Author: WorkCompAcademy

An increase in legal action forcing employers to reclassify contract workers as full-time employees could drive up labor costs significantly and heighten scrutiny on applications for workers’ compensation insurance.

Though no firm statistics are available on the size of the freelance economy, the story published in Insurance Business American says that a consulting firm estimated in 2014 that as many as 17.9 million Americans work as contract employees for 15 hours or more each week. And though the popularity of “1099 workers” – thus named for their tax status – is growing, so are court decisions ruling that many of these workers are misclassified and are due full employment benefits, including healthcare, training programs, travel reimbursements and workers’ compensation.

Such lawsuits and the additional expenses attached to reclassification could increase the cost of labor by 20% to 40%, a Wall Street Journal report estimated this week.

The misclassification of workers is particularly common in businesses such as dentist offices and nail salons, or for workers in the sales profession. Additionally, lawsuits against Uber and other app-related services like Homejoy and Luxe, have raised significant questions about the responsibility of “on-demand” companies.

“Many of these companies operate on very thin margins – not all can absorb the hit of having to switch to an employee workforce,” Jamie Davison, a partner at Redpoint Ventures, told the newspaper. “There is a real regulatory risk here, which we have to weigh, that some of these companies could owe millions in back wages and taxes.”

For insurance agents, the heightened scrutiny means additional pressure to help employers correctly classify employees. That’s something many companies and agents overlook while submitting workers’ compensation applications, said La’Troya McKinney, commercial lines account manager with Abram Interstate Insurance Services in California.

“One thing I always tell people is that 1099 is not an employment status,” McKinney said. “If an employer is scheduling their time, telling them who to see or where to go, they are an employee under the labor code and they can be fined up to $150 per day per employee for not having comp in place.”

She added that though these stipulations apply primarily in California – where 1099 status is under strictest review – it doesn’t hurt for agents across the country to adopt a similar no-risks attitude. “I tell people that if they base their decisions off regulations in what is one of the most rigid states, they can’t go wrong,” she said.

The WCAB determined that SB 863 changed the QME Panel timing requirements specified in Messelle v. Pitco Food, Inc. (2011) 76 Cal.Comp.Cases 956 (Appeals Bd., en banc).

In the case of David Murray v. County of Monterey a claim denial was sent to applicant by defendant’s adjusting agent on August 1, 2014 . On August 18, 2014, defendant requested a QME panel in the specialty of orthopedic surgery. The only issue at an expedited hearing was whether defendant’s QME panel request is timely. The outcome of this hearing was to determine what would be the correct specialty since applicant had requested physical medicine and rehabilitation. The WCJ found that the defendants panel request was not timely, and the defendant requested removal.

Labor Code § 4062.2, as amended by SB 863, allows a request for qualified medical evaluator panel to be made “[n]o earlier than the first working day that is at least 10 days after the mailing” of request for evaluation under Labor Code § 4060

In this case, defendant mailed the claim denial letter to applicant on August 1, 2014. The 15th day after the denial (10 days plus five for mailing) was August 16, 2014, a Saturday. Because the 15th day fell on a Saturday, that day is excluded and the next business day on which defendant could send its QME panel request was Monday, August 18, 2014. Defendant made its QME panel request on August 18, 2014, making the request a timely request.

The WCJ reached a contrary conclusion in reliance on Messelle v. Pitco Food, Inc. (2011) 76 Cal.Comp.Cases 956 (Appeals Bd., en banc). That decision, however, involved an earlier version of section 4062.2 that was substantially altered by amendment as part of Senate Bill 863.

Existing section 4062.2, which is the version applicable to this case, no longer requires the parties to seek agreement on an AME. The legislature deleted that provision in Senate Bill 863. Now the party desiring a QME panel may request one, “[n]o earlier than the first working day that is at least 10 days after the mailing” of a request for evaluation under section 4060 or an objection to the treating physician’s opinions under section 4061 or 4062. Thus, section 4062.2 now allows a request for a QME panel to be made on the 10th day after a written objection (or, on the 15th day, if the request is mailed). The rationale in Messelle, supra, is not applicable to section 4062.2 in its current version.

In 2012 the US Justice Department announced that drugmaker GlaxoSmithKline agreed to plead guilty and to pay $3 billion to resolve its criminal and civil liability arising from the company’s unlawful promotion of certain prescription drugs, its failure to report certain safety data, and its civil liability for alleged false price reporting practices. The resolution is the largest health care fraud settlement in U.S. history and the largest payment ever by a drug company.

But that was not the end of trouble for the global health care giant. Reuters Health reports it was then fined a record 3 billion yuan ($483 million) for corruption in China last year and is examining possible staff misconduct elsewhere, faces new allegations of bribery in Romania.

GSK confirmed it was looking into the latest claims of improper payments set out in a whistleblower’s email sent to its top management on Monday. A copy of the email was seen by Reuters. The company is already probing alleged bribery in Poland, the United Arab Emirates, Lebanon, Jordan, Syria and Iraq.

The latest allegations say GSK paid Romanian doctors hundreds, and in one cases thousands, of euros between 2009 and 2012 for prescribing its medicines, including prostate treatments Avodart and Duodart and Parkinson’s disease drug Requip. According to the email, the doctors were notionally paid for speaking engagements, but in three out of six cases, including the most highly paid one, they did not give any speech. The other three medics gave only one speech each, despite receiving multiple payments.

