Senate BillChaptered/SignedLabor
SB 487: Workers’ compensation.
What SB 487 does, verified December 8, 2025
This bill aims to provide better compensation for injured peace officers and firefighters. When an injured employee is a peace officer or firefighter, the employer will only receive up to one-third of the third-party defendant's liability insurance policy limit if the employee's damages exceed the employer's claim and the insurance limits are insufficient. The bill limits an employer's right to reimbursement, subrogation, or lien to the maximum recovery threshold. An employer cannot use the injured employee's future workers' compensation benefits as a credit or offset against the employee's claim. The bill also requires any settlement or release to limit the employer's claim for reimbursement to the portion not allocated to the employee. These provisions only apply to certain local employees, such as those working for cities, counties, or other local entities.
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Last action: Chaptered by Secretary of State. Chapter 763, Statutes of 2025. (2025-10-13)Alert me
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| Oct. 13, 2025 | Chaptered by Secretary of State. Chapter 763, Statutes of 2025. |
| Oct. 13, 2025 | Approved by the Governor. |
| Sep. 23, 2025 | Enrolled and presented to the Governor at 2 p.m. |
| Sep. 13, 2025 | Assembly amendments concurred in. (Ayes 37. Noes 0. Page 3023.) Ordered to engrossing and enrolling. |
| Sep. 12, 2025 | Read third time. Passed. (Ayes 72. Noes 0. Page 3392.) Ordered to the Senate. |
Latest bill textChaptered version, October 13, 2025 · 2,342 words
Senate Bill No. 487
CHAPTER 763
An act to amend Sections 3852, 3858, 3859, 3860, 3861, and 3862 of the Labor Code, relating to workers’ compensation.
[ Approved by Governor October 13, 2025. Filed with Secretary of State October 13, 2025. ]
LEGISLATIVE COUNSEL'S DIGEST
SB 487, Grayson. Workers’ compensation.
Existing law establishes a workers’ compensation system, administered by the Administrative Director of the Division of Workers’ Compensation, to compensate an employee for injuries sustained in the course of employment. Existing law requires an employer to provide all medical services reasonably required to cure or relieve the injured worker from the effects of the injury. Existing law establishes a Workers’ Compensation Appeals Board and sets forth various proceedings that are required to be brought forth before the board.
Existing law authorizes an employer who pays or becomes obligated to pay compensation, salary in lieu of compensation, or an amount to the Department of Industrial Relations to make a claim or bring an action against a third person who caused the injury or death of an employee that gave rise to the employer’s obligations. Existing law relieves the employer from an obligation to pay further compensation to or on behalf of the employee if the employer has paid litigation expenses, attorney’s fees, and the employer’s lien. Existing law requires any release or settlement of a claim to include notice to both the employer and employee, as specified, and the written consent of both the employer and employee, in order for the release or settlement to be valid. Existing law authorizes the appeals board to credit the employer with an amount equal to the recovery by the employee that has not been applied to certain expenses, to be applied against the employer’s liability for compensation, as specified. Existing law authorizes an employer to enforce payment of a lien against a third party, or against the employee, if damages have been paid to the employee, in the manner provided for enforcement of money judgments.
This bill would state that when the injured employee is a peace officer, as defined, or a firefighter, the employer will be entitled to receive no more than 1/3 of the third-party defendant’s liability insurance policy limit, if the employee establishes that their total damages exceed the net recovery after satisfaction of the employer’s claim and that the total liability insurance limits available are insufficient to fully compensate the employer and employee’s proven damages. The bill would limit an employer’s right to reimbursement, subrogation, or lien to the maximum recovery threshold, as specified. The bill would prohibit an employer from asserting any recovery by one of these injured employees as a credit or offset against future workers’ compensation benefits and would require a settlement or release to limit an employer’s claim for reimbursement to the portion of the settlement not allocated to the employee pursuant to these provisions. The bill would limit these provisions to those peace officers and firefighters who are employed by certain local entities, such as a city or county, among others.
The people of the State of California do enact as follows:
SECTION 1.
Section 3852 of the Labor Code is amended to read:3852.
