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Task Force Issues Stop Orders for Dangerous Equipment

Two Southern California garment businesses have been ordered to stop any work with dangerous equipment until the employers can ensure the equipment has the appropriate safeguards, the state Labor Enforcement Task Force says.

The task force is a multi-agency group formed to combat the underground economy.

The Central Valley Business Times reports that Vinh Loi Inc., a garment contractor with 26 workers employed at two locations in El Monte, had an industrial fabric cutter with improper safeguards to the cutting blade as well as the belt and pulley, the state says.

Kinary Inc., an El Monte denim washing business that employs 22 workers to dye and stone-wash jeans and other garments, had nine of its eleven industrial washers removed from service by Cal/OSHA until the proper safeguards in the belt and pulley workings on the washers are reinstalled, says the task force. Two of the same washers were not equipped with interlocks to prevent movement of the washer drums while the door is open, it says.

A worker was crushed to death in July 2011 after falling into an open, operating washing machine with missing interlocks at another denim washing shop in Los Angeles.

“Employers are required to ensure that their equipment is safe for workers to operate,” says Department of Industrial Relations Director Christine Baker, who oversees the task force. “When industrial machinery does not have the proper safeguards, workers can be killed or suffer serious injuries including amputation.”

Vinh Loi, Inc. is also under investigation by the Labor Commissioner’s Office and the Employment Development Department for labor law issues including cash pay and overtime as well as possible payroll tax violations. The state agencies have served notice of a pending audit to further investigate the business.

The task force includes investigators with the Department of Industrial Relations’ Division of Labor Standards Enforcement and Cal/OSHA, as well as the Employment Development Department, Contractors State License Board, the Board of Equalization, Alcohol and Beverage Control and the Bureau of Automotive Repair.

Mervyn’s Bankruptcy Court Defers Adjudication of Industrial Claim to California WCAB

The 2008 bankruptcy and default by fallen department store giant Mervyn’s LLC on its self-insured workers’ compensation insurance obligations represents the largest-ever for a state fund that will assume responsibility for the claims. The California Self Insurers Security Fund, believed at the time that Hayward-based Mervyn’s defaulted on almost $20 million in unpaid workers’ compensation claims, though the final total could be significantly lower because many claims are inactive.The Security Fund, a nonprofit mutual benefit corporation created by the state in 1984, is designed to ensure that workers’ comp claims are paid for workers in self-insured plans in the event of a default by their employer. In its 24 years, officials say, it has assumed liability for $160 million in claims involving 64 defaults, ultimately leaving it responsible for $90 million in net costs after accounting for about $70 million in surety bonds or deposits posted by the defaulting organizations. Prior to Mervyn’s, the last big default was National RV in late 2007, leaving $3.5 million in claims and $5 million in security deposits,

Joh Navroth II was an applicant with a pre-bankruptcy industrial injury. He is attempting to recover directly from the bankruptcy court in Delaware.The bankruptcy court issued an order deferring his claim to the WCAB.

Navroth seeks damages for alleged injuries from a work related accident (dropping a folding table on his foot). The Initial Claim includes allegations of and requests for compensation for physical and emotional suffering and demands for payment of vacation, sick and personal holiday time. The alleged incident occurred in California prior to Mervyn’s bankruptcy. Importantly, Claimant filed a statutory workers’ compensation proceeding (the “State Proceeding”) prior to the commencement of the bankruptcy case. The Amended Claims contain allegations of breaches of fiduciary duties, discrimination, employment discrimination, interference with contractual relations and interference with prospective business advantage. The Amended Claims increase the total sum Claimant seeks to in excess of $21 million. Claimant also alleges that the Amended Claims are secured.

The Amendments are untimely and therefore void, as they were filed after the General Bar Date of January 9, 2009. Claimant’s only timely filed claim is Claim No. 3283 in the amount of $671,759.86. The Amendments are clearly new claims filed after the Bar Date and are therefore void. The Court carefully reviewed the Amended Claims against the Initial Claim and it is beyond any doubt that the Amended Claims are not related to the Initial Claim.

