The Supreme Court of Tennessee reviewed an appeal regarding a workers' compensation settlement involving Christopher Furlough and Spherion Atlantic Workforce, LLC. The central issue was whether a court could invalidate a settlement approved by the Department of Labor based on the assertion that the accompanying SD-1 form was not "fully completed." The Court held that the Department's approval of the settlement implicitly included approval of the SD-1 form, and thus, a court lacks the authority to set aside the settlement on the grounds of the form's completeness. Consequently, the Court reversed the judgments of the Special Workers’ Compensation Appeals Panel and the trial court, dismissing Furlough's petition.
The factual background includes Furlough's injury while employed at Beard Property Maintenance in 2001, followed by treatment and a 10% permanent partial impairment rating determined by Dr. Thomas J. O’Brien. In 2005, while working for Spherion, Furlough sustained a subsequent injury from a recycling bin impacting the same area of his back. Despite being offered a light-duty job, he struggled with the physical demands and reported his inability to work, believing this led to his termination. Furlough consulted Dr. Robert Weiss, who determined that surgery was unnecessary and discharged him without a permanent impairment rating.
Employee, experiencing ongoing pain and inadequate treatment, sought help from Dr. O’Brien, who had previously performed surgery on him but declined to operate on a new injury due to a conflict of interest. Subsequently, Employee consulted attorney Donald D. Zuccarello, signing a contract and being referred to Dr. Richard Fishbein for an independent medical evaluation. Dr. Fishbein determined Employee had reached maximum medical improvement with a 13% permanent impairment rating, which included both his 2001 and 2005 injuries.
A benefit review conference on June 8, 2006, led to a settlement agreement of $11,500, minus attorney fees, and included future medical benefits. This settlement was approved by Workers’ Compensation Specialist Jim McGrath without the need for court approval. Post-settlement, Employee underwent three back surgeries with Dr. Stanley Hopp and later hired new counsel, Michael Walker, who filed a petition to set aside the settlement in April 2008.
During a December 2010 hearing, Employee argued that a statement in the settlement agreement regarding his return to work was inaccurate, claiming he had been terminated, which would affect his disability compensation. The Employer presented an affidavit confirming Employee's termination on December 13, 2005, while Employee argued he had not received notice of his termination and had done nothing wrong. The dispute centered on whether Employee was terminated and the cause of any termination.
Employee acknowledged reading paragraph 2.3 of the settlement agreement but claimed he did not understand it, asserting that neither Ms. Deatheridge nor Specialist McGrath explained its provisions. Employee vaguely remembered a brief meeting with a representative (unspecified) who instructed him to initial documents without providing explanations. He testified that he signed documents due to ongoing pain, inadequate treatment, and the belief that settling was necessary for prompt medical care.
Both Employee and Ms. Deatheridge had difficulty recalling details of the benefit review conference. Ms. Deatheridge, who had experience handling numerous workers' compensation cases, indicated that the one-and-a-half times cap on benefits would only apply to an employee terminated for cause and that understanding this cap was crucial for settlement negotiations. She stated she would not advise settling for quick medical treatment or signing an unfavorable settlement, maintaining that she typically explains options to clients and ensures their understanding before signing any documents.
Regarding the merits of Employee's settlement, Ms. Deatheridge noted that because Dr. Weiss released Employee without an impairment rating, there was a risk of receiving a zero percent rating if the case went to court. The trial court found Employee’s injury occurred on December 4, 2005, and questioned the credibility of Dr. Weiss’s assertion that Employee reached maximum medical improvement by December 21, 2005. The court credited Employee's testimony about being physically unable to perform offered light-duty work and having no notice of termination from Employer. It refrained from determining whether Employee had been terminated but concluded there was no evidence of termination for cause. The court also found that Employee lacked awareness of available workers’ compensation benefits and was not properly represented during the benefit review conference, highlighting that while an attorney was present, Employee did not comprehend the proceedings due to the limited time and discussion he had with his legal representatives.
The trial court found that Mr. Furlough was not adequately informed about the settlement process and his options, despite substantial preparation by his legal representatives. It granted the Employee's petition to set aside the settlement for two primary reasons: first, Mr. Furlough did not receive the benefits guaranteed under workers’ compensation laws (Tenn. Code Ann. 50-6-206 (c)(1)(B)); second, he was unrepresented by counsel during the settlement approval process, which required court approval (Tenn. Code Ann. 50-6-206 (c)(3)(B)). The trial court noted that the approving specialist failed to discuss the settlement statement with Mr. Furlough, leading to the conclusion that the settlement lacked legal standing. The court invoked its inherent authority and Tennessee Rule of Civil Procedure 60.02(5) to set aside the settlement, allowing for an amendment to the petition based on clear evidence. It indicated that Mr. Furlough could file a claim for benefits or request another benefit review conference. The Employer appealed, which was referred to a Special Workers’ Compensation Appeals Panel. However, the Panel dismissed the appeal, vacating the trial court's judgment on procedural grounds, noting that the settlement could not be finalized because the required statistical data form (Form SD-1) was incomplete, as per Tenn. Code Ann. 50-6-244(d).
