John Pike, who had filed for the compensation from the University of California system, also cited the stress he endured from death threats he received after the incident. Pike was fired in July 2012, after being on paid administrative leave for eight months.
"This case has been resolved in accordance with state law and processes on workers' compensation," UC Davis spokesman Andy Fell said in a statement.
The settlement, first detailed by the Davis Enterprise newspaper, was approved by an administrative law judge last week. A psychiatrist in the case rated Pike’s disability as moderate and said the former officer faced “significant emotional upheavals,” according to the newspaper.
In an online video that went viral, Pike was shown spraying the seated demonstrators close to their faces while they offered no resistance. The Nov. 18, 2011, spraying provoked outrage on campus and around the UC system, and a public task force investigation found that Pike’s action was unwarranted.
Settling a civil lawsuit, the UC system last year agreed to pay damages of $30,000 to each of the 21 UC Davis students and alumni who were pepper-sprayed during the otherwise peaceful protest related to the Occupy movement.