Minnesota Supreme Court: WCCA May Vacate Awards Based on Invalid Workers’ Compensation Settlements and Decide Employee Incapacity Without District Court Referral

Introduction

This decision resolves a recurring and practically significant question in Minnesota workers’ compensation practice: how should the Workers’ Compensation Court of Appeals (WCCA) and compensation judges handle settlements signed by an employee who was allegedly incapacitated at the time, and what forum decides that incapacity question?

The case arises from a 2015 workplace explosion that left employee Bobby Lykins with severe traumatic brain injury and cognitive deficits. In 2017, Lykins signed a “full, final, and complete” workers’ compensation settlement for $438,000 (later supplemented in 2018). After a conservator was appointed for Lykins in 2022, the conservator petitioned the WCCA in 2023 to set aside the awards approving the settlements, alleging either invalidity (because Lykins, allegedly incapacitated, had no conservator at the time) or fraud by omission (failure to submit critical medical records to the compensation judge).

The WCCA agreed more fact-finding was necessary and instructed a compensation judge to determine whether Lykins “appeared” incapacitated when the settlements were signed and, if so, to refer the matter to district court under Minn. Stat. § 176.092, subd. 3. Both sides sought review. The Minnesota Supreme Court affirms the need for fact-finding but vacates the instruction mandating referral to district court, clarifying that workers’ compensation courts have subject-matter jurisdiction to determine incapacity for purposes of settlement validity, and that § 176.092, subd. 3, does not apply when the employee already has a conservator or when the incapacity question is a retrospective one tied to setting aside a settlement.

Summary of the Opinion

The Supreme Court’s key holdings are fourfold:

• The WCCA has discretion under Minn. Stat. § 176.521, subd. 3, to set aside an award “made upon a settlement” if the settlement is invalid under § 176.521, subd. 1(a) (including where a conservator would have been required under § 176.092 but none existed).
• Conservator made a prima facie showing—supported by substantial evidence—that Lykins was an incapacitated person when he signed the agreements.
• Section 176.092, subd. 3 (requiring referral to district court when an employee “appears” incapacitated and has no guardian/conservator) does not apply where the employee already has a conservator or when incapacity is being determined retrospectively in the context of a petition to set aside a settlement.
• Workers’ compensation courts (WCCA and compensation judges) have subject-matter jurisdiction to determine whether an employee was incapacitated at the time of the settlement because the Workers’ Compensation Act incorporates the statutory definition of “incapacitated person.”

Accordingly, the Court affirms the WCCA’s decision to send the case to a compensation judge for fact-finding on incapacity, but vacates the directive that the matter be referred to district court. The compensation judge must determine whether Lykins was an incapacitated person under the 2016 version of Minn. Stat. § 524.5-102, subd. 6 (the version in effect at the time of settlement), and report those findings back to the WCCA for further proceedings.

Analysis

Statutory Framework

• Settlement validity and set-aside authority
  • Section 176.521, subd. 1(a): A workers’ compensation settlement “is not valid if a guardian or conservator is required under section 176.092 and an employee or dependent has no guardian or conservator.”
  • Section 176.521, subd. 2: Settlements may be approved only if “the terms conform with this chapter.”
  • Section 176.521, subd. 3: Upon petition, the WCCA “may set aside an award made upon a settlement, pursuant to this chapter,” and may refer to a compensation judge for a hearing.
• “For cause” reopening
  • Section 176.461 authorizes setting aside an award and granting a new hearing “for cause,” limited to: (1) mutual mistake of fact; (2) newly discovered evidence; (3) fraud; or (4) unanticipated substantial change in medical condition.
• Conservators and incapacity
  • Section 176.092, subd. 1: A conservator is required for an injured employee who is an “incapacitated person,” a term defined by incorporation of Minn. Stat. § 524.5-102, subd. 6.
  • Section 176.092, subd. 3: When in a proceeding before them, it appears that an injured employee is an incapacitated person without a guardian or conservator, the compensation judge or WCCA “shall refer the matter to district court.”
• Fact-finding authority
  • Section 176.381, subd. 1: The WCCA may refer any question of fact to a compensation judge to hear evidence, make findings, and report back to the WCCA.
• Definition of “incapacitated person” as of settlement date
  • Section 524.5-102, subd. 6 (2016 version governs, because settlements must conform to the law at the time they are executed): A person who lacks sufficient understanding or capacity to make or communicate responsible personal decisions and has demonstrated deficits evidencing inability to meet personal needs.