The benefit review conference (BRC) process is concluded upon reaching a mediated settlement with a signed document, as stated in Tenn. Comp. R. Reg. 0800-2-5-.09(1)(b). However, the Panel determined that the parties did not properly exhaust the BRC process due to procedural errors, meaning the Employee's lawsuit to invalidate the settlement agreement was filed prematurely. Consequently, the appeal is dismissed, the trial court's judgment is vacated, and the case is remanded to the Department of Labor for further proceedings. The court does not address the merits of whether the settlement should have been set aside.
The standard of review for subject matter jurisdiction is de novo, as is statutory construction, while factual findings are presumed correct unless shown otherwise. Under Tennessee Workers’ Compensation Law, parties may settle compensation matters, but such settlements must meet specified procedural and substantive requirements. The parties did not seek court approval under the relevant statutes, nor could they proceed under an alternative provision that applies only to specific settlement types. Instead, they sought Department approval, which requires a signed agreement, a determination that the employee receives adequate benefits, and, if the employee was unrepresented at the BRC, a review by an unrelated departmental specialist.
A settlement approved by the commissioner is regarded with the same authority as a court judgment under Tenn. Code Ann. 50-6-230. Such settlements can be appealed as a final order according to the Uniform Administrative Procedures Act. If an employee is represented by counsel, the parties must seek departmental approval for the settlement unless they opt for court approval. Conversely, if the employee is unrepresented, court approval is required unless the parties agree to seek departmental approval. The commissioner must ensure that unrepresented employees are informed about their benefits, rights, and the procedures needed to protect those rights.
The Panel determined that an employee's lawsuit to invalidate a settlement was prematurely filed, either because the settlement wasn’t finalized or because the parties failed to exhaust administrative remedies. The Panel found that the SD-1 form, necessary for settlement approval, was incomplete, which led to the conclusion that the settlement was not final. This is supported by Tenn. Code Ann. 50-6-244(d), which mandates that a fully completed SD-1 form be submitted for approval. While agreeing that the statute requires a completed form, the conclusion that a court can nullify a settlement after departmental approval based on form completeness is disputed. The legislature has assigned the Department the oversight role for the SD-1 form, and it is the Department's responsibility to enforce compliance. As such, courts should defer to the Department's judgment on whether the SD-1 form is fully completed, and their approval of the settlement and SD-1 form should not be second-guessed by the courts.
Courts lack authority to challenge the Department's approval of the SD-1 form, as established by Tennessee Code Annotated section 50-6-244(b). This statute specifies that in appeals of workers’ compensation trial verdicts, the statistical data from the SD-1 form is inadmissible, indicating legislative intent that appellate courts should not consider its content. Consequently, while the Workers’ Compensation Law mandates submission of completed SD-1 forms with settlement proposals, it assigns the Department the responsibility for reviewing these forms. The Department’s approval implies the form was adequately completed.
The Panel incorrectly determined the settlement was not "final" due to the SD-1 form's status and also found that the parties did not exhaust their administrative remedies prior to seeking judicial intervention. However, the parties did complete the benefit review conference process by reaching a mediated settlement, validated by a signed document. Under Tennessee law, exhaustion of administrative remedies is required before court intervention, but since the benefit review conference was exhausted, the trial court had subject matter jurisdiction. The Panel's suggestion that further exhaustion was necessary before petitioning the trial court is erroneous.
Employee is required to exhaust the benefit review conference process to file a claim under the Workers’ Compensation Law, but has not done so in this instance. Instead, Employee petitioned the trial court to set aside a Department-approved settlement. The court determined that Employee met the exhaustion requirement, affirming that it had subject matter jurisdiction.
Employer contended that the trial court lacked jurisdiction to set aside the settlement, asserting that judicial review of such settlements must occur under the Uniform Administrative Procedures Act (UAPA). Tennessee Code Annotated section 50-6-206(c)(2) states that an approved settlement can be appealed as a final order under the UAPA. However, Employee is barred from appealing the settlement due to not filing a petition for review within the required sixty days of the final administrative order.
The trial court granted Employee’s petition based on its inherent authority and Tennessee Rule of Civil Procedure 60.02(5), which allows relief from a final judgment for various reasons, including any other justifying reason. The trial court indicated it was basing its decision on clear and convincing evidence under Rule 60.02(5).
