Monday, December 26, 2011, 09:49 AM - Understanding the CA WC systemWhat were the top 10 developments in California workers' comp in 2011?2011 was not a blockbuster year in California workers' comp, although a few things do stand out. Here's my list, in no particular order:
1. TRANSITION FROM SCHWARZENEGGER ADMINISTRATION TO THE JERRY BROWN APPPOINTED DIR/DWC
In 2011 Brown appointees Christine Baker and Rosa Moran took the reins at the Department of Industrial Relations and the Division of Workers' Compensation respectively. Inheriting a slew of immediate problems including difficulties with EAMS, lack of staffing at some WCAB district offices, and the Medical Unit, Baker and Moran have launched some initiatives to tackle these problems, but with money in short supply, solutions may be incremental. 2011 did not see much activity on the rulemaking front, and a number of the Schwarzenegger Administration's 12-point cost saving measures remain in limbo.
At year's end it was unclear whether in 2012 the DIR/DWC will move aggressively on various systemic cost-savings issues or whether the DIR/DWC will hold back to see if stakeholders can hammer out a deal.
Several bills that Brown signed will require DWC implementation (see below).
Meanwhile, over at the WCAB, Brown appointed Commissioner Ronnie
Caplane to be the Chairperson of the WCAB, succeeding outgoing Chair Joe Miller. As Caplane became chair the WCAB had a number of empty commissioner slots, and at year's end it was not clear how quickly Brown would act to fill those slots.
2. MEAGER CHANGES FOLLOW 2011 LEGISLATIVE SESSION
Injured workers and labor advocates who hoped the Governor would sign significant legislation in 2011 remedying injustices from SB 899 were disappointed.
Brown vetoed bills that would have simplified the job retraining voucher process (AB 211) , prohibited discrimination in apportionment determinations (AB 1155) , allowed workers under specified circumstances to draw more than 104 weeks of TTD if they were recuperating from surgery (AB 947), and have required that utilization reviews be done by California doctors (AB 584).
Brown did sign bills requiring the DWC to develop a voc rehab expert fee schedule (AB 1168), requiring the DWC to develop streamlined notices
(AB 335), requiring the DWC to regulate the allowable costs of compounded medications (AB 378), and requiring proof of workers' comp coverage when renewing a contractors license (AB 397).
In casting his vetoes, Brown specifically noted that some of these changes would be approved only as part of a broader overall reform.
3. PREMIUM RATES APPEAR TO BE RELATIVELY STABLE AFTER INSURANCE COMMISSIONER AND WCIRB ADOPT NEW ADVISORY RATE METHODOLOGY
2011 was the first year in which the California Department of Insurance and the WCIRB used a new methodology to determine the advisory "pure premium rate". California Insurance Commissioner Dave Jones adopted $2.33 as an advisory pure premium rate and noted that the
"average filed pure premium rate" in early 2011 was $2.37 per $100 of payroll and the "average charge rate" was $2.38 per $100 of payroll, down from 2003 average charged rates of $6.29 per $100 of payroll.
While rate-setting changes may result in increases for some employee classifications, it appears that rates paid by employers overall have remained very stable at a time that the California economy was weak.
Also noteworthy was news by the WCIRB that the calendar loss ration for the first 9 months of 2011 had decreased from the 2010 calendar loss ratio.
For a link to a post on the topic of rate trends , see "Proof in the Pudding":
http://workerscompzone.com/index.php?m= ... 109-213717
Also adding cheer for California employers was a 28% reduction in assessments authorized by Labor Code 62.5 and 62.6. These assessments fund the Workers' Compensation Administration Fund, the UEBTF, the SIF fund, Cal-OSHA, Labor Standards enforcement and the Workers' Comp Fraud Account. According to the DIR, reduction in assessments were "acieved through fiscal controls put in place by Governor Brown".
4. TRANSITION AND TURMOIL AT STATE COMPENSATION INSURANCE FUND CONTINUES
At SCIF, transition and turmoil continued. Early in 2011 SCIF announced plans to lay off up to 1,800 workers, a move contested by SEIU Local 1000. Later in the year a severance agreement was reached between SCIF and the union that represents many SCIF employees.
