What Do You Think: Could SHO Reject ‘Form’ of $2,000 Settlement as Unfair?

Frank Ferreri

Columbus, OH (WorkersCompensation.com) – Does the word “form” in reference to a settlement agreement refer to the settlement itself or the structure of the agreement that gives the settlement legal effect?

That question surfaced in a recent Ohio case involving a manufacturer and a worker injured on the job.

The worker’s right hand was crushed in a punch press while he was working for the manufacturer. His workers’ compensation claim was allowed for a crushing injury and several other conditions.

The worker applied for an award of additional compensation due to the manufacturer’s alleged violation of specific safety requirements, or VSSRs. The manufacturer denied that it had violated safety requirements. Ohio’s Industrial Commission sent the parties a letter estimating that if the worker’s VSSR application was allowed, the award could range from approximately $21,000 to $70,000, subject to increase if there was ongoing compensation or future compensation paid on the worker’s claim.

Before a staff hearing officer issued his decision, the manufacturer and the worker submitted to the commission an agreement to settle the worker’s VSSR claim for a lump-sum payment of $2,000. The SHO then issued two orders. One order granted the worker a VSSR award of 30 percent of the maximum weekly rate. The other order rejected the proposed $2,000 settlement as “neither fair nor equitable.”

After the commission dismissed the manufacturer’s motion for reconsideration, the manufacturer filed a declaratory-judgment action in county court. The court dismissed the action, ruling that it did not have jurisdiction, and the appeals court agreed.

The worker then filed another action in the appeals court, arguing that the commission did not have the authority to reject the settlement agreement. The appeals court rejected this argument, prompting the manufacturer to appeal to the Ohio Supreme Court.

The worker sought a writ of mandamus, which is a procedure by which a court orders an agency like the Industrial Commission to perform an act. In this case, that act would be upholding the parties’ settlement agreement.

Regarding the parties’ settlement agreements, an Ohio regulation provides that if an SHO “does not find the settlement to be appropriate in its present form,” the SHO can approve or disapprove the settlement.

Could the SHO reject the $2,000 lump-sum settlement the parties reached?

  1. Yes. The regulation at issued focused on whether a settlement was “appropriate,” allowing the SHO to determine whether it was fair or not.
  2. No. “Form” refers to the structure of an agreement and deals with whether an agreement contains the elements of a valid contract.

If you chose A, you agreed with the Ohio Supreme Court in State ex rel. Zarbana Industries Inc. v. Industrial Commission of Ohio, No. 2020-1575 (Ohio 10/19/21), which held that the regulation granted the SHO the authority to reject the settlement on grounds that it was not fair or equitable.

“There is no indication, let alone the clarity required for a writ of mandamus to issue, that the settlement’s ‘form’ refers to its ‘structural’ suitability … rather than simply the settlement’s present iteration, i.e., its current terms,” the court wrote.

The court explained that reading the regulation as allowing an SHO to disapprove a settlement as inappropriate if the SHO finds that it is not fair or equitable was consistent with the regulations “broadly worded plain language.”

Additionally, the court pointed out that a VSSR award has a two-fold function in Ohio.

“A VSSR award is not simply a matter of compensating the injured party but is also ‘a penalty imposed on an employer,'” the court wrote. “The commission therefore has an interest — distinct from the injured worker’s interest in compensation — in ensuring that the penalty fairly matches the severity of the violation.”

As a result, the Ohio Supreme Court upheld the appeals court’s judgment.

This feature does not provide legal advice.

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