Can employers forfeit their right to third-party settlement offsets in workers' compensation cases? Sysco v. Labor Commission Explained

In Sysco v. Labor Commission, the Utah Court of Appeals addressed whether an employer can forfeit its right to seek third-party settlement offsets against workers’ compensation benefits by failing to raise the issue during the underlying benefits adjudication.

Background and Facts

Paul Roberts sustained injuries in four work-related automobile accidents between 2005 and 2014 while employed by Sysco Corporation. Roberts successfully recovered damages from third parties in civil lawsuits related to three of the accidents and was later awarded permanent total disability benefits by the Labor Commission. During discovery on the PTD claim, Sysco sought information about Roberts’s third-party settlements and filed motions to compel, which the administrative law judge denied. Crucially, Sysco never raised the issue of offsets during the benefits adjudication itself, only filing a motion to compel regarding settlement information after the Commission awarded benefits.

Key Legal Issues

The court addressed two primary issues: (1) whether the Labor Commission had jurisdiction to determine that Sysco forfeited its right to seek offsets, and (2) whether Sysco actually forfeited that right by failing to raise the offset issue during the benefits adjudication.

Court’s Analysis and Holding

The court distinguished between waiver and forfeiture, explaining that forfeiture is the failure to make timely assertion of a right, while waiver is the intentional relinquishment of a known right. The court held that parties have an obligation to raise all issues that could have been presented before the Commission, and those not raised are forfeited. Since Roberts had entered into settlements long before filing his PTD claim, Sysco had the opportunity to raise offset issues during the benefits adjudication but failed to do so. The court rejected Sysco’s argument that its discovery attempts preserved the offset issue.

Practice Implications

This decision underscores the importance of raising all potential offset claims during the initial workers’ compensation proceedings. Employers cannot rely solely on discovery efforts to preserve their rights to third-party settlement offsets. The ruling clarifies that the Labor Commission has fact-finding authority and can adjudicate issues in the first instance, unlike appellate courts. Practitioners should ensure that offset issues are explicitly raised and litigated during the benefits adjudication rather than attempting to pursue them post-award.