Assignment of Employee’s Action Against Third Party
When an employee is injured in the course of his employment and thereby entitled to bring a cause of action against a third party, the right to pursue such action can be assigned to the employer or its workers’ compensation carrier. The key to assignment in many jurisdictions is the actual payment of workers’ compensation, while other states require a “claim” for compensation. Once the requisite criterion is satisfied, the employer is subrogated to all the rights of the employee.
Even though the employer voluntarily pays workers’ compensation to the employee, the assignment of the third-party claim remains unaffected; a formal compensation award is required to effect an assignment to the employer in the majority of jurisdictions. To obtain a “formal” award, the employee is not required to contest the matter. A compensation award can be entered based on an agreement between the parties.
The assignment laws vary by state. For example, some states have determined that an employer’s payment into a “death without dependents” fund is not compensation that affects the question of assignment; other states hold otherwise. Additionally, if the employer recovers a sum from the third party that covers the compensation benefits paid to the employee, the amount paid for the employee’s medical benefits, and the costs of pursuing the recovery against the third party, a portion of any excess is to be paid to the injured employee.