Narrow scope of release in workers' comp case allows discrimination suit to proceed

Waiver language that is too narrow may leave the employer exposed to liability on issues it thought it had resolved.

Case name: Sherrod v. United Community Bank, Inc., No. 3:08-CV-402 (E.D. Tenn. App. 03/30/10).

Ruling: The U.S. District Court, Eastern District of Tennessee ruled that an employee could proceed with his suit against his former employer for disability discrimination, age discrimination, and workers' compensation retaliation. The agreement the employee signed to settle his workers' compensation claim did not foreclose every potential claim he could bring against the employer.

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What it means: Employers negotiating settlement agreements with employees need to carefully select language that will eliminate future liability for actions related to the events at issue. Waiver language that is too narrow may leave the employer exposed to liability on issues it thought it had resolved.

Summary: A bank employee fell and injured himself while at work and sought workers' compensation benefits. Two months later, the bank terminated him for allegedly poor performance. After he was terminated, he and the bank's insurance company settled the workers' compensation claim and obtained court approval of the agreement. He then sued the bank for disability discrimination, age discrimination, and workers' compensation retaliation under state law. The bank argued that by signing a general release as part of the workers' compensation settlement, the employee waived all claims he had against the bank. The District Court rejected the bank's argument, concluding that the employee's suit was not barred by the settlement.

The court disagreed with the bank's characterization of the court-approved settlement as a "general release." It noted that the settlement agreement's language waived all claims for medical expenses related to the employee's injury but did not mention anything about other types of claims.

Further, the bank's counsel, whom the court noted was "experienced," should have drafted language adding a waiver of all claims arising out of the employee's employment if it meant for the agreement to cover them. "Nothing in the document pertained to separate causes of action alleged in the present case, although these potential claims existed prior to the time when [the employee] agreed to the release language," the court said.

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May 27, 2010

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