Precedents Cited and Their Influence

• Scope of WCCA authority and standards of review
  • Hudson v. Trillium Staffing: Clarifies the Supreme Court’s review of WCCA orders on petitions to set aside, focusing on consistency with the record.
  • Hengemuhle v. Long Prairie Jaycees: Describes WCCA as a specialized agency; judicial restraint counsels deferring to agency expertise on matters not yet decided below.
  • Lagasse v. Horton and Sershen v. Metropolitan Council: Reinforce that basic fact-finding belongs to the compensation judge; the Supreme Court defers to findings unless manifestly contrary to the evidence.
• Reopening and settlement law
  • Maurer v. Braun’s Locker Plant: Recognizes petitions to set aside for “cause” under § 176.461; here, the Court goes further and clarifies that § 176.521, subd. 3, also allows set-aside for invalidity under § 176.521, subd. 1(a).
  • Monson v. White Bear Mitsubishi: The governing law for reopening must be the law in effect at the time of settlement; applied here to the definition of “incapacitated person.”
• Statutory interpretation
  • State v. Beganovic: Begin with plain meaning; read broadly where the Legislature did not limit language.
  • Buzzell v. Walz and Sterry v. Minnesota Dept. of Corrections: If the Legislature intended a narrower meaning, it could have said so; courts do not impose limitations absent in the text.
  • Botler v. Wagner Greenhouses and General Mills v. Commissioner of Revenue: Courts do not supply omissions or add words to statutes.
  • State v. Fugalli: Avoid strained readings.
  • Nash v. Commissioner of Public Safety: When provisions are enacted together, they inform each other’s meaning; relevant to reading § 176.521, subds. 1(a) and 3 in concert.
  • State v. Robinson: Where one statute incorporates another, the incorporated text functions as if written into the Act.
• Prima facie showings
  • State v. Hinckley and State v. Larson: A prima facie showing requires facts which, if accepted as true, suffice to support the requested relief.
• Jurisdiction and justiciability
  • Musta v. Mendota Heights Dental Center, Hagen v. Venem, Martin v. Morrison Trucking, and Sundby v. City of St. Peter: Workers’ compensation courts have plenary powers on matters arising under the Act, but cannot interpret statutes outside the Act. Here, incapacity under § 176.092 is part of the Act because it incorporates § 524.5-102’s definition, so workers’ compensation courts may resolve it.
  • Winkowski v. Winkowski and Onvoy v. ALLETE: Outline constraints of the case-and-controversy requirement; the district court’s prospective conservatorship powers do not create a justiciable claim about past incapacity for settlement validity. But the workers’ compensation tribunal faces a concrete dispute arising under the Act and may resolve it.
• Policy deference to Legislature
  • Meils v. Northwestern Bell, Profit v. HRT Holdings, and Correa v. Waymouth Farms: Policy concerns about settlement finality and uncertainty are for the Legislature; courts must apply the statute as written.

Legal Reasoning

• 1) WCCA may set aside awards based on invalid settlements under § 176.521, subd. 3

  The Court reads the phrase “may set aside an award made upon a settlement, pursuant to this chapter” in § 176.521, subd. 3, broadly. Limiting that language to the four “for cause” grounds in § 176.461 would render § 176.521, subd. 3, redundant and would deprive § 176.521, subd. 1(a)’s validity requirement of practical effect. Because both provisions were enacted together for the same purpose, the Court gives each provision effect. Thus, the WCCA may set aside an award upon a settlement that is invalid under § 176.521, subd. 1(a), in addition to traditional “for cause” reopenings under § 176.461. The Court expressly leaves open whether the WCCA’s set-aside power extends beyond these two grounds.

