Author: WorkCompAcademy

The U.S. Supreme Court declined to hear the petition filed by Liberty Mutual subsidiaries for relief from changes to New York workers’ compensation law that the company says may cost carriers as much as one billion dollars.

Liberty argues in its Petition for Writ of Certiorari filed in the high court this February, that the State of New York has operated a special workers’ compensation insurance fund for cases that reopen after being closed for a statutorily defined period, with the goal of protecting employers and their insurance carriers from bearing the costs of unforeseeable changes in the status of beneficiaries’ work-related medical conditions.

For decades, Section 25-a of the New York Workers’ Compensation Law (“WCL”) has required employers to support the fund through annual assessments and assigned the fund exclusive financial liability for reopened cases.

Correspondingly, the WCL exempted employers from the duty to obtain insurance to cover claims meeting Section 25-a’s prerequisites, and insurance carriers’ state-approved workers’ compensation policies defined the scope of coverage accordingly: They did not cover Section 25-a cases.

Likewise, Liberty Mutual claims the state-approved premiums that employers paid carriers for workers’ compensation insurance did not account for potential liability in Section 25-a cases, nor did the amount of loss reserves carriers maintained under state insurance law and generally accepted actuarial principles.

In 2013 the New York Legislature amended the WCL, closing the fund to cases reopened in 2014 or later.

As a result, carriers became liable for future reopened cases, regardless of whether the cases arose under a future workers’ compensation insurance policy or a preexisting one.

According to the legislative history, this amendment was intended to save New York businesses hundreds of millions of dollars in assessments per year by eliminating what the Legislature perceived to be a double charge for Section 25-a claims: once in the form of assessments paid to the fund, and once in the form of premiums paid to carriers – who, in the State’s view, received a “windfall,” since they would not incur liability for Section 25-a cases.

But Liberty Mutual says that rationale was obviously wrong. “It was clear then and it is undisputed now that carriers’ premiums were not computed to compensate them, and did not compensate them, for Section 25-a liability”.

Instead, Liberty says the real effect of the amendment is to impose on carriers a new liability for cases they had specifically excluded from their preexisting state-approved policies and that they had not been paid to cover.

According to the state-designated entity responsible for computing workers’ compensation costs, the amendment’s closure of the fund to future reopened cases under preexisting policies will inflict on carriers a staggering “unfunded liability” of over $1 billion.

The New York Court of Appeals rejected the Liberty Mutual subsidiary challenges to the amendment under the Contracts, Due Process, and Takings Clauses of the U.S. Constitution.

Amicus briefs were filed in the U.S. Supreme Court case by the Property Casualty Insurance Association and the Washington Legal Foundation.

Nonetheless, the U.S. Supreme Court declined to issue a Writ of Certiorari. They will not look into the matter or issue a ruling on the merits, which means the lower court holding applies. Not a good day for New York workers’ compensation insurance carriers.

On May 22, In an important 5-4 decision, the U.S. Supreme Court held that class or collective action waivers, particularly in wage/hour cases, and contained in arbitration agreements between employers and employees are valid and enforceable.

Companies can use arbitration clauses in employment contracts to prohibit workers from banding together to take legal action over workplace issues. The vote was 5 to 4, with the court’s more conservative justices in the majority. The court’s decision in Epic Systems Corp v Lewis could affect some 25 million employment contracts.

And perhaps the first victory for an employer under this new case law involves an Uber driver who claims in a federal case pending in New York that the ride-hailing company illegally charged him and other drivers a workers’ compensation fee. On May 31, the United States District court ordered that he must pursue his argument in arbitration as an individual, not a class action.

Gustavo Camilo agreed to arbitrate any disputes with Uber Technologies Inc. on “an individual basis only,” Judge Alvin K. Hellerstein of the U.S. District Court for the Southern District of New York said. Camilo therefore can’t proceed with a class action alleging various theories against the company.

The drivers sue on three counts; breach of contract, unjust enrichment and unlawful wage deduction. The class action suit was filed in the Supreme Court of the State of New York, and was timely removed to federal court under the Class Action Fairness Act.They demanded a jury trial, and seek reimbursement and restitution.

Uber moved to compel arbitration of the claims alleged against the Uber Defendants, to strike Plaintiff’s class allegation, and to dismiss the Complaint, on the basis of the arbitration and class waiver clause contained in Plaintiffs agreement with Uber.