The Initial Claim is the only remaining claim. The Court fully agrees with Debtors that the Court should abstain from hearing the Initial Claim. 28 U.S.C. § 1334(c)(I) directs the Court to consider exercising its discretion to abstain from hearing a matter arising under the Bankruptcy Code or arising in or related to a bankruptcy case, in “the interest of justice, or in the interest of comity with State courts or respect for State law.”

Abstention will limit the necessary tribunals to one, the California Workers’ Compensation Board (“CWCB”) in the State Proceeding. Were the Court to hear the Initial Claim, it could determine the validity but not the amount. The District Court would have to determine the amount. In re Amtrol, 384 B.R.686, 690 (Bankr. D. Del. 2008). The estate would therefore have to litigate in two courts, an obvious burden and waste of judicial resources.The Initial Claim, which is the sole remaining claim, raises only California workers’ compensation law. Abstention is therefore wholly proper. Fruit of the Loom, 407 B.R. at 600, 602; In re Holiday RV Stores, Inc., 362 B.R. 126, 130-31 (D. Del. 2007).

For the foregoing reasons, the Court entered an Order dismissing the Amended Claims and abstaining from hearing the Initial Claim and thereby deferring to the State Proceeding.

Fresno County DA Investigator Guilty of Comp Fraud

A former Fresno County District Attorney’s investigator was ordered to pay restitution after he pleaded no contest to a count of felony grand theft.

As part of his plea deal, John Harding Swenning, 46, of Kingsburg, was ordered Wednesday to pay $23,720 in restitution for investigation costs after he improperly received worker’s compensation benefits following a work-related injury. In 2009, Swenning made false statements to an investigator to get surgery from his worker’s compensation benefits.

His lawyer, Roger Nuttall, said Swenning “exaggerated symptoms” so he could get surgery and return to work.

Swenning is eligible to have the felony count reduced to a misdemeanor if he makes full restitution, Fresno County Superior Court documents said.

Superior Court Denies Applicant Request to Cash In Structured Settlement

The Superior Court of Los Angeles County, California issued an order denying a petition seeking court approval for the transfer to factoring company Fortress Funding LLC of an applicant’s rights to payments under a workers’ compensation settlement according to the report on the Corporate Counsel website. In the matter styled In Re Rudy Andrade, No. BS139876, Superior Court Judge Amy D. Hogue held that the issuer of the annuity that funded the settlement payments was an interested party with standing to appear and oppose the petition, and that, based on the arguments in the annuity issuer’s opposition, the petition was denied.

It is not uncommon in large workers’ compensation or personal injury cases to resolve the claim by way of a structured settlement. The settlement is typically funded by an annuity purchased from another insurance company for a lump sum of money. The annuity pays a regular benefit to the claimant over his or her lifetime, and may even offer a residual payment to the heirs of the claimant. There are advantages to a structured settlement for both parties. The lump sum paid by the carrier is less than the total aggregate of future payments, thus there is cost savings. The carrier no longer has to keep an open file as the future payments are paid directly by the annuity company. The applicant receives an aggregate dollar settlement higher than what the workers’ compensation benefit would have been. And, the annuity payments are tax free.

