A Section 32 Agreement is a voluntary lump-sum settlement that closes your workers’ compensation case. Once the agreement is signed and approved by a Workers’ Compensation Law Judge, it is final. Your weekly benefits stop. Your medical benefits may stop, depending on the terms of the agreement. Your case is over. There is no reopening it, no renegotiating it, and no going back.
That finality is what makes Section 32 agreements the most consequential decision in many workers’ compensation cases. A well-negotiated settlement can provide financial security and closure. A poorly negotiated settlement can leave an injured worker without adequate resources to cover future medical costs and lost income. The difference between the two almost always comes down to whether the injured worker had experienced legal representation at the negotiating table.
What a Section 32 Agreement is
Section 32 of the Workers’ Compensation Law authorizes the injured worker and the insurance carrier (or self-insured employer) to settle a workers’ compensation claim by agreement. The settlement is typically a lump-sum payment in exchange for the worker’s agreement to close the case. The agreement must be approved by a Workers’ Compensation Law Judge, who reviews it to determine that the terms are fair and that the worker understands what they are giving up.
Section 32 agreements are voluntary. Neither the injured worker nor the carrier is required to agree to a settlement. The carrier cannot force you to accept a lump sum, and you cannot force the carrier to offer one. Both sides must agree to the terms. If you do not believe the offer is adequate, you have every right to reject it and continue receiving your weekly benefits and medical care through the regular workers’ compensation system.
What a Section 32 Agreement typically includes
A Section 32 Agreement typically addresses three components: the remaining wage replacement benefits, the future medical costs, and any outstanding Schedule Loss of Use Awards or other benefits. The lump-sum amount is negotiated based on the projected value of these components.
The wage replacement component is calculated based on the weekly benefit amount, the expected remaining duration of benefits (which depends on the degree of disability and whether the pre-2007 or post-2007 rules apply), and a present-value discount that accounts for the fact that a lump sum received today is worth more than the same total amount received in weekly installments over several years.
The medical component is often the most complex part of the negotiation. If the agreement closes out medical benefits, the lump sum must be sufficient to cover the worker’s anticipated future medical needs related to the injury. This requires an estimate of what treatment will be needed, for how long, and at what cost. Underestimating future medical costs is one of the most common and most serious mistakes in Section 32 negotiations.
Some Section 32 agreements close out wage replacement benefits but leave medical benefits open. This hybrid approach gives the worker a lump sum for lost wages while preserving ongoing access to medical care through the workers’ compensation system. Whether this option is available depends on the negotiation and whether the carrier is willing to agree to it.
Medicare and the Section 32 Agreement
If you are a Medicare beneficiary or are reasonably expected to become one within 30 months of the settlement, the Section 32 Agreement must account for Medicare’s interests. Federal law requires that workers’ compensation settlements not shift the cost of injury-related medical care to the Medicare program.
This is typically addressed through a Medicare Set-Aside, or MSA, which is a portion of the settlement allocated specifically to pay for future injury-related medical expenses that Medicare would otherwise cover. The MSA amount must be approved by the Centers for Medicare and Medicaid Services, or CMS. If the MSA is inadequate and the settlement is later determined to have improperly shifted costs to Medicare, the consequences can include Medicare refusing to pay for injury-related treatment until the worker has spent the full settlement amount on medical care.
The Medicare review process can add time to the settlement. CMS review is not instantaneous, and the approval may require revisions to the proposed MSA amount. But skipping this step or underestimating the MSA creates risks that far outweigh the delay.
Why the carrier offers a Section 32
The insurance carrier offers a Section 32 because it is financially advantageous for the carrier to close the case at a known cost rather than continue paying weekly benefits and medical expenses at an unknown future cost. Every open workers’ compensation claim represents an ongoing financial obligation. Closing the claim eliminates that obligation.
This is not inherently problematic. Both sides can benefit from a well-negotiated settlement. The carrier achieves certainty. The worker receives a lump sum that may provide more financial flexibility than weekly payments. But the carrier’s interest in closing the case at the lowest possible cost means the initial offer is typically not the carrier’s best offer. It is a starting point for negotiation.
Understanding this dynamic is important. A Section 32 offer is not a take-it-or-leave-it proposition. It is an opening position. The final settlement amount depends on the strength of the medical evidence, the projected duration and cost of future benefits, the Medicare considerations, and the negotiating skill of the parties.
When a Section 32 makes sense — and when it does not
A Section 32 may make sense when you have reached Maximum Medical Improvement, your degree of disability has been established, you have a clear picture of your future medical needs, and the lump sum offered is sufficient to cover those needs plus lost income for the expected duration of your disability. It may also make sense when the remaining benefit duration is relatively short under the post-2007 caps and you prefer a lump sum to continued weekly payments.
A Section 32 may not make sense when your medical condition is still evolving, when future surgical procedures are possible, when the degree of disability has not been fully determined, or when the lump sum offered does not adequately account for future medical costs. It may also be a poor choice when the worker has difficulty managing large sums of money and would be better served by the structure of weekly payments.
Do not accept a Section 32 Agreement under financial pressure. The carrier knows that an injured worker who is struggling financially is more likely to accept a low offer. The fact that you need money now does not mean the offer on the table is adequate for the rest of your life. A settlement that seems like a relief today can become a hardship when the money runs out and the medical bills continue.
Why legal representation is critical
The insurance carrier has a lawyer protecting its interests in every Section 32 negotiation. That lawyer understands the projected cost of the claim, the durational limits, the Medicare requirements, and the negotiating leverage available. The injured worker should have the same level of representation.
An attorney evaluating a Section 32 offer will calculate the present value of remaining weekly benefits, estimate future medical costs based on the treating physician’s projected treatment plan, assess the adequacy of any proposed Medicare Set-Aside, identify whether a Schedule Loss of Use Award or other outstanding benefits should be factored into the settlement, and evaluate whether a third-party claim exists that affects the overall recovery picture.
Without this analysis, the injured worker is negotiating in the dark. The carrier knows what the claim is worth to the carrier. The question is whether the worker knows what the claim is worth to the worker. That knowledge requires a thorough evaluation of the medical evidence, the benefit structure, and the future costs. An experienced attorney provides that evaluation.
How Schwartzapfel Holbrook evaluates Section 32 Agreements
At Schwartzapfel Holbrook, we evaluate every Section 32 offer against the full projected value of the claim. That evaluation includes calculating the remaining weekly benefits based on the degree of disability and the applicable durational limits, estimating future medical costs through consultation with the treating physician’s independent clinical findings, assessing the adequacy of any Medicare Set-Aside, and factoring in any outstanding Schedule Loss of Use Awards or third-party claims.
We do not recommend settlement unless the offer adequately accounts for what the worker is giving up. A Section 32 Agreement that looks adequate today must still be adequate five years from now, ten years from now, and beyond. That requires an honest assessment of future medical needs, not an optimistic one. The carrier has a lawyer protecting its interests. Our clients have one protecting theirs.
Schwartzapfel Holbrook / Fighting For You