Author: WorkCompAcademy

A Contra Costa County jury found defendant David Michael Bufano guilty of violating California Labor Code for failing to provide workers’ compensation insurance for his employees. Bufano is the owner and operator of Grant Street Pub & Pizzeria in Concord and has at least 18 employees.

Additionally, the jury found Bufano violated state law when he violated a stop work order issued by the Department of Industrial Relations.

Bufano was sentenced to two years of court probation and fined $10,000. Under the Labor Code, the fine is paid to the California State Treasury to the credit of the Uninsured Employers Fund.

In July 2018, the District Attorney’s Office filed a criminal complaint against Bufano. The criminal filing stemmed from a joint enforcement strike force operation with the District Attorney’s Office, Department of Industrial Relations’ Labor Commissioner’s Office and Employment Development Department.

Inspectors from these agencies conducted surprise inspections at Contra Costa County restaurants during the summer of 2018. These restaurants were suspected of deliberately evading the obligation to provide workers’ compensation insurance to employees.

Bufano’s restaurant was cited on June 25 and a stop work order was issued by the Labor Commissioner until he could provide proof of workers’ compensation insurance. The very next day, Bufano’s employees were back at work at his direction in violation of the stop work order.

On June 27, a follow-up inspection revealed that the restaurant remained open for business and employees were present working. Bufano still had not obtained workers’ compensation insurance at the point of the follow-up inspection. He was cited by the Labor Commissioner and fined $6,000.

Willful failure to provide the insurance is punishable by substantial fines and misdemeanor criminal prosecution. Employees that do not know whether they are covered can check their employer’s notices board or ask a manager. Labor Code section 3550 requires an employer to post a notice identifying the current insurance at a conspicuous location.

The misdemeanor counts against Bufano are: Count 1, Failure to Obtain Workers’ Compensation Insurance Coverage and Count 2, Failure to Observe Stop Order.

The California Insurance Commissioner issued a Decision and Order imposing a $4,345,000 penalty on American Labor Alliance and CompOne USA for selling workers’ compensation and liability policies to employers of farmworkers without being properly licensed with the Department of Insurance.

Central Valley based American Labor Alliance attracted customers by marketing low workers’ compensation premium rates. It had contracted with fewer than 100 employers and had a small membership roll before 2016, but its membership surged after it introduced its workers’ comp benefit, according to documents from the department. It had more than 400 employers with 30,000 members as of February 2017. “Two-thirds of those employees are seasonal agricultural workers employed by roughly 50 farm labor contractors,” according to documents from the department.

American Labor Alliance and CompOne USA are subsidiaries of Agricultural Contracting Services Association, which is a Nevada not-for-profit corporation headquartered in Clovis, Calif., according to documents from the Department of Insurance. It characterizes itself as a “union labor organization” operating in California, New York and Georgia. Neither Agricultural Contracting Services Association nor any of its subsidiaries is licensed by the California Department of Insurance.

Despite a Cease and Desist Order issued by the Department of Insurance in October 2016 against the Agricultural Contracting Services Association, Incorporated and its affiliates, the American Labor Alliance and CompOne USA, and Board Chair Marcus Asay, and a Decision and Order issued by Commissioner Jones in November 2017 ordering them to refrain from selling insurance policies in California, the company continued to transact insurance without a license.

The new Decision and Order imposes the $4.3 million penalty that represents $5,000 for each of the 869 days that the companies sold workers’ compensation insurance without a license.

Pursuant to California Insurance Code section 12921.8, the Commissioner may also impose a monetary penalty which shall be the greater of five times the amount of money received by the company for which the license was required, or five thousand dollars ($5,000) for each day the company transacted insurance without a license.

FBI agents on behalf of the U.S. Department of Labor served warrants for workplace injury benefit program records in July 2017 at the headquarters office of American Labor Alliance.

Employers transacting business with Agricultural Contracting Services Association, Inc., American Labor Alliance, or affiliate CompOne USA, should contact the Department of Insurance Investigation Division at 661-253-7500 for assistance in determining the validity of their workers’ compensation coverage.

The Racketeer Influenced and Corrupt Organizations Act, commonly referred to as the RICO Act or simply RICO, is federal law that provides for extended criminal penalties and a civil cause of action for acts performed as part of an ongoing criminal organization. In order to prevail in a RICO action, a plaintiff must prove a “predicate offense” one of which is fraud. In addition to the predicate offense, a plaintiff must also prove a “pattern of racketeering activity.”

The plaintiffs bar has sought to apply RICO laws as a penalty in workers’ compensation claims for at least a decade with poor results. Conceptually they allege that an employer, carrier or third party administrator concocts a fraudulent scheme that is used over and over to prevent workers from obtaining just benefits.

Plaintiff efforts to succeed at RICO in the federal 6th Circuit (Kentucky, Michigan, Ohio, and Tennessee) ultimately ended in failure. In one the the last tries, a Michigan claimant alleged that employer/carrier defrauded him with “false” medical testimony, and filed federal Racketeer Influenced and Corrupt Organizations Act RICO case, In that case, Brown v. Ajax Paving Industries, 752 F.3d 656 (2014), the United States Court of Appeals for the Sixth Circuit followed the prior ruling in Jackson v. Sedgwick Claims Management Services, a carbon copy of this case, 731 F.3d 556, 558 (6th Cir.2013) (en banc).

Essentially in the 6th Circuit, RICO cannot be based on an underlying workers’ compensation claim because the court held that “loss or diminution of benefits the plaintiff expects to receive under a workers’ compensation scheme does not constitute an injury to ‘business or property’ under RICO.”

