Separate Agreement Does Not Have the Effect of Tolling the Two-Year Statute of Limitations Under the Workers’ Compensation Act

Weber Gallagher Simpson Stapleton Fires & Newby LLP

Ocean Wholesale Nursery LLC, the respondent, appealed from an order denying its motion to dismiss Donald Servais's, the petitioner, workers' compensation petition and from a final judgment awarding the petitioner $75,516.00. This decision was made because the compensation judge erred in denying the motion to dismiss, the Court reversed the order denying the motion to dismiss and vacated the final judgment on July 14, 2022.

The petitioner worked for the respondent as a nursery manager for approximately 5 years. On January 31, 2017, the petitioner and respondent entered into a confidential settlement agreement and general release indicating that they had concluded their business relationship and wanted to resolve all claims the petitioner had or may have against the respondent. As consideration of the same, the respondent agreed to pay the petitioner $5,000.00, and this would constitute the entire amount of consideration provided, and that the petitioner would not seek any further compensation for any other damages, costs, disbursements, or attorneys’ fees in connection with any of the matters encompassed by the Agreement. Further, that he had been paid properly for all work performed on behalf of the respondent, and that he had not sustained any work-related injury or illness for which he had not already filed a claim. 

There was a paragraph for exceptions, which indicated that the release did not affect or limit the claims that may arise after the date that the petitioner signed the agreement or the petitioner’s right to receive benefits for occupational injury or illness under the Workers' Compensation Law.

Approximately two years after the petitioner signed the agreement, on October 17, 2018, the petitioner filed a claim petition alleging an injury that had occurred almost three years prior on January 26, 2016. He had sustained an amputation of three fingers on the right hand while cutting pallets. 

The respondent filed a Motion to Dismiss, alleging that the petitioner had failed to file the claim petition within the two-year statutory time period under N.J.S.A 34:15-21. The respondent also alleged that the agreement did make clear that the petitioner was not barred from filing a claim, simply that he had missed the statutory period, and in addition, that petitioner was an independent contractor, not an employee. 

The petitioner opposed the motion, alleging that he had been misled into believing that he was receiving payment on his workers’ compensation claim that “was executed January 31, 2017” (the date of the execution of the Agreement) and alleged that his claim was timely filed because he had filed it within two years of the Agreement. The petitioner did not specify with an affidavit or certification the specifics of the alleged misleading statement. He instead argued that the language in the Agreement was ambiguous and that it would reasonably lead him to believe that the $5,000.00 he received was a partial payment for his work-related injury.

Even though the hearing had been limited to the Agreement and the statute-of-limitations issue, the judge also held the petitioner was an employee of the Nursery and had lost his fingers at work and not at home. The judge issued an order on February 18, 2020, denying the Nursery's motion to dismiss and finding the petitioner was an employee of the Nursery and his injury had "ar[isen] out of and in the course of his employment."

Following the hearing, there was a trial regarding the extent of the petitioner’s injuries. The Judge awarded the petitioner $75,516.00 for his injury and apportioned $1,000.00 of the $5,000.00 as part of the Agreement for the loss of the petitioner’s fingers as a credit to the respondent. 

The respondent then moved for a stay of the judgment pending appeal and indicated that the Judge had erred in extending the statute of limitations, deciding the employment and compensability issues, and in apportioning a part of the payment from the Agreement. The judge denied the respondent’s motion. 

The respondent then appealed, arguing that the compensation judge erred by: (1) misconstruing the $5,000 "employment separation payment" as a worker's compensation payment; (2) violating the Nursery's due-process rights by determining the petitioner was an employee and that he had been injured in the course of his employment without holding a proper trial on those issues; and (3) arbitrarily apportioning the $5,000 payment into a $4,000 employment separation payment and a $1,000 work injury payment.

The Court noted that settlement agreements are governed by basic contract principles and that a court should typically enforce a settlement agreement as it would any other contract. Capparelli v. Lopatin, 459 N.J. Super. 584, 603-604 (App. Div. 2019) (quoting Jennings v. Reed, 381 N.J. Super. 217, 227 (App. Div. 2005)). The Court should not rewrite or revise an agreement when the intent of the parties is clear. Id. at 604. Further, a court should allow the parties to illuminate the contract’s meaning through the submission of extrinsic evidence only if the contractual language is ambiguous. Ibid. 

The court noted that those circumstances were not present, or even alleged, in the petitioner’s opposition to the motion to dismiss. On the contrary, the petitioner’s opposition noted that the respondent did not pay for or provide for any of the petitioner’s medical treatment, and the opposition was based on the argument that the Agreement was ambiguous. After the Court reviewed the Agreement de novo, the Court concluded that there was no ambiguity and that the Agreement expressly excluded the petitioner’s workers’ compensation claim. Because the petitioner’s opposition to the motion was based entirely on the Agreement’s alleged ambiguity, the judge erred in holding a four-day hearing before deciding whether the Agreement was ambiguous, and then again when the Agreement was found to be ambiguous. 

The court found more specifically that paragraphs five and six would not reasonably lead a person to believe that the $5,000.00 payment under the Agreement was also a partial payment for his work-related injury, especially because the following “Exceptions” paragraph expressly stated that the Agreement did not affect or limit his right to receive workers’ compensation benefits. 

In addition, the judge's finding that $1,000 of the $5,000 payment of the agreement was payment for the petitioner's loss of fingers had no basis in the record evidence. In the Agreement, the petitioner did not waive his right to file a workers' compensation claim. On the contrary, in the Agreement, the petitioner expressly reserved his right to file a workers' compensation claim. Petitioner just didn't do so timely.

Comment: The Agreement was not ambiguous. It clearly excluded workers' compensation claims and was not a resolution of any workers' compensation claim. Thus, the $5,000 payment under the Agreement was not related to any work-related injury and did not have the effect of tolling the two-year statute of limitations under the Act. Accordingly, the Court reversed the order denying the motion to dismiss and vacate the final judgment.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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