• 2) The operative definition of “incapacitated person” is the version in effect at the time of settlement

  Under Monson, settlements must conform to the law at the time. Because § 176.092, subd. 1 incorporates the definition from § 524.5-102, subd. 6, the applicable definition is the one in force in 2017–2018 (the 2016 statutory text). Although the WCCA referenced the later 2022 version, the Court finds no reversible error because the definitions are materially similar and the WCCA’s reasoning applies to both. On remand, the compensation judge must apply the 2016 definition.

• 3) The conservator made a prima facie showing of incapacity at the time of settlement

  The record contains substantial evidence that Lykins had severe cognitive impairments requiring 24/7 supervision (including neuropsychological opinions and the treating physician’s statements), contrary to a defense report estimating 25 hours/week of supervision. The WCCA found there was no dispute that Lykins could not meet personal needs and that there was compelling evidence raising a factual question about his capacity to make responsible decisions. That finding is supported by substantial evidence and not manifestly contrary to the record. Whether conflicting evidence might prevail is for the compensation judge, not for the Supreme Court, at this stage.

• 4) Section 176.092, subd. 3’s referral requirement does not apply here

  By its terms, § 176.092, subd. 3 requires referral to district court only when in a proceeding before the compensation judge or WCCA, the employee appears currently to be an incapacitated person and is without a guardian or conservator. Here, Lykins already has a conservator. And the question is retrospective: whether he was incapacitated at the time of settlement. Therefore, the WCCA erred by instructing a referral to district court. The workers’ compensation forum should decide incapacity for settlement-validity purposes.

• 5) Workers’ compensation courts have subject-matter jurisdiction to decide incapacity in this context

  Because the Act incorporates the “incapacitated person” definition, determining whether § 176.521, subd. 1(a) invalidates a settlement is a question arising under the Act. Workers’ compensation courts have plenary authority to decide such issues. By contrast, a district court referral on past incapacity would likely present a non-justiciable, advisory question in a conservatorship proceeding already concluded in 2022. Thus, the compensation judge must make fact findings on incapacity and report them to the WCCA for final disposition of the set-aside petition.

Impact

• Settlement approval and finality
  • Approval “only if the terms conform” now clearly includes a validity check under § 176.521, subd. 1(a) for employees who appear incapacitated. Settlements executed without a required conservator can be invalid, and awards approving them can be set aside.
  • Employers/insurers and employee counsel must anticipate scrutiny of capacity and should build a record confirming the employee’s ability to understand the settlement or, where warranted, seek conservatorship before settlement.
• Forum and efficiency
  • The decision streamlines proceedings by keeping capacity determinations in-house (compensation judge/WCCA) when the question arises to determine settlement validity. No district court referral is required where the employee already has a conservator or where the incapacity inquiry is retrospective.
• Evidentiary practice and disclosures
  • Although the Court did not reach the fraud-by-omission claim, the opinion underscores the importance of filing pertinent medical evidence with a proposed settlement to facilitate lawful approval. Omitting material records that bear on capacity exposes settlements to challenge.
• Temporal rule-application
  • Practitioners must use the version of the incorporated definition of “incapacitated person” in effect at the time the settlement was signed. This temporal anchoring applies more broadly to other incorporated definitions affecting settlement validity.
• Practical compliance and risk mitigation
  • Expect increased pre-settlement capacity evaluations in cases with cognitive injuries, and more frequent appointment of conservators to avoid collateral attacks on settlement validity.
  • Compensation judges may more frequently request supplemental medical documentation addressing the employee’s decision-making capacity before approving “full, final, and complete” settlements covering long-term care benefits, home nursing, or other complex future entitlements.

