If you’ve been injured on the job, you’re likely considering your options under California’s workers’ compensation system. If you’re an employee, you’re entitled to workers’ compensation benefits that cover your medical costs and help offset lost income while you recover. There are a variety of methods through which workers’ compensation benefits may be paid. One of the methods that is not often discussed is a Compromise and Release (C&R).

What is a Compromise and Release?

A C&R is a contract between the injured worker and an insurance company who pays workers’ compensation benefits. The C&R effectively ends the workers’ compensation case via a settlement. Instead of receiving benefits over time, the injured worker agrees to settle the workers’ compensation case in exchange for a lump sum payment. By accepting a C&R, the injured worker forfeits his or her right to:

  •         Reopen the workers’ compensation claim at a later time
  •         Have the insurance company pay for any medical treatment

Who Qualifies for a Compromise and Release?

This option is generally only available to workers who are permanently disabled and who will have long-term medical needs. A C&R may also occur when the injury was denied by the insurance company, or when the injury is permanent and the amount of disability is determined. Injured workers who qualify for C&R generally do not return to work for the same employer after their injury is resolved, if it resolves.

How is a Compromise and Release Approved?

A C&R must be approved by a judge. To do so, the injured worker can:

  •         Attend a hearing or Mandatory Settlement Conference
  •         Attend a workers’ compensation trial
  •         Mail the C&R to the court for approval
  •         Appear before a judge without a scheduled hearing

Once the C&R is approved, the payment will be made within 30 days.

Is a Compromise and Release Payment Taxable?

Workers’ compensation benefits are not taxable, including a payment made via a C&R. If the injured worker made $15,000, and received a C&R settlement of $20,000, then he or she will only pay taxes on the $15,000 income.