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Author: WorkCompAcademy

Cal-SARA – a New Non-Profit – Seeks Staffing Agency Reform

A new nonprofit, trade association, the California Staffing Agency Reform Association (Cal-SARA), has been established by staffing industry leaders to clean up the current marketplace, which it claims is inundated with fraudulent and black market workers’ compensation insurance.

“The increasing demand for a contingent or variable workforce, combined with the decreasing supply of employees and workers’ compensation insurers, has allowed a massive black market to grow virtually unchecked. These illegal practices put staffing agencies, injured workers and California taxpayers at risk. Regulators have thus far been unsuccessful in policing these activities causing the situation to get worse,” says Mark Bertler, Executive Director of Cal-SARA.

Cal-SARA says that legitimate staffing agencies are forced to compete with scam agencies that do not operate with legitimate workers’ compensation insurance. Illegal operations drive prices down below the cost of doing business, creating an unfair marketplace. Customers of the California staffing industry have come to accept these illegitimate operations, largely due to the unfilled and accelerating demand for workers. Regulators appear to be playing “whack-a-mole” and cannot seem to shut them down as fast as they pop up.

Cal-SARA will provide education, training and legal support for its members, as well as providing assistance to regulators and insurers. Cal-SARA will also act to protect its members from illegal and unethical activity by aggressively pursuing all parties who enable these illegal arrangements, including brokers and PEOs.

A robust and inclusive committee structure will ensure that Cal-SARA’s mission and goals are advanced. These committees include industry leaders on their education, governance, audit, membership and litigation committees.

“Self-reform is the fastest and most reliable way to clean up our industry,” says Bertler. “Unethical and unscrupulous actors continue to destroy the market by blatantly utilizing illegal business practices without fear of sanction or punishment,” he explains. “The temptation to cross the line and operate in this emerging and dangerous underground marketplace is often too great. Once they stop paying for workers’ compensation insurance, they may also resort to payroll tax fraud as well. Cal-SARA is in the process of generating a war chest of resources and talent to put an end to these crimes,” he adds.

Cal-SARA promotes legal and regulatory compliance in the sale of workers’ compensation insurance and advocates for the common business interests of its members in recognizing and eliminating workers’ compensation fraud in the temporary staffing/staffing/recruiting industries. To learn more and join the fight against staffing industry workers’ compensation fraud, visit https://www.cal-sara.org/.

SCIF Says Happy New Year With $39M Dividend

State Compensation Insurance Fund announced plans to distribute an approximate $39 million dividend to its qualifying policyholders with policies that took effect between Aug. 27 and Dec. 31, 2020.

This dividend equals approximately 10% of the estimated annual premium reported during that time period.

This announcement follows up State Fund’s August declaration of an approximate 10% mid-year dividend that applied to all policies incepted between Jan. 1 and Aug. 26, 2020. The dividend distribution for the entire year equals approximately $114 million.

Through 2020, State Fund is reporting approximately $1.13 billion in premium.

“This has been a very challenging year for our policyholders and we’re glad we can continue to support them with this dividend declaration,” said State Fund President and CEO Vern Steiner. “We took a number of actions during 2020 to help our policyholders, including accelerating the delivery of our 2019 dividend payments and providing more than $40 million in COVID-19 safety support grants. This latest declaration continues that support – all qualifying State Fund policyholders now know they can expect another dividend payment next year.”

Since its creation in 1914, State Fund has paid out more than $5 billion in dividends to policyholders.

State Fund policyholders will begin to receive dividend payments during the second half of next year.

Ohio AG Claims OptumRX Knowingly Overcharged State

The Ohio Attorney General’s office says it may have uncovered evidence in a court battle to show that a pharmacy benefit manager knowingly overcharged a state agency.

A report in the Columbus Dispatch says that among hundreds of thousands of emails obtained from PBM OptumRX as part of the litigation was one that appears to acknowledge that the multibillion-dollar corporation was not following the terms of its contract with the Ohio Bureau of Workers’ Compensation.

The PBM administered prescription drugs for workers injured on the job. In all, OptumRX overcharged the bureau on more than 1.3 million claims for generic medications, the lawsuit says. The contract, in effect from mid-2009 until the fall of 2018, called for the PBM to charge the lowest of four potential prices for generic drugs, including a measure from the Centers for Medicare and Medicaid known as the Federal Upper Limit, or FUL for short.

But in a series of May 2015 emails marked as “confidential,” John Spankroy, director of public sector account management for Catamaran, a company purchased by OptumRX, said the Federal Upper Limit was never applied, despite the contract.

He told Susan McCreight, senior director of public sector account management, “Per BWC contract we are supposed to be using pricing logic that includes lower of FUL for generics. None of the BWC price schedules has FUL as a cost source.