Complex Concepts Simplified

• Incapacitated person: Under the 2016 definition incorporated into the Workers’ Compensation Act, someone who lacks sufficient understanding or capacity to make or communicate responsible personal decisions and has behavioral deficits evidencing inability to meet personal needs.
• Conservator: A person appointed by a district court to make decisions for someone who is an incapacitated person. For workers’ compensation settlements, a conservator is required if the employee is incapacitated.
• Settlement “validity” versus “for cause” reopening:
  • Validity: Even if a settlement was approved, the award can be set aside if the underlying settlement was not valid under § 176.521, subd. 1(a) (e.g., no conservator when required).
  • For cause: Independently, awards can be set aside for the four enumerated “for cause” reasons in § 176.461: mutual mistake, newly discovered evidence, fraud, or unanticipated substantial change in medical condition.
• Prima facie showing: An initial threshold showing that, if the facts are taken as true, would entitle the petitioner to relief. It does not resolve conflicts in evidence, which are decided at an evidentiary hearing.
• Roraff and excess fees: Roraff fees compensate counsel for recovery of medical benefits; “excess fees” are attorney fees above statutory contingency caps, sometimes warranted by case complexity or extraordinary lawyer effort.
• Subject-matter jurisdiction: The tribunal’s legal authority to decide a kind of dispute. Here, because the incapacity definition is incorporated into the Workers’ Compensation Act, workers’ compensation courts have jurisdiction to decide incapacity for settlement-validity purposes.
• Referral to district court under § 176.092, subd. 3: Required only when, in a current workers’ compensation proceeding, the employee appears incapacitated and lacks a guardian/conservator. It does not govern retrospective capacity determinations if a conservator is already in place.

Practice Guidance and Procedural Roadmap

• For compensation judges and the WCCA:
  • When incapacity at the time of settlement is credibly alleged, refer to a compensation judge for fact-finding under § 176.381 or § 176.521, subd. 3.
  • Apply the definition of “incapacitated person” in effect when the settlement was executed (here, the 2016 definition).
  • Do not refer to district court under § 176.092, subd. 3 if the employee already has a conservator or when the incapacity question is retrospective.
• For counsel and claims administrators:
  • Screen for capacity when negotiating settlements involving serious cognitive injuries. If in doubt, seek conservatorship before settlement.
  • Submit pertinent medical and neuropsychological records with the settlement for approval; document the employee’s understanding of the settlement’s nature and consequences (e.g., colloquy, affidavits).
  • Be cautious with “full, final, and complete” stipulations that close future care (e.g., 24/7 nursing): ensure capacity is addressed to preserve finality.
• On remand in this case:
  • The compensation judge must hold an evidentiary hearing and decide whether Lykins met the 2016 definition of “incapacitated person” when he signed the 2017 and 2018 agreements.
  • Those findings return to the WCCA, which will then decide whether to set aside the awards on invalidity grounds; the WCCA may also reach the separate fraud-by-omission claim under § 176.461 if necessary.

Key Unresolved Questions

• Whether the WCCA’s § 176.521, subd. 3 set-aside authority extends beyond invalidity under § 176.521, subd. 1(a) and the “for cause” grounds in § 176.461 remains open.
• The Supreme Court did not decide the merits of the alleged fraud-by-omission claim regarding failure to submit medical reports with the settlement proposal; that issue may be reached on remand.
• How compensation judges will operationalize capacity inquiries pre-approval (e.g., standards of proof, acceptable documentation) will likely develop case by case.

Conclusion

This decision sets two important precedents for Minnesota workers’ compensation practice.

• First, it confirms that the WCCA may set aside an award approving a settlement if the settlement was invalid under § 176.521, subd. 1(a), not only for the four “for cause” grounds in § 176.461.
• Second, it locates the determination of an employee’s incapacity for settlement-validity purposes squarely within the workers’ compensation system, obviating a district court referral when the employee already has a conservator and the question is retrospective.

By clarifying that the operative definition of “incapacitated person” is the one in effect on the date of settlement and by insisting on robust fact-finding before unwinding any award, the Court balances settlement finality with statutory safeguards for vulnerable employees. The opinion’s practical message is clear: where cognitive impairment is credibly in play, capacity must be addressed explicitly at the settlement stage—or the purported finality of the award will be at risk.