A workers' compensation compromise and release (C&R) agreement is not enforceable until approved by the Workers' Compensation Appeals Board[1] (LC 5001). Under CCR 10700, the WCAB is affirmatively required to inquire into the adequacy of all C&R agreements and may set a hearing to take evidence when necessary to determine whether a settlement should be approved or disapproved.
When a proposed settlement raises adequacy concerns, a WCJ has several tools available, including issuing an order suspending action (OSA) to request additional information and, if necessary, setting an evidentiary hearing. The scope of what a WCJ may properly require through an OSA, however, and the manner in which adequacy concerns must be addressed, has not always been clearly defined.
On June 24, 2026, the appeals board issued an en banc decision Gaines v. ABM Aviation, Inc. that establishes binding precedent on two questions: what a WCJ must consider in approving a settlement, and what a WCJ may and may not do when the submitted settlement record is inadequate.
Gaines arose from 24 individual cases, all venued at the Van Nuys district office, in which applicants sought removal from similar OSAs issued by the same WCJ on various C&R agreements submitted for approval. The cases involved a wide range of employers, injuries and claimed body parts, but shared a common pattern: Each case was in an early stage of litigation, many with little or no medical reporting, and in each case the parties sought to resolve the claim through a C&R before completing discovery.
Across the 24 cases, the WCJ issued OSAs that went substantially beyond requesting medical records. The judge directed parties either to obtain medical evaluations, or suggested that applicants dismiss their claims with prejudice. The WCJ also requested witness statements, civil lawsuit information, detailed breakdowns of settlement valuations and documentation justifying attorney fee requests.
Applicants filed petitions for removal, contending that the OSAs exceeded the WCJ's scope of review and that a judge reviewing a C&R may consider only whether the settlement is adequate.
The appeals board, by unanimous vote, granted all petitions for removal, ordered consolidation of all the cases and resolved them in a single en banc decision. It rescinded each of the OSAs, disqualified the WCJ from further proceedings in all 24 cases and returned each case to the presiding WCJ for reassignment. It held:
1. A workers' compensation settlement is enforceable only after WCAB approval. In approving a settlement, a WCJ must consider whether the agreement is valid and must determine whether the settlement is adequate in order to protect the injured worker and the public interest.
The appeals board reaffirmed that C&R approval is not ministerial. It explained that an approved C&R has the same force and effect as an award made after a full hearing, and must provide fair compensation equivalent to what the injured worker would expect to receive from an award. Adequacy review serves a dual purpose — protecting injured workers from improvident settlements made under economic pressure or without competent advice, and protecting the public interest by ensuring that payable benefits are not shifted onto public systems such as Medicare, Medi-Cal, EDD or Social Security. Notably, that purpose does not include protecting the interests of an employer.
The appeals board also clarified the scope of the WCAB's jurisdiction: It has authority to approve settlements of claims provided under the Labor Code, but it cannot approve settlements of claims outside the Labor Code. An injured worker must have actual knowledge of the benefits being released and must intend to release those claims. The WCJ may not simply approve any settlement filed, but must independently review the settlement and determine that it is adequate.
2. When the terms of the settlement are inconsistent, do not comply with the Labor Code and/or are inadequate, the WCJ may investigate by issuing an OSA, and if the parties do not provide sufficient information, the judge may hold a hearing to create an evidentiary record that establishes the adequacy of a settlement.
The appeals board explained that the information necessary to support adequacy depends on the facts of each case. The WCJ reviewing a settlement for adequacy must consider a multitude of issues including: valuation of future medical treatment, temporary disability, permanent disability, a supplemental job displacement voucher and death benefits. The WCJ also may consider threshold issues as to whether compensation is due, such as employment, the statute of limitations and affirmative defenses.
The appeals board explained that pursuant to CCR 10700(a), parties should file supporting, relevant medical records at the time they file a settlement. The board emphasized that parties may not withhold relevant medical records nor intentionally or negligently misrepresent that no such medical records exist. Parties also may provide other relevant information to assist the WCJ in determining adequacy including: a statement from the applicant, witness statements, depositions, recorded video of an injury, claim benefit letters including any denial letter or any other information. If the parties fail to provide enough information, the WCJ may obtain the necessary information either through issuance of an OSA, or through a formal hearing.
The appeals board drew a clear distinction between what an OSA may properly accomplish and what it may not. On the permissive side, a WCJ may issue an OSA to request relevant medical records, which regulations now require the parties to file concurrently with a settlement. A WCJ also may properly request supporting materials, civil case information in limited circumstances and documentation supporting a request for attorney fees, and may delay approval until sufficient information is provided.
