Author: WorkCompAcademy

The Department of Labor’s Office of Workers’ Compensation Programs (OWCP) provides workers’ compensation coverage to approximately 2.6 million federal and postal workers through the Federal Employees’ Compensation Act (FECA) program.

Back In Fiscal Year (FY) 2015 and FY 2016, a sharp increase in pharmaceutical spending for the FECA program raised concerns. Subsequent Office of Inspector General work found OWCP had not done enough to ensure it paid the best prices for prescription drugs, specifically noting the lack of a pharmacy benefit manager to help contain costs and the failure to determine if alternative prescription drug pricing methodologies would be more competitive.

In response, OWCP said it took a number of actions to reduce pharmaceutical spending, including implementing controls on prescriptions for compounded drugs and for opioids. According to data provided by OWCP, it significantly decreased total compounded drug spending from almost $256 million in FY 2016 to less than $176,000 in FY 2020 and reduced opioid spending from over $86 million in FY 2016 to approximately $29 million in FY 2020.5

However, the Office of Inspector General remained concerned about OWCP’s ability to effectively manage the cost, as well as the use, of pharmaceuticals in the FECA program.

Given these concerns, U.S. Office of Inspector General recently contracted with the independent certified public accounting firm of Harper, Rains, Knight & Company, P.A. (HRK) to conduct an audit to determine if OWCP had indeed effectively managed pharmaceutical spending in the FECA program since the 2015-2016 audit.

To answer this question, HRK’s audit included: analyzing 6 years of pharmaceutical data covering Fiscal Year 2015 through Fiscal Year 2020; interviewing OWCP management; reviewing OWCP policies, procedures, and other documentation; and comparing the FECA program to industry best practices and other workers’ compensation programs.

The March 2023 Office of Inspector General audit report found that OWCP did not effectively manage pharmaceutical spending in the FECA program from Fiscal Year 2015 through Fiscal Year 2020. Specifically, OWCP did not pay the best available prices for prescription drugs. HRK identified up to $321.26 million in excess spending during the audit period.

In addition, OWCP did not effectively monitor pharmaceutical policy changes to ensure implementation, resulting in claimants receiving thousands of inappropriate prescriptions and potentially lethal drugs, including 1,330 prescriptions for fast-acting fentanyl after issuing a policy that restricted its use.

HRK also found OWCP failed to timely identify and address emerging issues and did not perform sufficient oversight of prescription drugs that are highly scrutinized and rarely covered in workers’ compensation programs. As a result, OWCP spent hundreds of millions of dollars on drugs that may not have been necessary or appropriate for FECA claimants.

Finally, HRK found OWCP lacked sufficient clinical expertise and guidelines to ensure appropriate pharmaceutical decisions, which could negatively impact claimants’ health, recovery, and return to work.

Remarkably the current audit noted that “Health Affairs, a peer-reviewed journal of health policy that has been cited by government officials and national media, reported that prescription drug rebates can sometimes reach 50 percent or more of list price and total Medicare Part D drug spending offset by rebates on brand name drugs in 2018 was 25 percent.”

“Even though incorporating rebates can result in substantial savings, OWCP indicated it did not incorporate prescription drug manufacturer rebates in the FECA pharmaceutical program. According to OWCP officials, the FECA program never had a mechanism, or a contract, to incorporate rebates for pharmacy expenditures during the audit period.”

On the topic of appropriate prescriptions, the new audit continued to say that “OWCP issued significant policy and process changes related to claimant prescriptions prior to and during the audit period. Although these changes were intended to improve claimant safety and save costs, OWCP did not ensure the changes were properly implemented.”

“This occurred because OWCP did not effectively monitor its bill pay vendor, who was responsible for implementing these changes. As a result, OWCP allowed claimants to receive thousands of inappropriate prescriptions and potentially lethal drugs, which could have caused serious harm to claimants.”

“For example, OWCP paid for more than 98 percent (1,330 of 1,348) of prescriptions for fast-acting fentanyl, a potentially lethal and extremely addictive drug, without evidence of required cancer diagnoses.”

