Governor Brown signed AB 1422 into law on Tuesday. According to the Governor’s signing memo he said “I am signing AB 1422 which is clean-up legislation to last year’s workers’ compensation anti-fraud bills, AB 1244 and SB 1160. Those measures established new requirements and authority to help prevent and reduce fraud in the workers’ compensation system. Specifically, they require the suspension of medical providers who have been convicted of crimes involving fraud or abuse. They also require placing a stay on any liens filed by providers charged with such crimes (pending disposition of the charges).”

“AB 1422 confirms that the Workers’ Compensation Appeals Board retains jurisdiction to resolve disputes about the applicability of the automatic stay provision to specific liens. This bill is declaratory of existing law which provides for the resolution of these disputes through the Board’s current practices and procedures. Nothing in last year’s legislation creating the stay was intended, or operated, to divest the Board from jurisdiction over these issues.”

The Administrative Director of the Workers’ Compensation System would be authorized to adopt regulations to implement these provisions.

The original fraud law was ambiguous in terms of the status of liens filed by companies who were not themselves part of a criminal prosecution. Under the revised law, the stay provisions will apply not only to a person who is being prosecuted, but to a “controlled entity” as well. An entity is controlled by an individual if the individual is an officer or a director of the entity, or a shareholder with a 10 percent or greater interest in the entity.

In addition, the amendments address some other complications that have arisen. For example, in criminal law, a conviction is not entered until judgment is imposed, which usually means at the time of sentencing. With respect to addressing liens, that time frame does not work in cases where a provider pleads guilty, agrees to cooperate with prosecutors, and delays sentencing for an extended period. Other clarifications, such as the right to refuse to pay a bill of a convicted provider, simply fill in some gaps in the drafting of last year’s bills.

In some respects, the amendments are intended to be more explicit about what the Legislature intended the language in last year’s enactments to mean – and these are designated as declaratory of existing law because it is clear that the new language is precisely what was intended by the Legislature in this bill and SB 1160.

The new law deletes language that terminates the stay on lien proceedings at the end of the criminal proceedings, and specifies that the stay remains in effect until the completion of the special administrative proceedings that apply to liens filed by providers convicted of workers’ compensation fraud.

With respect to the constitutional issue of “due process” over the automatic stay provisions, the new law added the following language to LC 4615 “(e) The automatic stay required by this section shall not preclude the appeals board from inquiring into and determining within a workers’ compensation proceeding whether a lien is stayed pursuant to subdivision (a) or whether a lien claimant is controlled by a physician, practitioner, or provider.”

The next hearing on the motion for preliminary injunction pending in federal court based upon this constitutional issue filed Dr. Eduardo Anguizola, who is facing multiple counts of insurance fraud filed by Orange County prosecutors, is set on this Thursday, September 28, 2017 at 8:30 am in courtroom 9D in downtown Los Angeles. AB 1422  should provide federal Judge Wu with ample authority to deny the request for an injunction now that there is clear language affording stayed lien claimants with “due process” of law.