However, after a structured settlement, some applicants have second thoughts, and want to get a lump sum of cash for their structured settlement. Indeed, there are financial companies advertising on television offering cash for assignment of a structured settlement (for a deep discount of course). It would appear that the petition of Rudy Andrade is an example of such cases. Fortress Funding LLC was seeking to buy out his annuity funded structured settlement for a discount of 13.48%. An agreement such as this requires court approval pursuant to the California Structured Settlement Act. In this case the annuity company opposed the petition, and the Superior Court denied the petition to transfer the annuity to Fortress Funding LLC..

n its opposition, the annuity issuer argued, among other things, that:

  • The California structured settlement transfer act, Cal. Ins. Code § 10134 et seq., under which the petition was brought, did not apply to transfers of workers’ compensation payments.
  • The proposed transfer contravened the California Labor Code § 4900 prohibiting assignment of workers’ compensation payments.
  • The proposed transfer would be contrary to California common law, as the compromise and release agreement signed by the payee expressly prohibited assignment of the payments.
  • The proposed transfer would be contrary to a prior order of the Workers’ Compensation Appeals Board of the State of California, which approved the underlying workers’ compensation compromise and release agreement that expressly prohibited assignment of the payments.
  • The factoring transaction involved a transfer with an effective annual discount rate of 13.48%, and did not appear to be in the payee’s best interest.
  • The payee had no rights to the annuity that funded the workers’ compensation payments, and could not lawfully assign the annuity payments.

FDA Published Metal-on-Metal Hip Implant Warning

All artificial hip implants carry risks including wear of the component material. Metal-on-metal (MoM) hip implants have unique risks in addition to the general risks of all hip implants.

In MoM hip implants, the metal ball and the metal cup slide against each other during walking or running. Metal can also be released from other parts of the implant where two implant components connect. Metal release will cause some tiny metal particles to wear off of the device into the space around the implant. Wear and corrosion at the connection between the metal ball and taper of the stem may also occur. Some of the metal ions (e.g. cobalt and chromium) from the metal implant or from the metal particles will enter the bloodstream.

Orthopaedic surgeons take several precautions before and during hip replacement surgery to try to optimize the way in which the ball and socket rub against each other so that fewer wear particles are produced. However, there is no way to fully avoid the production of some metal particles.

Over time, the metal particles around some implants can cause damage to bone and/or tissue surrounding the implant and joint. This is sometimes referred to as an “adverse local tissue reaction (ALTR)” or an “adverse reaction to metal debris (ARMD).” Soft tissue damage may lead to pain, implant loosening, device failure, and the need for revision surgery (the old device is removed and replaced with another one). Patients with a progressing ALTR may be considered for earlier revision to prevent extensive damage to bone, muscle and nerves.Metal-on-metal hip implants can cause soft-tissue damage and pain, which could lead to further surgery to replace the implant, the U.S. health regulator said, following several recalls of the artificial hip parts.

International regulatory agencies have issued alerts and safety communications related to MoM hip implants.

  • In April 2010, the United Kingdom’s (U.K.) Medicines and Healthcare products Regulatory Agency (MHRA) issued a medical device alert that included specific follow-up recommendations for patients with MoM hip replacements. The recommendations included blood tests and imaging for patients with painful MoM hip implants. In February 2012, MHRA published a medical device alert and updated it in June 2012 with advice on the management and monitoring of patients with MoM hip systems.
  • In May 2012 Health Canada issued a public health communication to orthopaedic surgeons and patients regarding MoM hip implants. 
  • The Therapeutic Goods Administration of Australia published their safety information for healthcare professionals on MoM hips in September 2012. 

Johnson and Johnson, the biggest manufacturer of all-metal devices, recalled its ASR hip implant in 2010 following safety problems. Smith and Nephew withdrew a component of one of its all-metal artificial hip systems last June, following higher level of patient problems with the device. Stryker Corp begun recalling some components of its implant in July due to risks associated with corrosion. Other hip implant makers include Zimmer Holdings Inc and Wright Medical Group.

At the current time, there is not enough evidence to support the routine need for checking metal ion levels in the blood or soft tissue imaging if patients with MoM hip implants have none of the signs or symptoms described above and the orthopaedic surgeon feels the hip is functioning properly. The FDA is recommending that asymptomatic patients with MoM hip implants continue to follow-up with their orthopaedic surgeon every 1 to 2 years to monitor for early signs of change in hip status.

