Your Workers' Compensation Settlement in
North Carolina: What to Know
An on-the-job injury or illness can have serious long-term physical and financial consequences for you and your family.
Under North Carolina law, employers are responsible for compensating eligible injured workers for the medical treatment they need and the wages they lose due to a workplace injury or sickness. Hopefully, the injured worker fully recovers and returns to their previous job with no long-term consequences.
Sometimes, however, there may be permanent effects from your injury and you may be owed a workers’ comp settlement.
In North Carolina, workers’ compensation settlements are voluntary. You do not have to settle your case, no matter what the insurance company or your employer may tell you. Once approved, you could keep receiving lost wage and medical care benefits until you reach the maximum number of weeks allowed under law. However, it can be in your best interests to seek a fair lump sum settlement and not have to deal with the insurance company again.
Before you close your workers’ comp claim and accept a settlement, consult with an experienced workers’ compensation attorney who has your best interests and needs in mind. To see how much your settlement may really be worth, call 1-866-900-7078 today for a free case evaluation!
When Most Workers’ Comp Settlements Take Place
In general, possible workers’ comp settlements are not negotiated until your medical treatment is completed and your doctor releases you from treatment. This is called reaching maximum medical improvement, or MMI for short.
At MMI, the doctor will decide whether you:
- have any permanent impairments
- have any permanent physical work restrictions
- may need additional medical treatment in the future
These are important factors that go into determining how much your potential settlement may be worth.
Two Different Types of N.C. Workers’ Comp Settlements
In North Carolina, the two main categories of workers’ compensation settlements are:
- Clincher agreement, or compromise settlement agreement – a full and final settlement of your workers’ comp claimWhen you sign a clincher agreement, you generally give up your rights to future wage loss benefits and medical treatment in exchange for a sum of money. Clincher agreements are generally paid in lump sum payments but can also be structured to be paid out in installments over time.
Clincher agreements may take into consideration the following factors, among others:
- Are you partially or totally disabled?
- How much future medical treatment might you need and how much will it cost? What will your future medical expenses be?
- If you have permanent physical restrictions, how much income will you lose?
- Will you be able to return to work, and if so, in what capacity?
- How long will it take you to find another job?
- How much will you earn at another job?
Clincher agreements also usually require that you resign from the company and agree not to reapply for a position with the company in the future.
Therefore, if signing a clincher agreement, you are usually walking away from the medical care that was provided by workers’ comp and your job.
An experienced workers’ compensation attorney can advise you on whether accepting a clincher agreement makes sense for you, and if so, can help you pursue the highest possible settlement amount. For a free case evaluation, call us at 1-866-900-7078 today.
- NCIC Form 26A settlement – a partial settlement for payment of an impairment rating when you have been released to full duty (i.e. have no physical restrictions) and have gone back to work. Typically, a 26A settlement does not cover future medical expenses. However, if you sign a Form 26A, you can still request additional medical treatment under workers’ compensation for a period of two years.The potential value of your impairment rating is determined by multiplying any permanent partial impairment (PPI) rating assigned by your treating doctor at MMI by the number of weeks the state has assigned to the injured body part under the N.C. Workers’ Compensation Act. This figure is then multiplied by the amount of your weekly temporary total disability (TTD) check.The medical treatment portion of your case is not closed if you agree to a Form 26A settlement, and you can continue to receive medical benefits for two years after any impairment rating is paid. If you believe you will need medical treatment after the two-year point, you must apply for an extension to the North Carolina Industrial Commission (NCIC) before the two-year timeframe expires.
The Workers’ Compensation Settlement Negotiation Process
After you reach MMI, settlement negotiations may often occur at a mediation, which is also known as a settlement conference. You will be expected to attend the mediation with your attorney. There will also be an attorney there representing your employer and their workers’ compensation insurance company.
Both attorneys agree in advance on a professional mediator to run the mediation. Professional mediators are attorneys who are very knowledgeable about N.C. workers’ compensation law, though they do not know anything about your case until the opening session.
Mediations usually last about three to four hours. You may have to travel for the mediation, but that can potentially be avoided if your attorney has an office close to where you live (we have 16 of them).