Overall, staff morale at SCIF plunged to new lows as SCIF leadership made moves to trim costs and staff and close various offices.
At year's end SCIF announced a $50 million dividend for policyholders, its first since 2001.
5. WCAB VALDEZ DECISION REINFORCES TREND TOWARD INCREASING USE OF MEDICAL PROVIDER NETWORKS
A 2011 study by the California Workers Compensation Institute showed that usage of medical provider networks (MPNs) had continued to rise since 2004.
Meanwhile, an en banc ruling from the WCAB, Elayne Valdez v. Warehouse Demo Services, found that where unauthorized treatment is obtained outside a validly established and properly noticed MPN, reports from the non-MPN doctors are inadmissible, and may not be relied on.
Here is a link to my initial Valdez post:
http://workerscompzone.com/index.php?en ... 420-223325
But despite Valdez, in Southern California many applicant attorneys continue to circumvent MPNs based on carrier non-compliance with MPN regulations. A midyear seminar at the CAAA convention discussed dozens of scenarios where MPNs might be found out of regulatory compliance, enabling applicant to "take control" and choose a non-network provider. Still, at year''s end it appears that Valdez will likely trip up those applicant attorney practice models that routinely attempt to circumvent MPNs.
6. MANDATED REVISION OF PERMANENT DISABILITY SCHEDULE STILL NOT ACCOMPLISHED
By statute, California's permanent disability rating schedule is supposed to be revised every five years. In 2010 the Schwarzenegger Administration declined to adopt a revise of the 2005 PDRS, citing the fragile California economy.
Although the DWC may now be allocating some staff resources to the issue, 2011 saw no public leadership by the DIR/DWC on the issue. Various stakeholder groups have met with the DIR/DWC to discuss possible cost savings.
At year's end it was still unclear whether the DIR/DWC would take the lead in outlining its vision of a plan for cost-savings that would fund a PD increase or whether nothing will be done until a stakeholder consensus emerges.
7. LIEN BACKLOG CONTINUES TO PLAGUE CALIFORNIA SYSTEM
Lien backlogs continued to choke the California WCAB district offices at several California boards, principally in Southern California. The issue has been studied by CHSWC staff, which presented a comprehensive report on the scope of the problem that was adopted by CHSWC in January 2011. The CHSWC report included 28 recommendations for dealing with the problem of liens.
SB 863 (Lieu), a bill to tighten limitations periods on liens, did not make it through the legislative gauntlet.
As 2011 ends it is not clear what the DIR/DWC intends to do on many of the CHWSC recommendations. Proposed rulemaking by the WCAB has not been finalized:
8. EMPLOYERS WIN IN COURT ON COLA ISSUE
In 2011 the California Supreme Court issued an opinion in Baker vs. WCAB (formerly known as Duncan v. WCAB and before that as the XYZZ case), handing injured workers a defeat. At issue was the proper interpretation of California's COLA statute, Labor Code 4659(c) which applies a COLA to injuries after 1/1/03 where the worker is 70% disabled or above (i.e. permanent total or eligible for a "life pension" as disabled between 70% and 99%). Here is a link to my post on the case:
http://workerscompzone.com/index.php?en ... 811-121111
9. WORKERS PREVAIL IN COURT IN OGILVIE CASE
Advocates for disabled workers scored a win at the California Court of Appeals, First District in the case of Ogilvie v. City and County of San Francisco. The issue was over whether the "adjustment factor" in the 2005 PDRS could be rebutted by vocational testimony and whether the court would uphold the formula for doing so adopted by the WCAB in its en banc Ogilvie II decision.
Under the decision by the Court of Appeals, First District, the schedule can be rebutted by showing a factual error in calculation the rating formula, by showing the omission of medical complications in the preparation of the schedule, or by demonstrating a greater loss of future earning capacity than reflected in the scheduled rating. In so holding, the Court equated the pre SB 899 standard of lack of ability to compete in the open labor market with the SB 899 standard of diminished future earning capacity.