The appeals board identified several specific errors in the WCJ's approach. One, the judge operated under the misconception that substantial medical evidence is required to support adequacy of a stipulated settlement. It explained that stipulations exist, in part, to obviate the need for evidence. The only requirement is that sufficient information exists in the formal record to support a WCJ's decision on adequacy. Two, the WCJ improperly required parties to obtain medical evaluations within the text of OSAs, without notice or hearing. Any order requiring an applicant to attend an evaluation may issue only after notice to the parties, and no such order may issue within an OSA. If a medical evaluation is ultimately required to determine adequacy, it may be ordered only after an evidentiary hearing establishes the basis for that order. Three, the WCJ improperly directed applicants to dismiss their claims with prejudice as an alternative to obtaining medical evaluations without notice, due process or a hearing record.
The appeals board also noted that the WCJ improperly considered protecting the interest of insured defendants from overpaying claims. It declared that was not within the province of adequacy review. The board explained that if the record indicated that a defendant was overvaluing a claim, the settlement was adequate and should be approved because the purpose of adequacy review is to protect the injured worker and the public interest.
The appeals board also addressed the scope of inquiry into civil lawsuits and attorney fees. It explained that inquiry into related civil cases is appropriate only if a third-party credit issue exists, and must take place on the record. Regarding attorney fees, if the requested fee is disputed, the attorney is entitled to due process to establish its reasonableness, and the WCJ may approve the C&R while holding the disputed fee in trust pending a hearing.
Disqualification
In addition to finding that the WCJ improperly issued OSAs, the appeals board also concluded that the WCJ should be disqualified pursuant to LC 5311 and Code of Civil Procedure section 641(f) and (g). In many of the reports and recommendations, the board found that the WCJ used language expressing unqualified opinions as to the merits of the cases, and reflected a state of mind evincing bias. Specifically, the WCJ described the settlement approval process as a "free cash money handout system," and characterized the Van Nuys WCAB as a "haven" for applicants filing claims statewide for a "get rich quick" scheme.
The appeals board believed those statements, among many others in the record, warranted the judge's disqualification. It reminded the WCJ of her obligation to abide by the Code of Judicial Ethics, and ordered the presiding WCJ to appoint a new judge in each matter.
Gaines is a binding en banc decision, and is therefore precedent on all appeals board panels and WCJs statewide. Its practical significance is substantial for judges and practitioners on both sides of the C&R approval process.
The decision's most operationally important clarification is the distinction between what an OSA may request and what requires a formal hearing. The WCJ expressed legitimate adequacy concerns over early settlements on denied claims with no medical reporting. Gaines does not eliminate a WCJ's ability to scrutinize such settlements. A judge who has adequacy concerns may properly request medical records the regulation requires, and may delay approval until sufficient information is provided. What the WCJ may not do is convert an OSA into an order compelling medical evaluations, demanding dismissal with prejudice or reducing attorney fees, all of which require notice, a hearing and a formal record.
Gaines establishes that the protection of a defendant's interests are not considered in assessing whether a settlement is adequate. Instead, the purpose of adequacy review is to protect the interests of the injured worker and the public. If a WCJ believes a defendant overvalues a claim, the appeals board instructs that it is not the judge's role to protect defendants from the consequences of that deal. The settlement should be deemed adequate and should be approved.
The appeals board's emphasis on the distinction between a stipulation and a judgment is equally significant. The holding that substantial medical evidence is not required to support a stipulated settlement is a direct rebuttal to a practice that, if left unchecked, would effectively require both parties to complete discovery before settling. That would defeat the parties' mutual choice to resolve the claim through compromise. The governing inquiry is adequacy, not evidentiary sufficiency in the trial sense. When the submitted materials do not support a determination that the settlement adequately protects the injured worker, the correct remedy is to request additional information or set a hearing, not to impose an ultimatum.
Gaines confirms that a WCJ cannot use the adequacy review process as a mechanism to force a party into unwanted discovery or to effectively penalize it for choosing to settle without completing the medical-legal process. At the same time, the decision makes clear that the parties bear the burden of providing sufficient information to allow the WCJ to make a meaningful adequacy determination. A cover letter stating that the parties "wish to buy their peace" provides the WCJ with no basis to evaluate adequacy. Practitioners submitting C&Rs without supporting medical evidence should be prepared to provide a statement from the applicant, witness statements, denial letters or other documentation that assists the WCJ in understanding the value and risks informing the settlement.
The disqualification holding, while specific to the conduct of the WCJ in these matters, also carries broader implications. Gaines confirms that a judge's written statements in reports and recommendations on petitions for removal/reconsideration are subject to review for bias and impropriety, and that expressions of unqualified opinion on the merits, whether framed as judicial philosophy or as practical observation, can independently constitute grounds for disqualification.
For further discussion on the approval of compromise and release agreements, see Sullivan on Comp Section 14.78 Compromise and Release — Submission and Adequacy. For further discussion on disqualification of judges, see Section 15.54 Disqualification and Reassignment of Judge.