Albert Matthews settled his workers’ compensation claim with a structured settlement approved by the WCAB. The settlement provided for monthly payments of $2,800 for life, with ten years guaranteed. The employer’s insurer assigned the obligation to make the monthly payments to Liberty Assignment Corporation through a qualified assignment under federal tax law. (26 U.S.C. § 130(c).) The structured settlement agreement provided that the payments to Matthews “cannot be accelerated, deferred, increased or decreased” by Matthews. Liability for the monthly payments was funded through an annuity purchased from Liberty Life Assurance Company.

Three years later, Matthews filed in superior court a request for entry of a clerk’s judgment on the workers’ compensation award, pursuant to Labor Code section 5806. The clerk entered the judgment “in conformity with the Order Approving Compromise & Release.” WC then moved for entry of a qualified order approving assignment of the judgment from Matthews to WC Funding Group, Inc., a factoring company.

WC Funding alleged Matthews and WC entered into an “Agreement to Assign Award,” by which Matthews agreed to convert his workers’ compensation compromise and release into a civil judgment, then assign his right, title, and interest in the judgment to WC Funding. In exchange, he would receive a lump-sum payment of $40,343.34 on court approval of the transaction. He would also receive monthly payments of $1,950 from WC until 2021, when the payments would return to $2,800 per month for life. Matthews stated he would use the lump sum to pay his delinquent mortgage in order to avoid foreclosure on his house.

The trial court denied WC’s motion, concluding that converting the workers’ compensation award to a judgment was prohibited by Labor Code 4900. The Court of Appeal affirmed the dismissal in the published opinion in Matthews v Liberty Assignment Corporation.

Labor Code 4900 provides that “[n]o claim for compensation……is assignable before payment.” The term “claim for compensation” has been interpreted expansively. The Court said it “is evident that the legislature intended that there should be no assignment of claimant’s rights whatsoever and that the award should be paid by the one against whom it was made directly to the claimant and to no one else.”

“Because of the unique nature of workers’ compensation awards and the judgments entered on those awards, we believe a workers’ compensation award is not assignable simply because a judgment on the award has been entered. In a workers’ compensation proceeding, the WCAB may determine all relevant matters and enter an award. (§§ 5301, 5313.) Alternatively, if the parties reach a compromise, the WCAB may approve it and enter an award based on the compromise and release agreement. (§§ 5002, 5003.) WCAB approval is mandatory: “No release of liability or compromise agreement is valid unless it is approved by the appeals board or referee.” (§ 5001.)

The parties to the workers’ compensation proceeding put the terms of their structured settlement into a compromise and release agreement. The WCAB ordered that the compromise and release agreement be approved and entered it as the award to Matthews. Thus, the anti-assignment language became part of the WCAB’s award.