Feds Bust $5 Million Fake Paystub Disability Fraud Scheme

Three of nine defendants were arrested in a continuing investigation into a fraudulent unemployment and disability benefits scheme based out of Sutter County, United States Attorney Benjamin B. Wagner announced. Balkar Singh, 50; Harvinder Kaur, 37; and Harjinder Kaur Thandi, 34, all of Yuba City, will be arraigned before U.S. Magistrate Judge Dale A. Drozd.

In a 36-count indictment a federal grand jury charged nine defendants with participating in a scheme to defraud the State of California of unemployment and disability benefits. The remaining defendants: Jit Kaur, 62; Daljit Kaur Sangha, 41; Sukhwinder Kaur, 54; Darshan Rani, 44, all of Yuba City; Avtar Kaur Bains, 73, of Roseville; and Mo Pegany, 56, of Ceres, will appear in court at a later date.

This is the third indictment in an ongoing investigation. Six defendants were indicted in May 2012, and six others were indicted in September 2012.

According to the first indictment, Mohammad Nawaz Khan, 56; Mohammad Adnan Khan, 31; Iqila Begum Khan, 31, all of Live Oak, and Mohammad Shahbaz Khan 56, of Yuba City, controlled a series of companies that were reported to the Employment Development Department as farm labor contractors. The Khans sold fake paystubs to other people in the community and used the companies they controlled to report false wages for the individuals who purchased those paystubs. The Khans at times instructed the purchasers how the fake paystubs could be used to fraudulently claim unemployment and disability benefits. Over the course of the conspiracy, the defendants reported wages for over 400 separate individuals that resulted in more than 2,000 fraudulent claims for unemployment and disability benefits. The loss in this case is more than $5 million.

According to the new indictment, Jit Kaur, Bains, Sangha, Pegany, Singh, Harvinder Kaur, Thandi, Sukhwinder Kaur, and Rani purchased pay stubs that falsely showed they had been paid wages by companies controlled by the Khans. The defendants would then use that pay stub to file for unemployment benefits, disability benefits, or both. According to the indictment, the defendants purchased pay stubs for approximately $250 for every $1,000 in wages. They would use those fraudulent obtained wages to file for unemployment insurance, disability insurance, or both.

This case is the product of a joint investigation by the Federal Bureau of Investigation, the Department of Labor, Office of Inspector General, and the Employment Development Department, Investigations Division. Assistant United States Attorney Jared Dolan is prosecuting the case.

If convicted, the defendants face a maximum statutory penalty of 20 years in prison and a $250,000 fine for each count.

“Fraud against the employer-funded Unemployment Insurance program or the employee-funded Disability Insurance program costs all of us and will not be tolerated,” said Pam Harris, Director of the California Employment Development Department (EDD). “EDD’s investigators are committed to detecting and deterring fraud to protect the integrity of these vital programs, which are meant to benefit hardworking Californians and businesses.”

DWC Seeks Public Input On RBRVS Fee Schedule

The Department of Industrial Relations’ (DIR) Division of Workers’ Compensation (DWC) is seeking public input on payment ground rule topics as it moves forward with developing a Resource Based Relative Value Scale (RBRVS).

Senate Bill 863 directs DWC’s administrative director to adopt a physician fee schedule based upon the federal RBRVS used in the Medicare payment system. In the RBRVS-based system, relative value units interact with payment ground rules and the conversion factor to determine the maximum fee in light of the resources to provide the service. SB 863 provides that the physician fee schedule shall include payment ground rules that differ from Medicare, including, as appropriate, payment of consultation codes as well as payment of evaluation and management services provided during a global period of surgery. The division is seeking public input on which ground rules should differ from Medicare in the new fee schedule and why.

The forum can be found by clicking the “current forums” link on the top of the DWC forums page.

Comments will be accepted at the forum through Feb. 8, 2013. Please feel free to participate in this important process.

