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Unintended Compromise and
Release Consequences for
CalPERS Disability Retirees

By Edward L. Faunce, Esq.
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Ed Faunce specializes in public employees disability retirement law. In this article he discusses the unintended consequences of Compromise and Releases that include waivers of mandatory and permissive reinstatement.
We were recently contacted by a State Correctional Officer (CO), formerly employed at a State prison, who had previously been granted a disability retirement for lower leg nerve damage. Also, in 2004 he settled his workers' compensation case and agreed to a waiver of all mandatory and permissive reinstatement to his CO position. He told us that his workers' compensation attorney advised him that the waiver was simply pro forma and not to worry because CalPERS would never challenge his disability retirement. After all, nerve damage does not disappear.
A pro forma waiver in a C&R can turn into a later loss of disability retirement and employment rights.
But CalPERS had just required this retired CO to be examined by one of its "IME" doctors to determine whether he was still disabled.

California Government Code §21192 provides for such an examination:

"The board...may require any recipient of a disability retirement allowance under the minimum age for voluntary retirement...to undergo medical examination....The examination shall be made by a physician or surgeon, appointed by the board.... Upon the basis of the examination, the board...shall determine whether he or she is still incapacitated, physically or mentally, for duty in the state agency, the university, or contracting agency, where he or she was employed and in the position held by him or her when retired for disability...."

Historically, we have not worried about losing the member's disability retirement because the PERS statute also provides that even if it is determined that the member is no longer disabled, his/her disability retirement allowance is not cancelled if the employer does not voluntarily agree to reinstate the employee to their former job.
An examination under the Government Code can derail a retirement allowance.

California Government Code §21193 provides:

"If the determination pursuant to Section 21192 is that the recipient is not so incapacitated for duty in the position held when retired for disability...and his or her employer offers to reinstate that employee, his or her disability retirement allowance shall be canceled immediately, and he or she shall become a member of this system."

When the retired CO contacted us, he had just received a notice from CalPERS that their IME had pronounced him no longer disabled and that his disability retirement would be cancelled.

We have observed a vastly expanded CalPERS's effort to get previously disabled retirees to one of its special "IME" doctors. If the retiree has already signed a waiver of mandatory reinstatement rights, they must vigorously prepare for and defend at the appeal hearing in which the CalPERS's decision may be contested.

We advised him that he should appeal that decision to a formal hearing with the Office of Administrative Hearings because the State prison administration might simply cooperate with CalPERS by asserting that the CO had waived his right to mandatory reinstatement in his 2004 settlement. The CO decided to represent himself in the appeal hearing.

Predictably, the CO lost his appeal hearing and, when he requested the CalPERS's Board to reconsider his case, the CalPERS's staff attorney advised the Board to deny the reconsideration petition because when the CO settled his workers’ compensation case, he had signed a waiver of his rights under Government Code §21193: "[T]he Waiver of Employment Mr. [CO] signed was a settlement agreement in which he waived his right to ever return to work for CDCR, for valuable consideration. In so doing, he also waived his rights under California Government Code section 21193 to reinstatement to his former employer."

The recent case of Claxton v. Waters, 34 Cal.4th 367 (2004) protects an employee from waiving non workers’ compensation benefits. “To summarize, we hold that the standard language of the preprinted form used in settling workers' compensation claims releases only those claims that are within the scope of the workers' compensation system, and does not apply to claims asserted in separate civil actions.” (Id. at 376) But Claxton still recognized that the applicant may make an express waiver of a claim.

The CalPERS legal staff, arguing that the CO had waived his right to reinstatement under Government Code §21193, cited an earlier PERS decision, Case No. 7381, June 20, 2007, in which a previously retired CHP officer had been found no longer disabled and had settled his State Personnel Board termination case with an agreement in which he promised to never again apply to work at the CHP. The PERS Board of Administration found that this language waived the officer’s right of statutory reinstatement.

Such an examination can also be used to force someone back to work -- unless he or she waived the right to mandatory reinstatement.
In our CO’s case, the waiver language which he signed in 2004 provided:

"I understand that I have alternatives to settling the above-referenced workers' compensation claim(s) against the California Department of Corrections by a compromise and release agreement resulting in a lump sum payment to me. I understand that as long as I am employed by the Department of Corrections or the possibility remains that I might again become employed by the Department of Corrections, it is disadvantageous for the Department of Corrections to settle my workers' compensation case(s) by a compromise and release agreement. I have retired and understand that I have mandatory reinstatement rights to employment with the Department of Corrections' and the California Youth Authority. Upon my own initiative and after consultation with my attorney(s) to induce the State of California and its representatives to enter into a compromise and release agreement as final resolution to the above-referenced claim(s), I waive any and all mandatory or permissive rights to reinstatement or rehire by the Department of Corrections or the California Youth Authority. In the event the Department of Corrections or the California Youth Authority inadvertently hire me, I agree to be immediately dismissed with cause and hereby waive all rights of appeal from said dismissal. I agree not to challenge or move to set aside this voluntary resignation and waiver. The parties agree that the terms set forth herein shall be null and void and not binding upon the parties if not approved by the Workers' Compensation Appeals Board...." (underlining emphasis added.)

The entire waiver is quoted to show how this large State employer has so carefully worked out the language to insure that mandatory reinstatement rights under the CalPERS law are expressly identified and then waived.
Carefully crafted language required by the State to C&R a case can be a booby trap for the unwary.
At present, CalPERS is under enormous pressure to reduce the amount of money being paid out to disabled retirees. It requires no great stretch to realize that CalPERS and the State employers are in cahoots to set up these disabled and retired workers. CalPERS simply uses “bottom of the barrel” defense doctors to declare a retired employee no longer disabled. The State employer provides the waiver which allows CalPERS to remove the disabled employee from retired status. The retired member has now lost both their employment and their disability retirement allowance.
CalPERS uses “bottom of the barrel” defense doctors to declare a retired employee no longer disabled.
For a long time, at least since Robinson v. McGinn, 195 Cal.App.3d 66 (1987), it has been known that allowing a PERS member to resign while a disability retirement case is pending, carries potential adverse consequences for the workers' compensation attorney. Now we know that a waiver of mandatory reinstatement rights is the functional equivalent of a resignation.

For any employee under the minimum age for voluntary retirement, a C&R which ends the employee’s right to mandatory reinstatement probably should be avoided.

Editor's note: Before settling any case where the defense is requiring special language or addenda, one should check with a specialist in the field of law covering that language.
A waiver of mandatory reinstatement rights is the functional equivalent of a resignation for an employee under the minimum age for voluntary retirement.
Edward L. Faunce, Esq.
Faunce, Singer & Oatman
315 N. Vine Street
Fallbrook, CA 92028
Phone: 1-800-874-2284

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