A workers’ comp settlement agreement can be overwhelming, from the length to the technical legal terms. But before you sign on to a settlement of your workers’ comp claim, you need to understand what rights you are giving up and how much you’ll receive in benefits. This article explains many of the important parts of a typical settlement agreement.

What Are You Getting in Compensation?

The most important part of your settlement agreement is how much money you're going to receive. In addition to the total amount being offered, you should pay attention to the following important items:

• How the settlement will be paid. The agreement should state whether you’ll be paid in installments or in a lump sum. Most settlements are paid as a lump sum, but you may receive installments instead in some cases. If you will be receiving installment payments, you’ll need to know how much each installment will be, how often you will receive payments (for example, weekly or monthly), and how long your payments will continue.
• How future medical bills will be paid. If you agree to a full and final settlement of your claim, you will usually be responsible for paying any future medical bills out of your settlement amount. However, in exchange for a smaller settlement amount, you may be able to negotiate an agreement to have the insurance company pay for certain future medical bills. (See “What Claims Are You Giving Up?,” below, for more information.)
• Whether any part of your settlement must be set aside for Medicare. If you’re likely to still need treatment for your work-injury once you become eligible for Medicare, you may need what's known as a "Medicare set-aside." Medicare regulations require that you reserve a certain sum of money to pay for that future treatment. It’s very important to make sure you set aside enough money, because you could be subject to major penalties if you don’t. An experienced workers' comp lawyer should be able to make sure that your settlement includes an appropriate Medicare set-aside.
• How your attorneys’ fees will be paid. Workers' comp lawyers are usually paid by taking a percentage of the settlement or award. Nearly all states place a cap on attorneys’ fees for workers’ comp claims, and some states require that a workers' comp judge approve the amount. In some cases, the settlement agreement might state that your employer’s insurance company will pay your attorneys’ fees to your lawyer directly out of your settlement. In other cases, the settlement agreement might state that you are responsible for paying your own attorneys’ fees. Learn more about what will be taken out of your settlement or award.

What Claims Are You Giving Up?

Another very important part of your settlement agreement is the “release of claims.” Most workers’ comp settlements are full and final settlements, which means that your workers’ comp claim will be closed. For example, even if you need more medical treatment or have to take more time off from work because of your injury in the future, you will not be able to get additional benefits. (See our survey results on how many injuries get worse after workers' comp cases are closed.)

You might be able to negotiate the right to keep the medical portion of your claim open, meaning that the insurance company would pay for future medical bills related to your injury. A few states make it illegal for you to waive your right to future medical care; in these states, your future medical bills will be paid regardless of what settlement you agree to.

Are You Being Asked to Resign?

Sometimes, employers see settlement of workers’ comp cases as an opportunity to get rid of employees they don’t want to keep on for one reason or another. While you can't be fired for filing a workers’ comp claim, your employer can ask you to voluntarily resign as part of a settlement agreement. Whether you agree to this proposal depends on how much you want to stay at your job and how much your employer offers to pay in exchange for your resignation. Employers, rather than their insurance companies, usually pay this amount themselves. If you agree to resign, employers usually will request that you release all claims related to your employment (such as sexual harassment claims or claims for unpaid wages).

Before agreeing to a release of all employment-related claims, you should consult with an experienced employment lawyer. A lawyer can explain the value of your potential claims, whether you’re getting a good deal, and the impact of a voluntary resignation on your ability to receive unemployment benefits. In most states, including New York and California, you won't be eligible for unemployment benefits if you voluntarily quit your job. However, your settlement agreement may contain a provision stating that the employer agrees to not contest your application for unemployment benefits.

When Should I Contact a Lawyer?

If haven't already had a lawyer negotiate and help prepare a settlement, you should speak with a workers' comp attorney before signing any agreement that the insurance company has offered. This is especially true if your injuries were anything other than minor or you need to include a Medicare set-aside. Learn more about how much workers' comp lawyers cost and what you should consider before settling your workers' comp case.