(a) The claim of an employee, including, but not limited to, any peace officer or firefighter, for compensation does not affect their claim or right of action for all damages proximately resulting from the injury or death against any person other than the employer. Except as provided in subdivision (b), an employer who pays, or becomes obligated to pay compensation, or who pays, or becomes obligated to pay salary in lieu of compensation, or who pays or becomes obligated to pay an amount to the Department of Industrial Relations pursuant to Section 4706.5, may likewise make a claim or bring an action against the third person. In the latter event the employer may recover in the same suit, in addition to the total amount of compensation, damages for which they were liable including all salary, wage, pension, or other emolument paid to the employee or to their dependents. The respective rights against the third person of the heirs of an employee claiming under Section 377.60 of the Code of Civil Procedure, and an employer claiming pursuant to this section, shall be determined by the court.(b) (1) This subdivision applies only to an employee who is a peace officer, as defined in Chapter 4.5 (commencing with Section 830) of Title 3 of Part 2 of the Penal Code, or a firefighter who is employed by any of the following:
(A) A city.
(B) A county.
(C) A city and county.
(D) A fire protection district.
(2) An employer of an employee described in paragraph (1) shall be entitled to receive no more than one-third of a third-party defendant’s applicable liability insurance policy limits, if both of the following are true:
(A) The employee establishes that their total damages exceed the net recovery available after satisfaction of the employer’s claim.
(B) The total liability insurance limits available are insufficient to fully compensate the employer and employee’s proven damages.
(3) The one-third maximum allocation under this subdivision is intended to reflect a fair and equitable share of the recovery in light of the injured employee’s total damages, attorney’s fees, and costs of suit, and shall be deemed exclusive of any lien or offset by the employer.
(4) The employer’s right to reimbursement or subrogation shall be subordinate to the maximum allocation set forth in this subdivision. The maximum allocation to the employer described in this subdivision shall apply to all settlement agreements and judgments and shall take precedence over any employer lien or subrogation claim. Any remaining proceeds may then be allocated in accordance with existing lien and subrogation principles.
SEC. 2.
Section 3858 of the Labor Code is amended to read:3858.
(a) Except as provided in subdivision (b), after payment of litigation expenses and attorney’s fees fixed by the court pursuant to Section 3856 and payment of the employer’s lien, the employer shall be relieved from the obligation to pay further compensation to or on behalf of the employee under this division up to the entire amount of the balance of the judgment, if satisfied, without any deduction. No satisfaction of such judgment in whole or in part, shall be valid without giving the employer notice and a reasonable opportunity to perfect and satisfy their lien.(b) In any case governed by subdivision (b) of Section 3852, the employer’s lien or subrogation rights shall be limited to the portion of the recovery allocated to the employer and the employer shall have no right to assert any credit or offset against future workers’ compensation benefits owed to the employee, including, but not limited to, temporary disability, permanent disability, medical treatment, or vocational rehabilitation. The recovery allocated to the employer under subdivision (b) of Section 3852 shall not affect or diminish the employer’s obligation to provide any compensation under this division.
SEC. 3.
Section 3859 of the Labor Code is amended to read:3859.
(a) (1) Except as provided in paragraph (2), a release or settlement of any claim under this chapter as to either the employee or the employer is not valid without the written consent of both. Proof of service filed with the court is sufficient in any action or proceeding where such approval is required by law.(2) The written consent of the employer is not required in a claim that is subject to subdivision (b) of Section 3852.
(b) (1) Notwithstanding anything to the contrary contained in this chapter, an employee may settle and release any claim they may have against a third party without the consent of the employer. Except as provided in paragraph (2), a settlement or release shall be subject to the employer’s right to proceed to recover compensation they have paid in accordance with Section 3852.
(2) In any case governed by subdivision (b) of Section 3852, a settlement or release shall limit the employer’s claim for reimbursement to the portion of the settlement allocated to the employer pursuant to subdivision (b) of Section 3852.
SEC. 4.
Section 3860 of the Labor Code is amended to read:3860.
(a) (1) Except as provided in paragraph (2), a release or settlement under this chapter, with or without suit, is not valid or binding as to any party thereto without notice to both the employer and the employee, with opportunity to the employer to recover the amount of compensation the employer has paid or become obligated to pay and any special damages to which the employer may be entitled under Section 3852, and opportunity to the employee to recover all damages the employee has suffered and with provision for determination of expenses and attorney’s fees as herein provided.(2) If the employee is a peace officer, as defined in Chapter 4.5 (commencing with Section 830) of Title 3 of Part 2 of the Penal Code, or a firefighter, a release or settlement, with or without suit, subject to subdivision (b) of Section 3852, is not valid or binding unless it provides that the employer shall not receive more than one-third of the third-party insurance limits.