Here are the steps in a typical settlement negotiation process:
- The first thing that happens at the mediation is called the opening conference. This is when all the parties meet together in one room. The mediator starts out by explaining the process and then asks your attorney to explain the facts of your case. It is not necessary for you to say anything during the opening conference.
- After your attorney has told the mediator what is important about your case, the attorney for your employer and their insurance company will have a chance to tell the mediator what their clients want the mediator to know about the case.
- After the mediator understands the issues and the differences between how the attorneys see the case, the sides will separate into different rooms.
- From then on, the mediator will move between the two rooms exchanging information, possible monetary offers, and any counter offers.
- The mediation may continue until the sides have reached an agreement to settle the case or the mediator decides that the sides are too far apart and ends the mediation.
If the parties agree on a settlement amount and other terms, a document will be signed, which is a binding legal contract that a court would enforce if either side tried to back out later.
If the parties don’t agree on a settlement amount, there could be a hearing at the North Carolina Industrial Commission (NCIC) if either side has filed a hearing request. If no hearing request has been filed, the case can continue until such time as a settlement may be reached in the future.
A large majority of workers’ compensation cases settle at mediation. Both sides generally prefer to have some measure of control over the outcome, which they don’t have if an NCIC hearing officer is the decision maker.
In addition, mediation is much faster than going to court. It can take almost a year to get a decision from the NCIC hearing officer, and the decision can be appealed by either side, which can add more time to the process.
How Settlements Are Paid – Lump Sum or Structured
If you accept a settlement offer, you and your attorney can determine how you want it paid to you. Settlement payments may come in two forms:
- Lump sum: you receive the total settlement amount in a single payment. The majority of clincher agreements are paid as lump sum amounts.
- Structured: your settlement is paid to you in installments over an extended period. Your lawyer may advise you to consider a structured settlement if your work injury or illness left you totally disabled and in need of long-term care.
How Is a Lump Sum Payment Calculated?
There is no set formula for calculating a lump sum workers’ comp settlement payment. The settlement may be negotiated via the mediation process based on factors such as:
- lost wages
- current and future medical expenses
- severity of your injury
- any impairment rating (PPI)
- your education
- your ability to work
- your job prospects
Note: Pain and suffering are, unfortunately, not factors you can receive compensation for in a workers’ comp settlement.
Are Lump Sum Settlements Good?
Lump sum settlements can provide immediate financial security. If you’ve reached Maximum Medical Improvement, have a good understanding of what future medical needs you’re likely to have, and your attorney says they have negotiated a fair settlement, then a lump sum settlement may be the right decision for you.
If you are in the early stages of your recovery from a work injury or illness, accepting any lump sum settlement is very risky. At this stage, you’re not fully aware of the future medical care you may need, and any lump sum amount offered is likely inadequate to cover all the costs that may arise. There are other factors to consider when weighing a settlement offer, such as the fact that accepting a lump sum settlement can impact other benefits you may be receiving.
Seek guidance from a seasoned workers’ comp attorney before you agree to any settlement.
Are Workers’ Comp Settlements Taxable by the IRS?
In North Carolina, workers’ compensation benefits and settlements are generally not taxable by the IRS. However, if your employer or their insurance company requests that you keep your settlement confidential, you may have to pay taxes. The IRS has ruled that when compensation is paid under a confidentiality clause, the settlement may be subject to taxation.
The takeaway, as always, is to consult with an attorney before signing a settlement agreement, since any settlement agreement is likely your last chance to seek all the compensation you may be owed.
James Scott Farrin Has a Formidable N.C. Workers’ Comp Team
And that is exactly what you want when you are considering whether or not to potentially settle your workers’ compensation claim. A number of our workers’ comp attorneys are N.C. State Bar Board Certified Specialists in workers’ compensation law. This is the highest level of specialization available in N.C., and only a small percentage (less than 1%) of attorneys licensed to practice in the state have earned this recognition for workers’ compensation.5
On our team, we also have former Deputy Commissioners for the North Carolina Industrial Commission (the agency in charge of workers’ comp in N.C.). And eight of our attorneys were honored on the Best Lawyers 2024 “Best Lawyers” list for their work in workers’ compensation.4
Whether you are at the beginning of your workers’ comp claim or hoping to settle it, we can help. We will always put your needs first, and we know how to fight for everything you may deserve.
5 Figures provided by NC State Bar as of 1/23.