HRK made 10 recommendations to OWCP to strengthen management of pharmaceuticals in the FECA program, specifically regarding: evaluating alternate pricing methodologies, ensuring implementation of and adherence to policies, identifying emerging issues by developing and implementing an ongoing pharmaceutical monitoring program, ensuring sufficient clinical expertise among FECA staff, and using evidence-based clinical guidelines to inform prescription drug coverage policies.

OWCP generally agreed with the latest recommendations.

Proposed legislation would enact important changes to hold dangerous doctors more accountable in California, but, according to Consumer Watchdog the proposal excludes crucial reforms that will continue threaten patient safety.

Under current law, the Medical Board of California is comprised of 15 members: eight physicians and seven public members. All eight professional members and five of the public members are appointed by the Governor. One public member of the Board is appointed by the Senate Committee on Rules and one public member is appointed by the Speaker of the Assembly.

The bill, SB 815,creates a public member majority on the Medical Board by adding two additional public members, a top priority of patient advocates, however advocates say the proposed law fails to mandate patients have rights in the enforcement process or receive timely information about their doctors. The legislation under consideration is the Medical Board’s sunset review bill and must be passed this year.

The bill creates a Complainant Liaison Unit at the Medical Board to interact with members of the public, but does not give people who file a complaint about patient harm rights in the enforcement process. That means, for example, the Board does not have to interview the patient who was harmed, or the loved ones of a patient who died, before closing their complaint. The bill also does not address advocates’ call for greater disclosure of doctors’ records online and in person, so patients will remain in the dark if their doctor has harmed other patients.

The bill does however propose several important reforms that patient advocates have championed and support, said Consumer Watchdog, including: Changing the balance of power on the board by giving it more public than doctor members; reducing the standard of proof in doctor discipline cases to match that used by 41 other state boards and reduce the time and cost of investigations; and increasing the doctor licensing fees that fund the Board so it can address staffing shortages and reduce case timelines that have crippled accountability.

The Board is required under current case law, (Ettinger v. Board of Medical Quality Assurance (1982) 135 Cal.App.3d 853, 856), to obtain “clear and convincing proof to a reasonable certainty.” This is a higher burden of proof than in 41 other jurisdictions throughout the U.S. states and territories, which generally apply a “preponderance of evidence’ standard.”

The proposed new law specifies that the standard of proof required to obtain an order on a statement of issues or accusation for a violation that would result in license suspension or revocation shall be a clear and convincing evidence standard and a preponderance of the evidence standard for any other violation.

And to facilitate the investigation process, the proposed law requires, when requested by an authorized officer of the law or by an authorized MBC representative, the owner, corporate officer, or manager of an entity licensed by the Board of Pharmacy to provide records within 3 days of when the request was made. And the proposal also requires MBC licensees to participate in an interview no later than 30 calendar days after being notified when the licensee is under investigation.

Under current law, MBC’s Central Complaint Unit (CCU) receives and triages all complaints. If it appears that a violation may have occurred, the complaint is transferred either to the DCA’s Division of Investigation, Health Quality Investigation Unit (HQIU), which includes sworn peace officers, or to MBC’s own Complaint Investigation Office (CIO), which is comprised of non-sworn special investigators.

Investigators investigate the complaint and, if warranted, refer the case for disciplinary action. MBC’s Discipline Coordination Unit processes all disciplinary documents and monitors cases that have been referred for formal discipline to the Office of the Attorney General (OAG), which serves as MBC’s prosecuting attorney.

If a licensee or registrant is placed on probation, MBC’s probation unit monitors the individual while they are on probation to ensure they are complying with the terms and conditions of probation. The Probation Unit is comprised of inspectors who are located throughout the state, housed within various field offices. Having inspectors throughout the state helps eliminate excess travel and enables probationers to have face-to-face meetings with the inspectors for monitoring purposes.

“We applaud Senator Roth for proposing reforms in this bill that will increase doctor accountability, including adding two public members to the Board, but without additional changes dangerous doctors will escape investigation and patients will continue to be harmed,” said Carmen Balber, executive director of Consumer Watchdog.

After noting that a “twist of fate brings to us substantially the same Nissan employment arbitration contract in two otherwise unrelated cases,” the Second District Court of Appeal published a pair of decisions involving the legal standard for determining “unconscionable” arbitration clauses.