In first registering as an Uber driver, a prospective driver must agree to a technology services agreement with Uber. Plaintiff signed an agreement with Uber requiring that all disputes or issues, including the question of arbitrability, be resolved through binding arbitration.The arbitration provision contains a class waiver, preventing the arbitrator from considering claims on a class or representative basis

In ruling on the motion, the court referenced the new Supreme Court decision when it said “More recently, and subsequent to the briefing in this case, the Supreme Court held that waivers of class actions are valid and not precluded by Section 7 of the NLRA, 29 U.S.C. § 157. See Epic Sys. Corp. v. Lewis, No. 16-285, 2018 WL 2292444 (U.S. May 21, 2018).”

Accordingly the court ordered “Plaintiff is directed to arbitrate his claims on an individual basis and this action will be stayed pending the arbitration.”

A new report published by CHSWC describes work undertaken by the RAND Corporation for the Department of Industrial Relations (DIR) to evaluate California’s Return-to-Work (RTW) Fund as it approaches its third year of implementation. This research builds directly on a number of past RAND studies for DIR and the Commission on Health and Safety and Workers’ Compensation (CHSWC).

Senate Bill (SB) 863 sought to improve the adequacy of permanent partial disability benefits by raising the maximum weekly PPD benefit and by increasing disability ratings for selected injuries; both changes would lead to more generous PPD benefits. To address remaining concerns about the adequacy and targeting of PPD benefits, SB 863 also instructed the Director of the Department of Industrial Relations (DIR) to design and implement a new $120 million program named the Return-to-Work Supplement Program (RTWSP). It was established on April 13, 2015.

California’s Return-to-Work Supplement Program (RTWSP) is a new benefit for permanently disabled workers who suffer disproportionately high earnings loss in comparison to their workers’ compensation benefits. The RTWSP provides a one-time $5,000 payment to workers who cannot return to work following a permanently disabling workplace injury.

DIR has authority to adjust the design and implementation of the RTWSP through additional regulations. To determine the need for modifications to the program, DIR asked RAND to evaluate the RTWSP’s performance and suggest improvements. RAND conducted an evaluation of the program’s performance and identified options for improving the RTWSP. The study included an environmental scan, stakeholder interviews, and analysis of program data. RAND also held a Technical Advisory Group meeting with key stakeholders.

RAND found that the RTWSP is performing well on several dimensions. The eligibility criteria have accurately targeted workers with more severe disability and program administration is efficient, with little evidence of fraud or abuse.

However, take-up of the program is low: in a sample of eligible workers, just over half applied to receive the benefit. The most important factor predicting access to the program was legal representation, suggesting that many workers are failing to navigate the process on their own despite the intent of the program’s designers. RAND also found that the eligible population is larger than initially anticipated, a trend driven in part by rising utilization of California’s voucher-based vocational rehabilitation benefit (the Supplemental Job Displacement Benefit).

Based on these findings, RAND recommends that modifications to the RTWSP focus on increasing program take-up among currently eligible workers. DIR could accomplish this by making issuance of the Return-to-Work Supplement automatic, or through outreach and notification efforts. DIR should also improve monitoring of SJDB voucher issuance to track emerging changes in the RTWSP-eligible population and to facilitate oversight of the SJDB.

Drs. William Longton, Ruben Kalra, and Richard Shinaman have agreed to collectively pay $260,000 to settle allegations by the U.S. Department of Justice that they failed to keep and maintain adequate records and other allegations pertaining to controlled substances at their Novato, Pleasant Hill, and Pleasanton offices.

The physicians operate under the name Pain Medicine Consultants, Inc., with offices in multiple Bay Area locations.

The settlement agreement resolves allegations by the government that a January 2014 DEA inspection uncovered multiple violations by Longton, Kalra, and Shinaman of the Controlled Substances Act, 21 U.S.C. § 801.

In the agreement, the physicians acknowledge that they each, at the relevant time, were registered with the DEA as Practitioners, providing them with authorizations to handle Schedules II through V controlled substances. They also acknowledge they had an obligation to “keep and maintain” records related to their receipt and distribution of controlled substances in connection with their practices.

