Third-Party Claims in California Workers' Compensation

What is a Third-Party Claim?

While workers' compensation is typically your exclusive remedy against your employer for work-related injuries, California law allows you to pursue a separate civil lawsuit against any third party whose negligence caused or contributed to your injury.

A third party is anyone other than your employer or a co-worker acting within the scope of their employment. This could include:

• Negligent drivers who cause accidents while you're working
• Property owners who maintain unsafe premises
• Manufacturers of defective equipment or tools
• Subcontractors on a job site
• Architects or engineers whose negligent designs cause injury
• Medical providers who commit malpractice

Key California Labor Code Sections (LC 3850-3864)

Labor Code Section 3850 - Definitions

Defines key terms including "employer" (which includes the employer's workers' compensation insurer), "employee," and "compensation" (all benefits and payments provided under the workers' compensation system).

Labor Code Section 3852 - Right to Sue Third Parties

This is your fundamental right. Your workers' compensation claim does not affect your right to sue any third party for all damages proximately resulting from your injury. You can pursue both workers' compensation benefits AND a civil lawsuit against the responsible third party.

Labor Code Section 3853 - Employer's Right to Intervene

If you bring a lawsuit against a third party, your employer (or their insurance company) has the right to intervene in your case to protect their interest in recovering the workers' compensation benefits they paid on your behalf.

Labor Code Section 3854 - Employer's Independent Right to Sue

If you don't sue the third party within one year after your injury, your employer gains the right to sue the third party directly to recover the compensation benefits paid to you.

Labor Code Section 3856 - Allocation of Recovery

When you recover money from a third party, the proceeds are allocated as follows:

1. First: Reasonable litigation expenses and attorney fees
2. Second: The employer's lien for workers' compensation benefits paid
3. Third: The remainder goes to you (the injured worker)

Labor Code Section 3858 - Employer's Credit Against Future Benefits

After the employer's lien is paid, the employer is relieved from paying further workers' compensation benefits up to the amount of your remaining recovery. This prevents double recovery while ensuring you benefit from pursuing the third-party claim.

Labor Code Section 3859 - Settlement Requirements

Important: No settlement with a third party is valid without written consent from both you and your employer. However, you may settle without employer consent if your settlement adequately compensates the employer for their lien.

Labor Code Section 3860 - Employer Notice Requirements

When you or your employer files a lawsuit against a third party, you must give written notice to the other party. This ensures all interested parties can protect their rights.

Labor Code Section 3861 - Credit Determination

The Workers' Compensation Appeals Board (WCAB) determines the credit the employer receives against future benefits based on your third-party recovery.

Labor Code Section 3864 - Protection from Contribution Claims

A third party who is sued cannot seek indemnity or contribution from your employer (unless there was a pre-injury written agreement). This protects employers from being dragged into lawsuits by the third parties who actually caused the injury.

Understanding Subrogation

Subrogation is the employer's legal right to recover workers' compensation benefits paid to you from the third party who caused your injury. There are three ways an employer can exercise subrogation rights:

1. Direct Action: Sue the third party directly under LC 3852 and 3854
2. Intervention: Join your lawsuit against the third party under LC 3853
3. Lien Claim: Assert a lien against any recovery you obtain from the third party

The employer's subrogation claim includes all "compensation" paid - this encompasses temporary disability, permanent disability, medical expenses, and any other benefits provided under the workers' compensation system.

Employer Liens on Your Recovery

When you recover money from a third party, the employer has a lien (a legal right to be paid) for the workers' compensation benefits they have paid. Key points about employer liens:

• What's Included: Medical expenses, temporary disability, permanent disability, vocational rehabilitation, and all other compensation benefits
• Attorney Fees Deduction: The employer's lien is reduced by their proportionate share of your attorney fees and litigation costs (LC 3856)
• Enforcement: The employer can enforce their lien against the third party or against you if you've already received the settlement (LC 3862)

Credit Against Future Benefits

After your third-party recovery, the employer receives a credit against their obligation to pay future workers' compensation benefits. This is governed by LC 3858 and LC 3861.

How the Credit Works:

1. Your total third-party recovery is calculated
2. Attorney fees and litigation costs are deducted
3. The employer's lien for past benefits is satisfied
4. The remaining balance becomes a credit against future benefits

Effect on Future Benefits:

The credit applies to ALL future workers' compensation benefits, including:

• Future permanent disability payments
• Future medical treatment
• Supplemental job displacement benefits
• Any other future compensation

Common Third-Party Claim Scenarios

Motor Vehicle Accidents

If you're injured in a car accident while working (delivering goods, traveling between job sites, etc.) by another driver's negligence, you can sue that driver while also receiving workers' compensation.

Defective Products

If a machine, tool, or piece of equipment malfunctions and causes your injury, you may have a product liability claim against the manufacturer, designer, or distributor.

Premises Liability

If you're injured at a location owned or controlled by someone other than your employer (such as a client's property), the property owner may be liable for unsafe conditions.

Toxic Exposure

If you're exposed to toxic chemicals manufactured by a third party, you may have claims against the chemical manufacturer in addition to workers' compensation.