The effort to win comp related RICO cases then moved to the 9th Circuit (nine western states including California and Arizona) arguably the most liberal Circuit in the federal system. In Laurie Miller et al. v. York Risk Services Group, nine plaintiffs worked as firefighters or engineers for the Phoenix fire department, and York adjusted the department’s workers comp claims. The plaintiffs alleged, in part, that York worked with the City of Phoenix to wrongfully deny or delay their workers comp benefits in violation of the federal RICO Act. Before the case went to trial, it was settled at the end of 2015. Thus the concept was not tested in the 9th Circuit Court of Appeals.

Now they have lost another RICO case this time filed in California.

John Black, and a group of police officers and fire fighters assert a RICO claim involving the City of Rialto and the City of Stockton, CorVel Enterprises, York Risk Services Group and others. These plaintiffs allege “York, CorVel, and Rialto engaged in a pattern of fraudulently denying and delaying legitimate claims in order to lower the liability of the city, while at the same time maximizing the TPA’s revenues (and allowing the TPA to maintain and obtain contracts with other public entities based on their ‘outstanding’ financial performance at the expense of public servants)”

In 2016 the federal trial judge reviewed the 4th amended complaint and dismissed the case without leave to amend. The decision was based in part upon a determination that a workers’ compensation benefit is not a property right subject to RICO, a ruling consistent with the 6th Circuit.

The 9th Circuit Court of Appeals just affirmed the dismissal in the unpublished case of Black v CorVel Enterprises Comp Inc. The 9th Circuit Court of Appeals ruled that “Appellants fail to establish any property interest in their workers’ compensation benefits prior to a final award of benefits” citing  Angelotti, 791 F.3d at 1081. “Therefore, the district court properly dismissed Appellants’ 42 U.S.C. §1983 claims.”

Additionally they said “we find the exclusive remedy provision of the WCA preempts Appellants’ IIED and UCL claims. Charles J. Vacanti, M.D., Inc. v. State Comp. Ins. Fund, 14 P. 3d 234, 244-45 (Cal. 2001). Appellants’ alleged injury is ‘a normal part of the [workers’ compensation] claims process.’ Id. at 250 (citing Marsh & McLennan, Inc. v. Superior Court, 774 P.2d 762, 767 (Cal. 1989)). Therefore, the district court properly dismissed Appellants’ state law claims pursuant to the exclusive remedy provision of the WCA.”

The Internal Revenue Service has announced that the standard mileage rate for business miles will increase to 58.0 cents per mile as of January 1, 2019, up 3.5 cents from the rate for 2018.

As a result, the California Workers’ Compensation Institute (CWCI) notes that effective for travel on or after January 1, 2019, the rate that California workers’ compensation claims administrators pay injured workers for travel related to medical care or evaluation of their injuries will also increase to 58.0 cents per mile.

The new workers’ compensation medical mileage rate will apply for 2019 travel dates, regardless of the date of injury on the claim, but for 2018 travel dates claims administrators should continue to pay the current rate of 54.5 cents per mile.

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

In a Newswire issued December 14, the IRS announced that as of January 1, 2019, the standard mileage rate will increase to 58 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 www.dir.ca.gov/dwc/forms-Mileage.html) which show applicable rates based on travel date.

A new form with the 2019 rate will be posted shortly, but should not be used until reimbursements are made for 2019 travel. In the meantime, claims organizations should alert their staff and programmers that the medical mileage rate will increase to 58.0 cents per mile for travel on or after January 1, 2019.

It’s rare for prosecutors to bring homicide charges against a physician for a patients death. But the Los Angeles district attorney’s office claimed that the second-degree murder convictions in 2015 of a Los Angeles area doctor were the first against a U.S. doctor for recklessly prescribing drugs,

In 2007 Dr. Hsiu Ying Lisa Tseng, a licensed physician practicing internal medicine and osteopathy, joined Advance Care AAA Medical Clinic in Rowland Heights, a general medical practice operated by her husband.

By 2010, the clinic had developed a reputation as a place where patients could easily obtain prescriptions for controlled substances, including opioids, sedatives, muscle relaxants, and drugs used to treat drug addiction. According to one visitor, the clinic looked “like a parole office” with “drug dealing.”

Beginning in 2008, pharmacists began to refuse to fill prescriptions written by Tseng because the prescriptions raised “red flags”; the patients’ profiles, conduct, and the combination of substances and quantities Tseng prescribed indicated no legitimate medical purpose for writing the prescriptions. When Tseng learned of this, she referred her patients to “mom and pop” pharmacies, which continued to fill her prescriptions.

That same year, law enforcement investigators, including investigators from the coroner’s office, began calling Tseng to discuss the deaths of several of her patients and to apprise her that the patients had died of suspected drug overdoses shortly after obtaining prescriptions from her.

A dozen of Tseng’s patients died, though prosecutors only brought three murder charges because of other factors involved in some of those deaths, such as drugs prescribed by other doctors and a possible suicide. In 2012, Tseng was charged with three counts of second degree murder, 20 counts of unlawfully prescribing controlled substances to patients, and one count of obtaining a controlled substance by fraud.

After a a six-week trial, a jury found Tseng guilty of three counts of second degree murder, 19 counts of unlawfully prescribing controlled substances, and one count of obtaining a controlled substance by fraud. Jurors deliberated for 10 days before reaching the verdicts. The trial court sentenced her to 30 years to life in state prison. Tseng appealed, and the Court of Appeal affirmed in the partially published opinion of People v Hsiu Ying Lisa Tseng.

She claimed on appeal that substantial evidence did not support the murder convictions and that the trial court erred in (1) admitting evidence of six uncharged patient deaths; (2) failing to unseal and quash a search warrant of her financial records; (3) failing to grant a mistrial based on prosecutorial misconduct; (4) reopening closing argument; and (5) failing to apply Penal Code section 654 to the murder conviction sentences.

The Court of Appeal concluded that “None of her arguments are meritorious.”