According to the agreement, following the DEA’s inspection, the government concluded that between January 10, 2012, through January 17, 2014, Shinaman, Longton, and Kalra failed to keep and maintain adequate records pertaining to controlled substances, as required by 21 C.F.R. § 1304, et seq.; failed to include the address of the patient on controlled substance prescriptions that they each issued as required by 21 C.F.R. § 1306.05(a); and exceeded the authority of their registrations by filling a prescription for a controlled substance, in violation of 21 C.F.R. § 1306.06.

According to the terms of the agreement, Longton, Kalra, and Shinaman will collectively pay the government $260,000 to resolve all civil claims related to the violations identified in the investigation.

Assistant U.S. Attorney Rebecca A. Falk is handling the matter on behalf of the U.S. Attorney’s Office for the Northern District of California, with assistance from the DEA San Francisco Field Division, Oakland Resident Office Diversion Group.

The California Court of Appeal affirmed the rule that after discovery of undocumented worker status by an employer, the workers are entitled to most of the legal rights and remedies provided to employees by state and federal laws. This includes wage and hour laws.

Juan Luis Lepe, Virgilio Flores-Juarez, and Berna Vargas filed a lawsuit against their former employer, Luft Enterprises, a California Corporation, doing business as Inn-Decor and Otmar Luft, alleging unpaid overtime wages, failure to provide meal and rest periods, and other Labor Code violations and unfair business practices

The Company manufactures furniture for businesses such as restaurants and casinos. Plaintiffs worked 10 or more hours per day without an afternoon or second meal break. The Company failed to pay overtime wages or provide meal and rest periods. Prior to May 2010, defendants were aware that plaintiffs were not authorized to work in the United States due to their immigration status. This was the agreed upon claim period in this case.

The trial court entered judgment in favor of plaintiffs in the total amount of $140,016 (Lepe – $59,776; Flores-Juarez -$59,776; and Vargas – $20,464) and against all defendants jointly and severally. Plaintiffs were also awarded their attorney’s fees and costs.

Defendants appealed and challenge the judgment, contending (1) they may not be compelled, as a matter of law, to pay past wages allegedly due because plaintiffs were not legally authorized to work in the United States; (2) there is insufficient evidence that defendants issued inaccurate wage statements; (3) the trial court erroneously granted plaintiffs’ attorney’s fees motion; and (4) the trial court abused its discretion in awarding certain costs.

The Court of Appeal found merit in defendants’ challenge to the award of costs but otherwise affirmed in the unpublished case of Lepe v. Luft Enterprises, Calif. Ct. App., No. E067382 (May 10, 2018).

In support of their contention, defendants rely on the holding in Salas v. Sierra Chemical Co. (2014) 59 Cal.4th 407, 414, 424-425 (Salas). The Court of Appeal found such reliance to be misplaced.

In Salas, the plaintiff sued his former employer under the California Fair Employment and Housing Act (FEHA) alleging defendant employer failed to reasonably accommodate his physical disability and refused to rehire him in retaliation for filing a worker’s compensation claim. After the complaint was filed in Salas, the defendant learned that the plaintiff may have used another man’s Social Security number in order to gain employment. Defendant successfully moved for summary judgment.

The California Supreme Court reversed, holding that the federal Immigration Reform and Control Act of 1986 (8 U.S.C. § 1101 et seq.) did not preempt application of the antidiscrimination provisions of California’s FEHA to workers who are unauthorized aliens, but that “federal preemption does bar an award of lost pay damages under the FEHA for any period of time after an employer’s discovery of the employee’s ineligibility under federal law to work in the United States.”

In reaching this holding, the Salas court noted that its “preemption analysis for the postdiscovery period is limited to employers who discover the plaintiff employee’s unauthorized status after the employee has been discharged or not rehired. . . . Because imposing full liability for lost wages would provide a disincentive for such immigration law violations, thereby furthering the goals of federal immigration law, in these situations arguably federal law would not preempt lost wages remedies for violations of state laws like California’s FEHA.”

Here, defendants concede knowledge of plaintiffs’ unauthorized work status during the “agreed-upon claim period in this case.”

“Since defendants were aware of plaintiffs’ unauthorized work status during the time of their employment, defendants actively joined in the violation of federal immigration law. Under this circumstance, the Salas court holding does not apply, and plaintiffs are not barred from recovering their lost wages.”