GSK also provided doctors with many international trips and made payments to them under the guise of participation in advisory boards, the email said.

The China scandal, which involved alleged bribes totaling hundreds of millions of dollars, hit GSK’s sales in the country, although Chief Executive Andrew Witty, reporting quarterly results on Wednesday, said its Chinese business was stabilizing.

The sender of the Romania email said its contents would be passed on to the U.S. Department of Justice and the Securities and Exchange Commission (SEC), which are investigating GSK for possible breaches of the Foreign Corrupt Practices Act. An SEC program provides cash incentives for whistleblowers to report corporate malpractice.

Each year the California Chamber of Commerce releases a list of “job killer” bills to identify legislation that will decimate economic and job growth in California. The CalChamber tracks the bills throughout the rest of the legislative session and works to educate legislators about the serious consequences these bills will have on the state. The 2015 session will soon close, so what remains of the 2015 “job killer” list of proposed legislation.

As of July 17, the deadline for bills to pass policy committees and move to the floor, seven Senate job killer bills and two Assembly job killer bills remain active. One “job killer” bill is already on its way to the Governor. Surprisingly, none of them pertain to workers’ compensation.

AB 359 has been sent to the Governor for signature. The proposed law alters the employment relationship by requiring any successor grocery employer to retain employees of the former grocery employer for 90 days and continue to offer continued employment unless the employees’ performance during the 90-day period was unsatisfactory. The law was supported in part by A 2014 study by the Food Labor Research Center at U.C. Berkeley (commissioned by the United Food and Commercial Workers) titled, “Shelved: How Wages and Working Conditions for California’s Food Retail Workers Have Declined as the Industry has Thrived,”

Other labor related bills that are still alive, but not passed include SB 3 which would increase the minimum wage by $3.00 over the next two and a half years with automatic increases tied to inflation.

Also pending is SB 406 which would significantly expand the California Family Rights Act by reducing the employee threshold from 50 to at least 25 employees and expanding the family members for whom leave may be taken, which will provide a California-only, separate 12 week protected leave of absence for both small and large employers to administer.

AB 465 would preclude mandatory employment arbitration agreements. The CalChamber says the proposed law is likely pre-empted by the Federal Arbitration Act even if passed.

The remaining seven “job killer bills” are not directly related to employment law issues, but nonetheless are targeted by the CalChamber for driving up costs. There should be no workers’ compensation surprises as was the case in August 2013 with SB 863. But then again, the industry did not know SB 863 was in the pipeline until the very last week.

The DWC has posted a new report this month on progress implementing SB 863. “This report confirms that the reforms are on track. Employer costs are under control and injured worker benefits are increasing,” said Labor and Workforce Development Secretary David M. Lanier. “While there is ongoing work to reduce delays and improve the system – overall the progress is impressive.”

The report concludes that workers’ compensation costs for employers have dropped. In May 2015, the Department of Insurance adopted advisory pure premium rates for July 1, 2015, which on average are five percent less than the industry average for filed pure premium rates as of Jan. 1, 2015, and 10.2 percent less than the average of the approved Jan. 1, 2015 rates.

Benefits for injured workers have also increased. Prior to the reform legislation, the minimum weekly benefit payment for people with permanent disabilities was $130, and the maximum was $270. The new minimum weekly PD benefit is $160, and the maximum is $290. Also, the Return-to-Work-Supplement Program – which provides a one-time $5,000 supplement to eligible injured workers – became effective in April 2015. As of June 30th, DIR had issued 434 checks totaling over $2 million.

SB 863 also created an Independent Medical Review (IMR) program, in which physicians use evidence to determine the necessity of requested treatments. “The progress made since the passage of SB 863, which allows medical – rather than legal – experts to make medical decisions, is very encouraging,” said DIR Director Christine Baker. Additional key findings of the report include:

1) IMR decisions are being issued well within the 30-day statutory time frame from receipt of medical records.
2) Lien filings are a big factor in the reduction in overall costs. The report shows that lien filings have decreased by approximately 60 percent since the passage of SB 863. A retrospective evaluation report of SB 863 cost monitoring completed last November by the WCIRB estimated savings of $690 million due to the reduction in lien filings.
3) Commitment to evidence-based medicine is also demonstrated through recent adjustments to the Medical Treatment Utilization Schedule (MTUS). The MTUS is a set of guidelines for appropriate medical care based on high-quality, unbiased scientific studies. However, the system allows for exceptions when treatment can be based on guidance other than the MTUS.

SB 863’s revisions to the MPN program went into effect on August 27, 2014. More of these networks have been approved, and they are also now more accountable to DWC. Physician listings must be updated quarterly, and if a provider leaves the network, they are required to give 45 days’ notice. Furthermore, the revised access standards require an MPN to have at least three available physicians from which injured workers can choose.

On April 13, 2015, DIR launched the Return-to-Work Supplement Program (RTWSP) for injured workers. This $120 million per year fund, which provides an additional $5,000 to each eligible injured worker who has a disproportionate loss of earnings, is an important component of the workers’ compensation reforms in SB 863. As of June 30, 2015, DIR made supplemental payments totaling $2,170,000 to injured workers. DIR received 508 applications for the one-time payment of $5,000 by that date, with 454 application reviews completed, and the remaining 54 applications under review. Of the 454 applications reviewed, 388 applications were deemed eligible, and 66 were denied, either because the person was injured before Jan. 1, 2013, or the application filed was incomplete or a duplicate.