The California Supreme Court declined to hear the case. But since the Court of Appeals, First District had remanded the case back to the WCAB for further factual determination, we may yet hear more about Ogilvie in 2012.
At year's end the meaning of the decision and methodologies permissible under Ogilvie are still subject to debate in the comp legal world.
Moreover, it is thought that advocates of reform will try to take away "the cases" (Ogilvie and Guzman) as part of a deal for a revised benefit schedule.
10. DIR CONTINUES TO FOCUS ON THE UNDERGROUND CALIFORNIA ECONOMY
As 2011 came to a close, a hearing at California's Capitol reminded observers of the huge problem known as the "underground economy".
Testimony by DIR director Christine Baker noted that out of a sample of 1,498 employers identified by EDD , over 25% were found by the Workers Compensation Insurance Rating Bureau to be lacking insurance coverage.
Baker's testimony noted that it appears that many employers are misclassifying or buying just enough coverage to stay under the radar.
Here is a link to my post on the topic:
http://workerscompzone.com/index.php?en ... 210-162217
Notable on this topic is SB 459, which will allow fines of up to $15,000 per violation for willful misclassification of an employee. Penalties of up to $25,000 can be assessed if there is a "pattern and practice" of willful misclassification of employees.
That's my list for 2011.
In a post coming soon I'll be featuring a quiz about predictions for California workers' comp in 2012. Meanwhile, here is a link to my quiz for 2011:
http://workerscompzone.com/index.php?m= ... 102-095809
To put all this in perspective, here is a link to the Top 10 Developments in California Workers Comp in 2010:
The Top 10 Developments in California Workers Comp in 2009 is here:
http://workerscompzone.com/index.php?m= ... 101-104842
Wednesday, December 21, 2011, 09:48 PM - Political developmentsIt's that time of year when our collective unconscious is focusing on sugar plums, flying reindeer and roasting chestnuts.
You deserve such relaxing delights. After all, if you're reading this you survived fistfights at the mall over teaser sales merchandise, copper thieves who hoped to harvest your home wiring, and you're just glad that the Stux worm is slithering somewhere in Tehran rather than coursing through your laptop.
Pat yourself on the back for surviving another year in our hoary culture. Time to put your feet up and think back on the year.
There's a little drama left yet in the quickly passing 2011 California workers' comp scene.
It's a drama...a lawsuit actually....given prominent coverage by Workcompcentral's Western Bureau Chief Greg Jones in a recent article on www.workcompcentral, titled "California Lawsuit Alleges Defense Firm Encouraged Fraudulent Billing".
The piece by Jones covers a wrongful termination lawsuit filed against a large statewide workers' comp firm, Adelson, Testan, Brundo & Jiminez.
(my disclosure here: I have worked with an alum of the Adelson firm but have not discussed this matter with that person. Also, at any given time I have probably have at least one or two dozen active applicant cases being litigated against defendants repped by various Adelson firm offices, but I have no inside knowledge about the firm's billing and personnel practices and I respect many of the firm's individual attorneys).
The plaintiff in the lawsuit is Richard Unitan, an attorney who joined the Adelson firm after a decades long career in Southern California.
Indications are that the lawsuit will be a slugfest. Managing partner and firm founder Steve Testan has been quoted as vehemently challenging the allegations of Unitan and his counsel, Jeffrey K. Winikow.
Unitan charges that he was dismissed for failing to bill at a level that "is virtually impossible to achieve with accurate and honest billing practices".
Specifically, Unitan appears to be charging that Adelson attorneys were required to bill a minimum of 3,000 hours per year and that the structure of the firm's billing and timekeeping requirements encouraged attorneys to churn and put "a good deal of fiction into billing statements".
This is alleged to be done in "incremental billing", where lawyers bill at hourly fractional rates in 1/10 of an hour increments.
There are a variety of billing arrangements used by California workers' comp defense firms, including some "flat fee" billing arrangements.