In a separate email, Spankroy told Bryce Owens, the Illinois-based PBM’s manager for pricing and analytics, “We do not see FUL included as a cost source option.”

Spankroy also acknowledged: “BWC is not aware of this (yet).”

The admission is highly relevant” to the central issue in the legal dispute: “whether OptumRX was required to follow the pricing terms included in the BWC contract,” said Yost’s legal team in a Dec. 16 court filing.

But Andrew Krejci, who is with Optum’s corporate communication office, says the federal FUL requirement was never part of the PBM’s agreement with the state.

“The plain language of the contract demonstrates that the lesser-of reimbursement methodology, which was agreed upon and utilized by the parties over the course of their almost decade-long relationship, incorporated three reimbursement options and CMS FUL was never one of them,” OptumRx said in a court filing.

The bureau dropped OptumRX more than two years ago after a consultant determined the PBM was vastly overcharging the state.

The same consultant later discovered that PBMs – including OptumRX – in Ohio’s Medicaid program, which pays for health care of the poor and disabled, were charging three to six times the standard rate, enabling them to take home nearly $250 million in a single year.

According to the lawsuit, which seeks unspecified damages, OptumRx overcharged the bureau on 57% of 2.3 million prescription claims from injured Ohio workers between January 2014 and September 2018.

EDD Remains Easy Fraud Target – Even From Prisoners

Hundreds of thousands of dollars have been fraudulently taken in two separate schemes that targeted California Employment Development Department unemployment insurance benefits that were intended for Californians hit hardest by the ongoing COVID-19 pandemic shutdown.

A federal grand jury in Fresno returned an indictment involving a prison-based scheme out of the Central California Women’s Facility (CCWF) in Chowchilla.

Inmate Sholanda Thomas, 36, and parolee Christina Smith, 37, were indicted for conspiracy to commit mail fraud and aggravated identity theft charges for the submission of several fraudulent EDD unemployment insurance claims in Thomas’ and other CCWF inmates’ names.

Recorded jail calls and emails show that Thomas and others engaged in “bundling,” that is, they obtained the names, dates of birth, and social security numbers for inmates at CCWF and relayed that information to Smith to submit the fraudulent claims. The claims were submitted shortly thereafter, and the benefits were loaded onto debit cards that were mailed to the addresses provided.

The underlying applications for the claims falsely stated that the inmates had worked within the prescribed period as hairstylists, barbers, and other occupations, and that they were available to work, which was not true because they were incarcerated. The claims would have been denied if accurate answers had been given. EDD and the United States have suffered a loss of over $200,000 as a result of the fraud.

Thomas and Smith used the proceeds for their own benefit, which included Smith keeping Thomas’ share in a shoebox pending Thomas’ release from prison, and Smith getting plastic surgery.

In the second scheme, Andrea M. Gervais, 43, of Roseville – a former Employment Development Department employee – allegedly participated in a mail fraud scheme involving approximately 100 fraudulent Pandemic Unemployment Assistance (PUA) claims in the names of persons other than Gervais.

According to the criminal complaint, at least 12 of the 100 claims were processed for payment, and over $200,000 in PUA benefits were paid out to Gervais’s Roseville address in the form of Bank of America debit cards. The total value of all fraudulent PUA claims from her residence was at least $2 million.

The investigation began when investigators discovered a PUA claim using the identity of a sitting United States Senator for approximately $21,000. This fraudulent claim was processed for payment, and Gervais received a PUA debit card in the United States Senator’s name. Investigators further discovered that Bank of America ATM cameras captured Gervais on multiple occasions withdrawing cash from at least seven of the PUA debit cards, and at least one captured transaction showed Gervais using the debit card issued to the United States Senator.

If convicted, Thomas and Smith face a maximum statutory penalty of 20 years in prison for conspiracy to commit mail fraud, and a mandatory and additional two-year prison sentence if convicted of aggravated identity theft. If convicted,

Gervais faces a maximum statutory penalty of 20 years in prison for mail fraud.

Sacramento Cleaning Company Owner Faces Premium Fraud

Jorge Gerardo Maldonado, 55, of Sacramento, was charged with three felony counts of insurance fraud after allegedly underreporting payroll and employees to illegally save on workers’ compensation insurance premiums, resulting in a $687,560 loss to three insurance carriers.

After one of the victim insurance companies suspected Maldonado of fraud, the California Department of Insurance launched an investigation into his Sacramento cleaning company Pro-Care Building Maintenance (Pro-Care). It found that Maldonado underreported payroll and committed premium fraud. Maldonado has owned Pro-Care since 2014.

