctly
- Your average weekly wage before the injury
- Future medical needs: the likely cost of treatment you'll need going forward
- Unpaid benefits, such as underpaid or late temporary disability
- Apportionment: whether part of your disability is attributed to other causes
- Disputed issues, such as contested body parts or whether the injury is work-related
- Liens: amounts claimed by medical providers or EDD that may need to be resolved as part of the settlement
Medicare, Social Security, and Taxes
- Medicare: if you're on Medicare, or expect to be soon, Medicare's interests in future medical costs may need to be addressed in a C&R, sometimes through a Medicare Set-Aside.
- Social Security Disability: workers' comp benefits can reduce SSDI payments. The way a lump sum is written into the settlement can affect how much of an offset applies.
- Taxes: workers' comp settlements are generally not subject to income tax.
- Job displacement voucher: for injuries on or after January 1, 2013, you may be entitled to a $6,000 Supplemental Job Displacement Benefit voucher for retraining if your employer is unable to accommodate your permanent work restrictions.
Already Have a Settlement Offer?
Insurance companies sometimes send settlement papers directly to injured workers who don't have a lawyer. Before you sign anything, make sure you can answer these questions:
- Is it Stips or a C&R, and do you understand what each one means for your future medical care?
- Is the permanent disability rating behind the offer correct, and does it include every injured body part?
- Are you owed any back temporary disability or medical reimbursement?
- Are there liens that will come out of the settlement?
- If it's a C&R, does the amount realistically cover the treatment you're likely to need?
You can get a lawyer at any stage, including after you receive an offer. In California, once you retain an attorney, the workers' comp attorney fees are approved by the judge and paid as a percentage of the benefits recovered. Getting your case reviewed to ensure adequacy of a settlement offer costs nothing up front.
What Happens After You Sign?
Once both sides sign, the settlement documents are filed with the Workers' Compensation Appeals Board. A judge reviews them, sometimes at a short hearing, and either approves the settlement or asks for changes. After approval, the insurance company pays according to the award: a lump sum for a C&R, or ongoing payments under Stips. If a claim was denied or disputed, settlement is often how that dispute is finally resolved.
Settlement FAQ
Should I take a Compromise and Release or Stipulations?
It depends on your situation. Stipulations generally keep future medical care open and pay permanent disability over time. A Compromise and Release pays a lump sum but usually closes future medical care. Your need for ongoing treatment, other health coverage, and financial goals all matter.
Can I reopen my workers' comp case after settling?
A case settled by Stipulations can generally be reopened for new and further disability within five years of the date of injury. A Compromise and Release is generally final once approved, and can be set aside only in limited circumstances.
Is a workers' comp settlement taxable?
Generally, no. Workers' compensation benefits, including settlements, are generally not subject to income tax.
Does a judge have to approve my settlement?
Yes. Every California workers' comp settlement must be approved by a workers' compensation judge, who reviews whether it's adequate before it becomes final.
Can a settlement affect my Social Security Disability or Medicare?
It can. Workers' comp benefits may reduce SSDI payments, and Medicare's interests may need to be addressed in some settlements. How the settlement is written can affect both.
Can I hire a lawyer after I've received a settlement offer?
Yes. You can get representation at any stage before the settlement is approved. Attorney fees in workers' comp are approved by the judge and paid as a percentage of the benefits recovered.
For more answers, visit our workers' comp FAQ page.
Have a settlement offer? Get it reviewed first.
Our Long Beach office helps injured workers across Southern California understand their options and make the right settlement choice. Free consultation, and no fee unless we recover benefits for you.
Schedule a Free Consultation Call (714) 202-7182