The opinion in Basith v. Lithia Motors, Inc. – B316098 (Apr.2023) began by noting that “These two cases raise the same vital question in contract law: what exactly is California’s test for unconscionability? More precisely, when there is a very high degree of procedural unconscionability, is there any meaningful content to the second element of substantive unconscionability? In an online world where contracts usually appear only in a take-it-or-leave-it format and where there thus is much procedural unconscionability, this question about substantive unconscionability looms large.”

In Basith, and the companion Fuentes v. Empire Nissan, Inc. – B314490 (Apr.2023) Both cases involved employees of unrelated Nissan dealerships in southern California, who agreed to similar Nissan form arbitration clauses when hired. Both sued the dealerships for labor code related violations, and the dealerships filed motions to compel arbitration of the disputes. In both cases the trial court denied the motion, ruled the arbitration contract was unconscionable. The trial court was reversed in both published opinions.

Mohammad Basith applied to work as general manager for a car dealership doing business as Nissan of Carson. The dealership’s owner, Lithia Motors, Inc., ran a network of dealerships. Basith signed an arbitration agreement electronically. After Nissan terminated Basith, he sued Nissan and Nissan moved to compel arbitration. The trial court denied the motion, ruling the arbitration agreement was unconscionable.

When Evangelina Yanez Fuentes applied to work for at another Nissan dealership, she signed paper documents that included an “Applicant Statement and Agreement.” Below that heading, the print in this one-page form was “strikingly minute and, in the record photocopy, blurry to boot.” The longest paragraph squeezed something like 900 words into about three vertical inches.

When the Nissan dealership fired Fuentes, she sued, and it moved to compel arbitration. The trial court ruled the arbitration contract was unconscionable. Font size was a dominating issue in one case – Fuentes – and entirely absent as an issue in Basith’s case. In Fuentes the longest paragraph squeezed something like 900 words into about three vertical inches. Basith did not state he had trouble reading these documents.

In OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 125 (Kho) the Supreme Court of California ruled that the unconscionability defense has two mandatory elements: a party must establish both procedural and substantive unconscionability.

The opinion noted that nearly every form employment contract can be perceived as having some procedural unfairness. Employees may lack power to bargain at all. Sometimes employers insist, “sign it or no job.” However, when “the law attributes some procedural unfairness to every form employment contract, the real fight boils down to whether the substance of the final terms are fair. “We must enforce this contract if its substance is even-handed.”

Fuentes argues the tiny and unreadable print of Nissan’s form makes the substance of the contract unfair. Tiny font size and unreadability go to the process of contract formation, however, and not the substance of the outcome. Font size and readability thus are logically pertinent to procedural unconscionability and not to substantive unconscionability.

Font size is not the substance of a contract. Terms can be fair or unfair in substance, no matter the font size. When an employer puts a contract in an unreadably minute font, this practice definitely is problematic, but not for substantive reasons. Under California law, an agreement must be both procedurally and substantively unconscionable to be unenforceable. Allowing a single feature to count for both categories would nullify this requirement.

Another argument about substantive unfairness is that Fuentes was the only one to sign the arbitration agreement, and this shows a lack of mutuality. “This argument is misplaced. Nissan’s missing signature is irrelevant to whether the substance of the contact is fair. A missing signature cannot make a fair deal unfair.”

Basith maintains the contract’s wording is so convoluted that uncounseled lay people would not understand whether the agreement meant they were waiving rights.

“A complaint about prolix legalese is the same type of objection as a complaint about font size. If the substance of a contract is fair, how the contract is expressed cannot change that. Font size, format style, or verbal obscurantism does not affect the fairness of the final allocation of rights and duties. This contention does not address, and cannot establish, substantive unfairness. To rule otherwise would drain the element of substantive unconscionability of meaningfully independent content and effectively would turn the unconscionability doctrine into a one-element test of vast and unsettling sweep.”

The majority opinion concluded that since the unconscionability defense requires a party to establish both procedural and substantive unconscionability. (Kho, supra, 8 Cal.5th at p. 125.) and there was no substantive unconscionability established in either case, the trial court was reversed in both cases, and the cases remanded with an order to arbitrated both cases.

A dissenting opinion was filed by P.J. Stratton in both cases.