WCAB En Banc Decision Rejects Jurisdiction Over NFL Player’s Claim

Applicant played professional football for four years with the Arizona Cardinals (Cardinals) from 1999 to June 24, 2003. The Cardinals are a National Football League (NFL) team based in Arizona, where the players regularly train and practice for games. During the four years applicant was employed by the Cardinals, the team played a total of 80 games; 40 of them in Arizona and the remainder in 16 other states, including 7 games in California.

In the summer of 2010 he heard from another former NFL player, Michael Jameson, that he could file a workers’ compensation claim of cumulative industrial injury in California and he filed an Application for Adjudication of Claim, alleging that he incurred industrial injury to multiple body parts as a result of “cumulative injury” incurred while playing and practicing for the Cardinals during the four year period ending in 2003.

The Cardinals contend that the California Workers’ Compensation Appeals Board (WCAB) should decline to hear applicant’s workers’ compensation claim because each of the three employment contracts he signed with the Cardinals contains an identical forum selection clause that said “This Contract has been entered into in the State of Arizona and in no other state, and the parties acknowledge that the Player’s principal place of employment shall be within the State of Arizona and in no other state. Claims for workers’ compensation shall be filed with the Industrial Commission of Arizona, and the parties agree that they shall be subject to the workers’ compensation laws of the State of Arizona and of no other state.”

The WCJ found that the WCAB “has jurisdiction over applicant’s claim,” but that “Applicant’s contacts with California are not sufficient to warrant exercising the Board’s jurisdiction in light of applicant’s contractual agreement with his employer to file his workers’ compensation claims in Arizona.” Based upon those findings the WCJ further ordered that applicant “take nothing” on his claim for California workers’ compensation benefits, which is tantamount to dismissal of the claim. The WCAB affirmed the decision in the En Banc decision of Dennis McKinley v Arizona Cardinals: The Travelers Indemnity Company.

Under applicant’s theory that each and every game in which he played contributed to the injurious exposure that caused his claimed cumulative injury, at least 16 other states besides California could have concurrent jurisdiction over the claim for workers’ compensation. In that there are 16 other states that could potentially exercise jurisdiction over applicant’s cumulative injury claim for workers’ compensation, the WCAB carefully considered whether that claim is properly adjudicated in California. The answer to that question also implicates the exclusive remedy aspect of workers’ compensation that is part of California law and the similar laws of most states. In view of this limited connection with California, and in light of the Arizona forum that applicant and the Cardinals reasonably identified in their employment contracts, the WCAB decline to exercise jurisdiction over his claim for workers’ compensation.

Applicant’s primary connection during his four years of employment by the Cardinals was with the State of Arizona. The Cardinals’ home base is in Arizona and that is where the team is headquartered. Applicant regularly trained and practiced at the team’s facility in Tempe, Arizona, and he spent the substantial majority of his work time in that state. By contrast, applicant was not a resident of California when he contracted to play football for the Cardinals and his contracts of employment were made in Arizona. The majority of applicant’s work duties were performed in Arizona where he regularly practiced and where the Cardinals played 40 of their 80 games during the period of his employment. In addition, 33 of the other 40 games were played in states other than California. In short, there was limited connection with California with regard to applicant’s employment by the Cardinals and his claimed cumulative injury. In the view, of the WCAB, that limited connection is insufficient for the WCAB to exercise jurisdiction over his claim for workers’ compensation in derogation of the Arizona forum he and the Cardinals reasonably identified in their employment contracts as the place where any claim for workers’ compensation would be filed.

Applicant argues that because he paid California income tax for games that were played in the state he has a due process right to have his workers’ compensation claim adjudicated by the WCAB. However no authority holds that payment of state income tax requires the WCAB to adjudicate an employee’s claim for workers’ compensation, and tax law does not control how California’s system of workers’ compensation is administered, given the very different purposes of those laws.

