What Is a Commutation in a California Workers’ Compensation Case?

In a California workers’ compensation case, a commutation refers to the process of converting future disability payments into a lump-sum payment. This means the injured worker receives a portion of their award all at once instead of through weekly or biweekly payments.

Commutations must be approved by a workers’ compensation judge and are typically used in limited situations where the lump sum serves a clear financial purpose.

When Is a Commutation Used?

A commutation may be granted when the injured worker demonstrates a need for immediate access to funds. This may include:

• Paying off medical expenses or debts
• Covering the cost of home or vehicle modifications due to the injury
• Addressing financial hardship due to reduced work capacity

The judge will review whether the commutation is in the best interest of the injured worker and whether it will leave them financially stable in the long term.

Types of Commutations

There are two types of commutations in California workers’ compensation cases:

• Total commutation – All remaining permanent disability payments are paid at once
• Partial commutation – Only a portion of the future payments is paid up front, and the rest continues as scheduled

Commutations are calculated based on the present value of future payments, and an appropriate discount rate is applied to account for the early payout.

How Is a Commutation Different from a Compromise and Release?

A commutation applies to an already awarded benefit, usually permanent disability, where the worker is simply requesting early payment of future installments.

A Compromise and Release (C&R), on the other hand, is a settlement agreement in which the injured worker agrees to close the case in exchange for a lump sum that typically includes medical and disability benefits.

In short, a commutation does not close the case or end medical care rights, it only affects how disability payments are received.

Do You Need a Judge’s Approval for a Commutation?

Yes. A commutation requires a formal request and must be approved by a workers’ compensation judge. The judge will consider:

• The reason for the request
• Whether the injured worker is represented by an attorney
• The financial impact on the worker
• Whether the commutation is consistent with the worker’s best interests

Need Help Requesting a Commutation?

If you are considering a commutation to meet immediate financial needs, it is important to understand the legal and financial implications. The Law Offices of Norman J. Homen can help determine whether a commutation is appropriate and guide you through the process. Contact us today for a free consultation.