A federal judge approved about a $1 million settlement of a class action lawsuit claiming the news giant Hearst violated California Labor Code provisions and exploited contractors who were involved in the distribution of the San Francisco Chronicle and other news media.

The class action claims were filed in July 2020 by independent contractors Yolanda and Pablo Sanchez and Monica Tejada in the United States District Court Northern District of California. They were employed by Hearst as newspaper dealers in and around Burlingame, Hillsborough, and San Mateo, California, from 2012 until October 21, 2018.

Hearst has a principal office in San Francisco County and is engaged in the ownership, management, and operation of the San Francisco Chronicle newspaper. It is the largest distributor of print news subscription products in Northern California, and the contractors say home newspaper delivery to subscribers is a major piece of the company’s enterprise.

Hearst, through the workers it hires as independent contractors, distributes the San Francisco Chronicle, as well as the New York Times, the Wall Street Journal, the East Bay Times, the San Jose Mercury News, the Sing Tao Daily, the World Journal, the Korea Times Daily, Barron’s, and the Financial Times.

The plaintiffs claim that they were misclassified as independent contractors. The complaint claims that under “conventional legal, and economic tests, Plaintiffs’ and the Class Members’ relationship with Hearst was that of an employee and not of an independent contractor. Because Plaintiffs and the Class Members were and/or are employees and not independent contractors, numerous California Labor Code violations have occurred and/or are occurring.”

Plaintiffs were paid piece rates for delivering different newspapers that did not vary based on their hours worked. For example, Plaintiff Yolanda Sanchez was paid $.16 for each delivery of the NY Times, San Francisco Chronicle and Financial Times, and $.10 for each delivery of USA Today. Further, Plaintiff Pablo Sanchez was paid $.22 for each delivery of the NY Times, San Francisco Chronicle, USA Today, Financial Times, and his piece rates ranged from $.10 to $.38.

Yolanda Sanchez worked approximately ninety-one hours per week, Pablo Sanchez worked approximately seventy-five (75) hours per week, Monica Tejada worked approximately forty-four to fifty hours per week and the three alleged that they received less than the applicable minimum wage.

Hearst allegedly demanded additional services outside of the contracts and outside of the delivery hours specified in the contracts for which Plaintiffs were required to remain on-call and subject to Hearst’s control. For example, Hearst required re-delivery of missing, damaged, or stolen products.

The plaintiffs accused the company of “Failing to compensate Class Members for all hours worked, failing to compensate piece rate employees for rest and recovery periods and other non- productive time, failure to provide Class Members with meal periods and rest periods, failure to provide Class Members with minimum and overtime wages, failing to maintain accurate and complete employment records, failure to provide Class Members with accurate, itemized wage statements, failure to reimburse Class Members for business expenses, and failure to timely pay all wage earned.”

Plaintiffs also alleged that these acts, “which violate the California Labor Code, constitute unlawful and unfair business practices in violation of the California Unfair Competition Laws.”

After several years of litigating this case, this month U.S. District Court Judge Vince Chabria granted approval of the $950,000 settlement on behalf of the plaintiffs and 56 class members. The Judge approved attorneys’ fees of up to 35% of the settlement or $332,500 and litigation costs up to $40,000. Class members will receive an average pre-tax award of over $9,280, and any undeliverable awards will go to the East Bay Community Law Center in Berkeley.

The 56 class members include all persons who have entered into written contracts with Hearst solely pursuant to a home delivery agreement in the State of California regarding newspapers, including, but not limited to, the San Francisco Chronicle, at any time from July 27, 2016, through the date of the Preliminary Approval Order entered by the Court, and who do not submit a timely and valid Opt Out.

Hearst has faced similar class action claims from workers multiple times in the last decade, including from more than 3,000 former unpaid interns whose unfair labor practices suit was thrown out in 2016. Courthouse news reported that the Second Circuit Court of Appeals heard that case in tandem with another lawsuit against the makers of the movie “Black Swan.”  Under the standards set in the “Black Swan” case, Glatt v. Fox Searchlight 811 F.3d 528 (2015), interns do not have to be paid if they receive “educational and vocational benefits” through “hands-on” job experience. The federal judge assigned to the Hearst case found that the Hearst interns fit this description and threw out their lawsuit.