On July 10, 2016, a Pro-Care employee was injured while on the job and a workers’ compensation insurance claim was filed with one of the company’s insurance carriers. During a review of the claim, it was found that Pro-Care underreported payroll and failed to report the end of policy payroll to the insurance company as the policy required.

The Department’s investigation further discovered that Maldonado failed to report payroll and employees of Pro-Care to three insurance carriers from 2017 through 2019. The alleged unreported payroll was over $5 million.

Maldonado self-surrendered to the Sacramento County Jail on Wednesday, December 23, 2020.

The case is being prosecuted by the Sacramento County District Attorney’s Office.

Injured Worker $575K Discrimination Jury Verdict Affirmed

In 2008, Charter Communications hired Anthony Lave as a “broadband tech.” Approximately two years after he was hired, Lave injured his back while working. He filed a workers’ compensation claim and, although he continued to work, Lave ultimately received a permanent disability rating of 30 percent.

Years later, in 2014, Lave asked for time off, claiming he needed to take his wife to a medical appointment. Lave’s supervisor failed to respond for over a week. Frustrated with the lack of a response, Lave complained to a human resources employee but eventually abandoned his request for time off. This occurred again a few days later.

Lave claimed that his relationship with his supervisor worsened after Lave bypassed him and went to human resources regarding his leave requests. Lave testified that his supervisor would stare him down, and disciplined him for minor infractions, and continued to delay his responses to Lave’s leave requests.

Later, Lave’s preexisting back injury flared up in early 2015, leading him to take one day of sick leave. When he returned, the same supervisor issue a “milestone” to Lave for taking a sick day off. A “milestone” was the documentation Charter used to memorialize employee discipline. Lave complained to another human resources employee and then, days later, filed a formal complaint against his supervisor. The local human resources department would “handle the situation.”

Lave then reopened his workers’ compensation claim, and required time off by Charter’s own physician. He returned to work, but was suspended in less than a month because of a customer complaint. Lave filed another complaint with human resources, claiming his suspension was in retaliation for taking time off work. Lave never received a response to his complaint and was later terminated from employment.

Lave filed this lawsuit against Charter, alleging he was retaliated against based on his disability related to his back injury; for taking time off to accompany his wife to her medical appointment; for taking sick leave; for taking medical leave; and for filing complaints arising from his disability accommodation and leave requests.

A jury awarded him $575,000. And a post judgment awarded $400,800 in attorney fees, rather than the requested amount of $1,064,062.70. The judgment was affirmed in the unpublished case of Lave v Charter Communications.

The court of appeal found that the trial court correctly excluded evidence that Charter did not produce during discovery.

With regard to the remaining issues over the jury verdict, the court found that “Charter fails to undermine the jury’s ultimate finding in Lave’s favor and award of damages.

Cal/OSHA Targets Meatpacking and Food Processing Employers

Cal/OSHA has cited eight more employers for not protecting workers from COVID-19 during inspections at meat processing facilities across the state.

The inspections were opened upon learning of a COVID-19 fatality and several illnesses, and after receiving complaints. The employers cited failed to take required steps to prevent COVID-19 infection in the workplace such as safe physical distancing procedures or proper face covering usage for workers in production areas.

Enforcement of COVID-19 protections at meatpacking and food processing facilities has been a priority of Cal/OSHA given the high rates of positive cases and alarming number of deaths among food processing workers,” said Cal/OSHA Chief Doug Parker. “These citations represent a portion of our enforcement efforts in these industries. More citations will be issued when violations are identified and inspections are closed.”

On November 12, Cal/OSHA cited Smithfield Foods, Inc. in Vernon $58,100 in proposed penalties for multiple COVID-19 related violations, including two serious in nature, and its staffing firm CitiStaff Solutions was also cited $46,695 for two serious violations. Both employers failed to ensure that workers used face coverings properly in production areas and during breaks, and failed to provide effective training and instruction on how the virus is spread and how to disinfect areas properly. The investigators determined that Smithfield Foods, Inc. failed to adequately address at least 300 COVID-19 illnesses (including three that required hospitalization) amongst its employees and contracted workers hired by CitiStaff Solutions. Smithfield Foods, Inc. further failed to report serious COVID-19 illnesses to Cal/OSHA.

Central Valley Meat Co. was cited for not informing employees of possible exposure when coworkers were infected with COVID-19 and for failing to provide face coverings and ensure their proper use. Cal/OSHA opened a complaint-initiated inspection at the facility in Hanford on April 29 and identified violations in the employer’s training procedures and response to COVID-19 hazards. Citations were issued on December 11 with $50,000 in proposed penalties for two violations classified as serious.

