The District Court for the Eastern District of Louisiana dismissed an employee’s disability discrimination claims based on a broad release in her workers’ compensation settlement agreement with the employer. Peddy v. Aaron’s, Inc. Case No. 02:18-cv-1625 (E.D. La. Feb. 21, 2019). The Court also ruled in favor of the employer on its counterclaim for breach of the settlement agreement, and determined the employer was entitled to its attorneys’ fees and costs to defend the lawsuit.

The employee sustained a workplace injury in 2009, and filed a workers’ compensation claim. The employer accommodated the employee’s resulting medical restrictions for several years following the accident. However, according to the employee, the employer stopped accommodating and terminated her employment in 2016. The employee subsequently filed suit alleging failure to accommodate, disability harassment, disability discrimination and intentional infliction of emotional distress. Her workers’ compensation claim was still pending at the time she filed her disability discrimination lawsuit.

The employee settled her workers’ compensation claim after she filed the disability discrimination lawsuit, but before serving it on the employer. The settlement agreement released the employer from “all liability of any nature whatsoever, whether past, present or future, . . . including all claims arising under . . . the laws of Louisiana . . . the laws of the United States . . . [or] the Louisiana tort law, as a result of the [2009 workplace injury].” The settlement agreement also prohibited the employee from filing any claims against the employer “arising from” the 2009 workplace injury.

The defendant asserted counterclaims against the employee for breach of contract and indemnification under the agreement. After the parties filed their respective answers, the employer moved for judgment on the pleadings. The Court held that the dispute was ripe for judgment on the pleadings since it involved contractual interpretation.

The Court first determined that the employee released her disability discrimination and tort claims when she signed the workers’ compensation settlement agreement. The Court reasoned, “[the employee’s] disability and tort claims plainly arise ‘as a result’ of [workers’ compensation injury], because she frames her injuries as a ‘but-for’ cause of her claims.” The employee specifically claimed that the accident caused permanent disabilities, “and that [the employer] created a hostile work environment and discriminated against her because of her disabilities.”

The Court also found that the employee breached the terms of the settlement agreement by maintaining the lawsuit after she signed the settlement agreement. Thus, the employer was entitled to its attorneys’ fees and costs in defending the action. The employer was not, however, entitled to judgment on its indemnification claim, based on the language of that provision.

This decision reinforces the importance of considering other potential claims, and particularly disability discrimination claims, when resolving a workers’ compensation dispute. A general release is not appropriate in every situation. However, in workers’ compensation cases involving former employees or employees who cannot return to work (with or without reasonable accommodations), including a general release of employment and tort claims prevents an employee from pursuing disability discrimination claims on the heels of receiving a workers’ compensation settlement. Employers should consult with counsel about including a general release of claims in a workers’ compensation agreement to ensure the release is appropriate under the circumstances and supported by adequate consideration.