If this case proceeds to trial it may provide a fascinating window into the economics of workers' comp defense practice. But if 3,000 hours is the de facto standard at a firm, that's a lot of hours.
Could it be true that compressed defense billing rates encourage insurance defense firms to pad their bills?
This sort of issue was at the heart of a nasty dispute several years ago in San Francisco, when civil litigation firm Tarkington, O'Connor & O'Neal was accused of billing irregularities and overbilling. The Tarkington firm eventually won a verdict against its insurer over comments that the insurer's auditor had made to the press about the firm's billing practices. The situation was different than the Unitan Vs. Adelson situation, but it's a reminder that reputations are fragile and that it's good to withhold judgment until one has the facts.
In Workcompcentral, Jones notes that plaintiff attorney Winikow claims that Unitan was the victim of a corporate culture that encourages and pressures attorneys to act not in the best interests of their clients to resolve disputes efficiently, but rather in the best interest of the law firm. Testan is quoted as saying that incremental billing is standard in the defense industry and that Unitan was terminated for a number of reasons unrelated to billing requirements.
Keep your eye on this one in 2012.
Sunday, December 18, 2011, 04:19 PM - Political developmentsMy longtime law partner Mike Gerson was awarded a well-earned honor last week: the Barry Williams Lifetime Achievement award, bestowed by the East Bay Chapter of CAAA.
Barry Williams was a legendary figure in California workers' compensation before his untimely death. Williams had always been noted for his encyclopedic knowledge of California workers' compensation law and his tenacious representation of workers. Although Williams never received the appointment to the statewide WCAB that he had sought, Williams' career and memory lives on among many of those who had the pleasure of working with him.
Having worked with both Barry and Mike, it was doubly a treat to see Gerson get this award.
Unlike some lawyers who may be in it "just for the money', Mike has always had a passion to represent the underdog and an interest in the development of the law.
Since my office is adjacent to his, I've often had the difficult task of telling Mike to pack up and go home for dinner. As the nights wear on, Mike has often been oblivious to time, caught up in preparing for trial or formulating case strategy.
Time and time again I've seen him achieve superior results, cutting through the legal fog with his wit and persistence.
Thinking about this reminded me of an old newsletter message Mike had written in 1990 while serving as statewide president of the California Applicants Attorneys Association.
Here are some excerpts from that 1990 piece:
"Recently, I trudged my way back from the Board with the worries of the world heavy on my shoulders. The defendants ran the clock on an all-day trial that took 14 months to calendar, and another four months might go by before a new trial date gets set."
"I was fatigued, depressed and frustrated by a system for which I continuously apologize to our clients. representing injured workers has become overwhelmingly distressing. As I heard my office, I thought "My God! I do do good for injured workers!" And as I thought this, I chanted under my breath as I marched, "I do do good". I swung open the office door exalting-"I'm a do-gooder, that's what I am! And I'm proud of it"."
"Enthusiastically, I reached for my 50-or-so messages and the stack of incoming mail, and said hello and good-bye to my secretary as she left for the day. So began my typical work day at 5 p.m."
"This type of work requires commitment, sympathy and compassion for the victims of work injuries, and a passion to help others. You either have this kind of passion or you don't."
It's this sort of philosophy which has distinguished Gerson over the years.
Like professionals and business people who excel in any field, the true leaders in this type of law have a vision and a commitment that is genuine.
It's been my great pleasure to work with Mike over the decades, and I'm thrilled to see him be honored.
Stay tuned. In the coming week I'll be doing a post on the Top 10 Developments in California Workers' Comp.
Workers' Comp in 2011
Wednesday, December 14, 2011, 08:40 AM - Political developmentsOne of the things I've always liked about the "comp community" is the sense that most of the comp attorneys, QME doctors, and WCAB staff have a sense of loyalty to the system.
That sense of collegiality was on display at yesterday's effort in Oakland to help the needy at holiday time. THe occasion was the Oakland Mayor's Toy Drive.
An event at Boxer & Gerson that was co-sponsored by Hanna & Brophy netted hundreds of toys for kids and several thousand dollars which will allow the program to buy more toys.