With respect to public policy issues raised by the applicant, the WCAB concluded “In the special circumstances of this case, we conclude that California has a stronger public policy interest in following the parties’ forum selection clause than it does in exercising jurisdiction over applicant’s claim for workers’ compensation.”

The WCAB concluded “our concern about court congestion and the overburdening of already strained judicial resources is not based upon abstract speculation. The NFL consists of 32 teams playing in 23 states and occasionally in foreign countries. Each club is allowed a maximum of 53 players on their roster. Because three NFL teams are domiciled in California, players from all of the 29 other teams could potentially claim that they incurred some portion of a cumulative industrial injury in California merely because they played one or more games in the state. In fact, numerous claims have been filed in California by professional football players and other professional athletes, and those claims impose a substantial burden on the WCAB’s limited resources.”

DWC Schedules MPN Regulations Public Meeting

The Division of Workers’ Compensation (DWC) has scheduled a public meeting to discuss the issues related to drafting regulations regarding the SB 863 changes to medical provider networks. The meeting will be held: on Wednesday, Jan. 30, 2013 from 10 a.m. to noon at the Elihu Harris State Office Building Auditorium located at 1515 Clay Street in Oakland.

This is the first opportunity for the public to provide input to the Division on regulations to implement MPN changes under SB 863. Specifically, the following issues will be addressed:

  • New MPN applicants
  • Reapproval process
  • Petition process for MPN suspension/revocation
  • Administrative penalties
  • MPN audits/investigations
  • Independent Medical Review (IMR) process

CWCI Says Opioid Drug Monitoring Could Save $57.2 Million

As debate swirls about future funding for California’s $3.7 million a year Controlled Substance Utilization Review and Evaluation System (CURES), a new California Workers’ Compensation Institute study asserts that allowing 3rd party payer access to CURES would improve quality of care and strengthen utilization and cost control over opioid prescriptions dispensed to injured workers, which for accident year 2011 claims alone would cut California workers’ compensation claim costs by an estimated $57.2 million

Excessive use of prescription painkillers has become a nationwide public health problem, and a huge cost driver in California workers’ compensation, where highly addictive “Schedule-II” narcotics such as oxycontin and fentanyl have been widely used, even for relatively minor sprain and strain injuries. In 2011, the Division of Workers’ Compensation adopted chronic pain management guidelines to help control the use of these drugs to treat injured workers, but they have continued to account for a growing proportion of workers’ compensation prescriptions. One tool California does have to combat prescription drug abuse is CURES, its 3-year old electronic prescription monitoring program run by the Department of Justice. CURES allows doctors, pharmacists and law enforcement to track the prescription history of patients receiving opioids to identify fraud and abuse patterns. Many workers’ compensation stakeholders assert that access to CURES data, coupled with enhanced medical cost containment strategies (including pharmacy benefit managers, medical provider network monitoring and utilization review) could significantly reduce inappropriate opioid prescriptions dispensed to injured workers. However, since a $70 million cut in the Department of Justice budget was announced in late 2011, the state has struggled to come up with the $3.7 million a year needed to fund CURES.

Using data from prior studies and CWCI’s Industry Claims Information System database, authors Alex Swedlow and John Ireland estimate that 23 percent of the 500,000 California job injury claims in accident year 2011 involved opioid prescriptions. Though the Institute projects that access to CURES would generate no savings on the 41 percent of workers’ compensation opioid claims involving a single prescription, potential savings from reduced medical and indemnity payments on the 59 percent of the opioid claims involving multiple prescriptions would range between 3 to 7 percent – or $57.2 million on the accident year 2011 claims.

Debate over the funding of CURES continues, as Attorney General Kamala Harris this week urged Governor Brown to restore funding for the program in light of the state’s improving budget picture. In the meantime, the Institute has released its analysis in a white paper, “Estimated Savings from Enhanced Opioid Management Controls Through Third Party Payer Access to CURES.” The white paper is available in the Research section of the Institute’s website,