(b) (1) Except as provided in paragraph (2) and Section 3859, the entire amount of the settlement, with or without suit, is subject to the employer’s full claim for reimbursement for compensation the employer has paid or become obligated to pay and any special damages to which the employer may be entitled under Section 3852, together with expenses and attorney’s fees, if any, subject to the limitations in this section set forth.
(2) Pursuant to subdivision (b) of Section 3852, the employer’s claim for reimbursement shall be limited to the portion of the settlement allocated to the employer. The employer shall have no right to assert any credit or offset against future workers’ compensation benefits.
(c) If settlement is effected, with or without suit, solely through the efforts of the employee’s attorney, then prior to the reimbursement of the employer, as provided in subdivision (b) hereof, there shall be deducted from the amount of the settlement the reasonable expenses incurred in effecting settlement, including costs of suit, if any, together with reasonable attorney’s fees to be paid to the employee’s attorney, for services rendered in securing and effecting settlement for the benefit of both the employer and the employee.
(d) If settlement is effected, with or without suit, solely through the efforts of the employer’s attorney, then, prior to the reimbursement of the employer as provided in subdivision (b) hereof, there shall be deducted from the amount of the settlement the reasonable expenses incurred in effecting settlement, including costs of suit, if any, together with reasonable attorney’s fees to be paid to the employer’s attorney, for services rendered in securing and effecting settlement for the benefit of both the employer and the employee.
(e) If both the employer and the employee are represented by the same agreed attorney or by separate attorneys in effecting a settlement, with or without suit, prior to reimbursement of the employer, as provided in subdivision (b) hereof, there shall be deducted from the amount of the settlement the reasonable expenses incurred by both the employer and the employee or on behalf of either, including costs of suit, if any, together with reasonable attorney’s fees to be paid to the respective attorneys for the employer and the employee, based upon the respective services rendered in securing and effecting settlement for the benefit of the party represented. If both parties are represented by the same attorney, by agreement, the attorney’s fees shall be based on the services rendered for the benefit of both.
(f) The amount of expenses and attorney’s fees referred to in this section shall, on settlement of suit, or on any settlement requiring court approval, be set by the court. In all other cases these amounts shall be set by the appeals board. If the employer and the employee are represented by separate attorneys they may propose to the court or the appeals board, for consideration and determination, the amount and division of those expenses and fees.
SEC. 5.
Section 3861 of the Labor Code is amended to read:3861.
(a) Except as provided in subdivision (b), the appeals board is empowered to and shall allow, as a credit to the employer to be applied against their liability for compensation, such amount of any recovery by the employee for their injury, either by settlement or after judgment, as has not theretofore been applied to the payment of expenses or attorneys’ fees, pursuant to the provisions of Sections 3856, 3858, and 3860, or has not been applied to reimburse the employer.(b) In a claim subject to subdivision (b) of Section 3852, the employer shall not assert, claim, or enforce any credit or offset against any future workers’ compensation benefits, including, but not limited to, future indemnity, medical, and vocational rehabilitation benefits, based on the employee’s civil recovery from a third-party tortfeasor. The appeals board is not empowered and shall not allow such a credit to be applied to the employer.
SEC. 6.
Section 3862 of the Labor Code is amended to read:3862.
(a) Except as provided in subdivision (b), an employer entitled to and who has been allowed and has perfected a lien upon the judgment or award in favor of an employee against any third party for damages occasioned to the same employer by payment of compensation, expenses of medical treatment, and any other charges under this act, may enforce payment of the lien against the third party, or, in case the damages recovered by the employee have been paid to the employee, against the employee to the extent of the lien, in the manner provided for enforcement of money judgments generally.(b) Pursuant to subdivision (b) of Section 3852, the employer’s claim for reimbursement shall be limited to the portion of the settlement allocated to the employer. The employer shall have no right to assert any credit or offset against future workers’ compensation benefits.
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