Embattled Oakland Mayor Jean Quan attended and spoke to an audience of judges, doctors and attorneys about the great need in these challenging economic times. Quan indicated that on the first day for toy program sign-ups over 1,000 Oakland kids were registered.
Quan indicated that Bay Area food banks were considerably down in resources.
A note of special mention and thanks to the folks who worked hard to make the toy event a success: Maria Sager of Boxer & Gerson and Keith Epstein of Hanna & Brophy.
Hopefully the various comp communities at boards around the state can find inspiration in this sort of event to help fill needs that aren't being met.
Also, a word of congratulations here to Christine Baker, who has been appointed to head the Department of Industrial Relations. Baker had previously been serving as Acting Director.
Stay tuned. In the coming weeks I'll be assessing the top developments in workers' comp in 2011 and giving a year end quiz for those who have a crystal ball for 2012.
Saturday, December 10, 2011, 04:22 PM - Political developmentsCalifornia continues to suffer due to the huge underground economy.
Honest employers end up competing against employers who cut corners on workers' comp coverage, labor laws, and taxes.
This was the subject of a hearing at California's capitol this week. The hearing was the California Senate Info-Hearing on Small Business and the California Economy. You can watch it online by clicking on the California
State Senator Mark DeSaulnier noted that these issues have been studied for some time, including by the Little Hoover Commission, and the problem seems to be getting worse.
The hearing was far too long and detailed to summarize in a blog post. Speakers included Scott Hauge from Small Business California, Dan Kurtilla of EDD, David Fogt of the California Contractors State Licensing Board, several contractors, and others.
Christine Baker, the Acting Director of the California Department of Industrial Relations, testified. Baker noted that the strategy of the department is to focus on non-compliant employers without interfering unnecessarily with compliant employers.
During the past few years there have been many publicized "sweeps" by labor standards enforcement.
Baker noted that lack of workers' comp coverage is a good indication of cheating and provides a huge competitive disadvantage.
SB 313 (sponsored by Desaulnier) provides for increased penalties for lack of coverage and Baker noted that DIR is seeing "some significant citations"
According to Baker, out of 1,498 employers randomly identified by EDD about 31% were found by the WCIRB to be lacking coverage. On followup, about 80 out of the 479 suspected scofflaws were found to have coverage and 45 got notice and then obtained coverage. 56 were cited for no coverage at the time of inspection and 46 were cited for past lapse of coverage. Baker noted that fines of over $400k were levied.
Whatever the exact numbers and percentages, it's clear that this is a huge problem. Baker noted that they hear many stories of employers who buy just enough coverage to stay under the radar. Other employers misclassify workers.
So starting in January 2012 DIR plans a more proactive program to use data to identify cheaters ".by red flags".
And she noted some changes in strategy at the department of Labor Standards Enforcement, including "surveillance before inspection".
Dan Kurtilla of EDD noted that EDD is the lead agency in the Joint Enforcement Strike Force, which is an interactive task force. They have 16 MOUs with agencies such as IRS, the Franchise Tax Board, Department of Justice, the U.S. Department of Labor, the Department of Insurance, the Department of Consumer Affairs , and DIR etc.
Kurtilla claimed that Franchise Tax Board Studies show that 11% of any California tax owed in any year is being unpaid because of the underground economy. This could amount to $6.5 billion in unpaid taxes.
At a time when schools, universities, and aid to needy folks is being cut, that's real money.
From the workers comp context, this is not new. I've been posting on this for years. Here are links to "It's the Employer Fraud, Stupid" #1 :
http://www.workerscompzone.com/index.ph ... 670342ae49
And to "It's The Employer Fraud, Stupid" #2:
http://www.workerscompzone.com/index.ph ... 818-110358
With benefit increases dependent on system cost savings, identifying cheating employers becomes ever more critical.
Here is the link to view the second segment of the Senate Informational Hearing on Small Business and the Underground Economy:
And here is a link to a good piece on the issue written by Marc Lifsher for the Los Angeles Times:
http://www.latimes.com/business/la-fi-u ... 0311.story