In June, Cal/OSHA became aware that several One World Beef Packer employees were hospitalized for complications related to COVID-19, including one employee who died. When Cal/OSHA inspected the Brawley facility, investigators noted that workers in the production lines and quality assurance area were not provided protective barriers and were working too close to each other. Furthermore, the employer failed to report the serious illnesses and fatality within the eight-hour time limit as required by law. Cal/OSHA cited One World Beef Packer $23,000 on December 11 for one serious violation and a regulatory violation for failing to report the serious illnesses.

After reports of outbreaks, Cal/OSHA opened inspections at meat processing plants in Vernon last June and July as part of a targeted enforcement effort. An onsite inspection at California Farms Meat Company confirmed the employer did not implement physical distancing procedures or install barriers in the production area, where workers separated chicken by hand and operated machines within close distance of each other. Cal/OSHA cited the employer $11,700 in proposed penalties on December 14 for the serious violation.

In July, Cal/OSHA opened inspections with CLW Foods and its staffing firms California Enterprises Employment and HR Staffing Solutions in Vernon. The employers were cited on December 14 for multiple violations, including some categorized as serious for failing to address COVID-19 hazards by training employees and ensuring proper physical distancing procedures on conveyor lines, in the production area and when employees took breaks. CLW Foods and California Enterprise Employment were also cited for failing to report serious COVID-19 illnesses to Cal/OSHA.

December 21, 2020 – News Podcast


Rene Thomas Folse, JD, Ph.D. is the host for this edition which reports on the following news stories: U.S. Supreme Court Allows States to Regulate PBM Drug Prices. WC Claim, and CalPERS Retirement Defeats FEHA Claim. WCAB En Banc Limits Walk-Through Orders. Riverside Woman Learns $500K EDD Fraud Scheme on YouTube. 16 Pharmacies Admit Health Care Fraud Schemes. Pain Medicine QME Pays $153K to Resolve Opioid Charges. Mitchell International Releases 4th Quarter Comp Trends Report. DWC Responds to Increasing COVID Infection Rates. New NCCI Report Tracks COVID-19 Impact on Comp Claims. OSIP Publishes Public Self-Insured Annual Summary.

December 14, 2020 – News Podcast


Rene Thomas Folse, JD, Ph.D. is the host for this edition which reports on the following news stories: Constitutionality of California Employer Arbitration Ban Argued. Applicant Attorney Arrested For Adelante Interpreting Inc. Scam. Former Ventura County Firefighter Guilty of $148K Comp Fraud. Simi Valley Contractor Convicted for $176K Premium DIR, DWC Publish IMR 2019 Annual Review Progress Report. OSHA Announces $2,851,533 in Coronavirus Violations. New CMS Final Rule “Modernizes” Anti-Kickback” Law Implementation. Feds Approve Telemedicine Opiate Prescribing – For Now. “V-Day” – First Person Now Vaccinated for COVID. Hackers and Anaphylactoid Reactions Tarnish Vaccine Launch.

2021 Mileage Reimbursement Rate Declines to 56 Cents

The Internal Revenue Service just announced that the standard mileage rate for business miles will decrease to 56.0 cents per mile as of January 1, 2021, down 1.5 cents from the rate of 57.5 cents per mile for 2020.

As a result, the California Workers’ Compensation Institute reports that effective for travel on or after January 1, 2021, the rate that California workers’ compensation claims administrators pay injured workers for travel related to medical care or evaluation of their injuries will also decrease to 56.0 cents per mile.

The new workers’ compensation medical mileage rate will apply for 2021 travel dates, regardless of the date of injury on the claim, but for 2020 travel dates claims administrators should continue to pay 57.5 cents per mile.

California Labor Code §4600 (e)(2), working in conjunction with Government Code §19820 and Department of Personnel Administration (DPA) regulations, requires claims administrators to reimburse injured workers for such expenses at the rate adopted by the Director of the DPA for non-represented (excluded) state employees, which is tied to the IRS published mileage rate.

In its December 22 news release the IRS announced that as of January 1, 2021, the standard mileage rate will drop to 56.0 cents per business mile driven.

The IRS bases the standard mileage rate on an annual study of the fixed and variable costs of operating an automobile, which includes the cost of gasoline and depreciation.

There have been multiple mileage rate changes over the past decade, so the California Division of Workers’ Compensation has posted downloadable mileage-expense forms on the forms section of its website (DWC Forms (ca.gov) which show applicable rates based on travel date.

A new form with the 2021 rate will be posted shortly, but should not be used until reimbursements are made for 2021 travel.

Given the upcoming holidays, however, claims organizations should alert their staff and programmers as soon as possible that the medical mileage rate will decrease to 56.0 cents per mile for travel on or after January 1, 2021.