While Rule 60.02 applies only to final judgments, courts have acknowledged the possibility of seeking relief from court-approved settlements, though such relief is rare. Previous cases show a mixed application of Rule 60.02(5) regarding the setting aside of workers' compensation settlements. The court has previously avoided addressing the specific issues related to Department-approved settlements in similar cases.
In cases of Department-approved settlements under Tennessee law, there is no court order; instead, a final administrative order is issued. Such settlements are granted the same legal standing as court judgments for purposes outlined in Tennessee Code Annotated section 50-6-230. Consequently, these settlements can be treated as final judgments under Rule 60.02, which allows a trial court to set them aside if specific grounds for relief are met. However, relief under Rule 60.02 is considered an "exceptional remedy," intended to balance finality and justice, and should not be easily granted.
A party seeking this relief must provide clear and convincing evidence, meaning the truth of the facts must be highly probable, and the burden of proof is significant. Motions for relief must be filed within a reasonable time, with a strict one-year limit for motions based on sections (1) or (2) of Rule 60.02. Rule 60.02(5) allows for relief beyond this one-year limit but is narrowly construed and does not apply if the request is simply late or based on choices made by the party.
The document also emphasizes that while parties may settle workers’ compensation claims, statutory approval is required, and the procedural safeguards must be followed. In this case, the settlement must be approved by the commissioner or their designee, contingent upon the agreement being signed and the employee receiving the benefits mandated by the relevant code sections.
Settlement agreements involving employees in workers' compensation cases must follow specific protocols based on whether the employee is represented by counsel. If unrepresented, a settlement must be reviewed by a department specialist not associated with the case. For represented employees, the parties typically seek departmental approval unless opting for court approval. The commissioner or designee must ensure unrepresented employees are fully informed about their rights and available benefits. In this case, the trial court granted relief under Rule 60.02(5), determining the employee was "not represented" despite having retained counsel, which led to the conclusion that court approval was necessary, and the employee had not been adequately informed. However, evidence shows that the employee was indeed represented; he had signed an employment contract, met with counsel, and paid attorney fees. The trial court's interpretation of "not represented" was deemed too broad, as the statute explicitly requires thorough information for unrepresented employees at the time of settlement approval.
The statute mandates that the assessment of an employee's legal representation occurs at the time a settlement is submitted for approval, not at a later date when a petition to set aside the settlement is filed. The trial court erred by considering the lack of representation when the employee had legal counsel during settlement negotiations and at submission. Additionally, the court's ruling was incorrectly based on the employee not receiving substantial benefits under the Workers’ Compensation Law, despite the requirement that this determination applies to settlements approved by both the Department and courts, regardless of representation. The judge must evaluate whether the employee is receiving benefits substantially aligned with the Workers’ Compensation framework. The definition of “substantially receiving benefits” indicates that the employee should be compensated similar to the provisions of the workers’ compensation statutes, which varies case by case, particularly depending on the employee's return to work status with their pre-injury employer. If the employee returns to work at no less than their previous wage, they are eligible for a maximum of one and one-half times the medical impairment rating, while failure to do so allows for benefits up to six times the rating. Tennessee courts have established the “meaningful return to work” concept to address scenarios where an employee may not maintain employment after returning to their pre-injury employer, acknowledging the complexities and variances in such cases.
Three factors are considered in determining an employee's eligibility for higher disability benefits: (1) the extent to which the injury prevents the employee from performing their job; (2) the employer's refusal to accommodate work restrictions related to the injury; and (3) whether the injury causes sufficient pain to hinder work continuation. The employer claims it reinstated the employee, who subsequently left the job, and asserts that the employee was terminated for cause, disqualifying them from higher benefits. Conversely, the employee argues that their injury prevented them from fulfilling job requirements and that their termination was due to the injury, warranting the application of the higher cap.
The employee seeks relief from a mistake in the Department’s approval of their settlement, which inaccurately indicated that they had been terminated, thereby affecting the maximum disability award. However, the employee's petition, filed over a year after the settlement, is considered untimely under Rule 60.02(1), and thus relief is not available. Additionally, the trial court erroneously granted relief under Rule 60.02(5), which is reserved for extraordinary circumstances not addressed by other sections of Rule 60.02.
The trial court also attempted to invoke its inherent authority to set aside the settlement, arguing it did not comply with applicable law. In doing so, it referenced a precedent where an employee, initially unrepresented, faced challenges in obtaining medical bill payments after a work-related injury. Ultimately, the court concluded that it erred in granting the employee's petition under both Rule 60.02 and its inherent authority.
An employee filed for workers’ compensation benefits but was misled by an insurance adjuster regarding the duration of benefits and attorney fees. Believing this misinformation, the employee dismissed his attorney before a benefit review conference, where he was not informed of potential lifetime benefits. Nearly two years later, the employee petitioned the trial court to set aside the settlement, which the court granted. The employer appealed, but the appellate court upheld the trial court’s decision. The court clarified that relief from the settlement did not need analysis under Rule 60.02, as the trial court had exercised its inherent authority to set aside the settlement for non-compliance with the law.
The discussion referenced Jerkins v. McKinney, which involved a trial court denying a new trial motion without the parties being aware until after the appeal period expired. The trial court later issued a second order denying the motion and granting additional time for an appeal. The defendant, instead of appealing, filed suits to set aside the judgment under Rule 60.02. A different judge ruled that the defendant could still appeal based on the second order and had not exhausted remedies in the original action, thus lacking the right to maintain the independent actions.
The defendant's appeal led to the Court of Appeals reversing the trial court's judgment, but this Court later reviewed and reversed the Court of Appeals' judgment. Upon review, the Court identified three options available to the defendant after discovering an order overruling his motion for a new trial: appeal based on the plaintiff's waiver of timeliness, file a motion for relief under Rule 60.02, or file a petition for writ of error. The Court characterized the plaintiff's waiver as an informal invocation of Rule 60.02 benefits. It acknowledged the general legal principle that a trial judge cannot set aside a judgment after thirty days, yet noted that Rule 60, adopted to provide relief against final judgments, allows for modification before finality.
In this case, the Court determined that the facts justified relief under Rule 60.02(1) for "mistake, inadvertence, surprise or excusable neglect." It deemed the trial court's issuance of a second order denying the motion for a new trial to start a new appeal period as appropriate under Rule 60.02(1). The Court further asserted that the trial court had the authority to grant relief sua sponte upon becoming aware of the need for it without waiting for a formal motion.
However, the Court declined to grant a new trial under Rule 60, as there was no substantive attack on the judgment, only procedural irregularities. It then addressed whether an independent action was warranted under the circumstances, referencing a lack of Tennessee authority and looking to federal rules for guidance. The Court stated that independent actions are rare and only appropriate under exceptional circumstances, requiring a recognized ground such as fraud or mistake, and confirming that no other adequate remedy exists.
To succeed in an independent action seeking relief from a judgment, a plaintiff must demonstrate three criteria: (1) a recognized ground for relief, (2) an absence of fault, neglect, or carelessness on their part, and (3) the absence of any other adequate remedy. Relief will not be granted if the party seeking it could have pursued an adequate legal remedy or sought modification of the original judgment. The discretion to grant relief rests with the trial judge. In the case of Jerkins, the court found the independent action inappropriate as the defendant had multiple adequate remedies available but failed to pursue them. The court emphasized that while relief in independent actions is rare and typically requires exceptional circumstances, there is no time limit for filing such actions. Subsequent cases have applied the Jerkins criteria to deny relief when plaintiffs did not allege extrinsic fraud or when their own negligence contributed to their predicament. Overall, independent actions are only upheld under specific conditions where other remedies are unavailable or inadequate.
An independent action is only permissible under unusual and exceptional circumstances when no other remedy is available or adequate. Multiple cases, including Jerkins and its progeny, have established that relief will be denied if the plaintiff cannot demonstrate extrinsic fraud or if they have other adequate remedies available. For instance, in Tanner, relief was granted because the plaintiff lacked alternative remedies after not being served with a warrant, whereas in Tip's Package Store, relief was denied as the defendants had adequate remedies to challenge the judgment. The court emphasized that the failure to utilize available remedies precluded a collateral attack on the judgment. Although the court in Dennis granted relief without applying the Jerkins test, this should not be interpreted as overturning the established doctrine. In the current case, the Employee did not meet two of the three Jerkins criteria needed for relief in an independent action, as other adequate remedies were available.
Employee had the opportunity to seek relief for an alleged mistake regarding his employment status either through Rule 60.02(1) or by appealing the Department-approved settlement under Tennessee Code Annotated section 50-6-206(c)(2), but failed to pursue either option. Unlike previous cases, Employee cannot be deemed without fault, as he was aware of his employment status and had retained counsel to discuss his claim. After the settlement, he acquired new counsel within a year, who could have sought relief under Rule 60.02(1). The court found no basis to allow the trial court to exercise its inherent authority to review the case independently. The circumstances surrounding Employee's case differ significantly from those in Dennis, where there were substantial issues regarding misinformation, oversight, and lack of counsel. Consequently, the Panel was incorrect in deeming the Department-approved settlement non-final due to incomplete documentation and in asserting that the benefit review conference process was not exhausted. The trial court's decision to set aside the settlement under Rule 60.02(5) and its inherent authority was also erroneous. The judgments of both the Panel and the trial court are reversed, and Employee's petition is dismissed, with costs of the appeal charged to Christopher Furlough and his surety.
