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Category: Daily News

CWCI Examines California’s Proposed Agricultural Heat Injuries Presumption

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A bill that would give a presumption of compensability to farmworker heat-related injury claims if the employer is found to be out of compliance with Cal/OSHA’s outdoor heat illness prevention standard would likely create more challenges than it would solve, entail significant administrative friction costs, and is unlikely to have an appreciable impact on agricultural worker safety according to a California Workers’ Compensation Institute (CWCI) study.

CWCI’s analysis of SB 1299 (Cortese), examines the population of agricultural workers covered by the legislation, measures the percentage of workers’ compensation claims filed by agricultural workers that involve heat-related injuries, and compares the percentage of heat-related claims in the agriculture sector to the percentage for non-agricultural workers covered by the high-heat procedures in the Cal/OSHA Outdoor Heat Illness Prevention Standard. In addition, the analysis considers the impact of the legislation on the California workers’ compensation system.

Among the findings:

– – Despite global warming and climate change, there are very few agricultural heat illness claims in California workers’ compensation. CWCI’s review of more than 3.2 million claims filed by California workers from 2019 through 2023 found that only 659 of the 100,777 claims filed by agricultural workers (0.65%) were due to heat-related illness. That proportion was comparable to other industries covered by the Cal/OSHA high heat standard, such as landscaping (0.65%), construction (0.67%) and mining, oil and gas extraction (0.56%).

– – The small percentage of claims involving heat illnesses likely reflects the success of Cal/OSHA’s outdoor heat illness prevention standard, enacted in 2005 and amended in 2015. The standard requires, among other things, access to shade and water, active monitoring of employees who need to acclimatize to heat, supervisor and employee training, and a heat illness plan. In addition, it requires employers to initiate high heat procedures if the temperature exceeds 85 degrees, and if the temperature crosses 95 degrees, agricultural workers must take a mandatory 10-minute cool-down break every two hours. Employers also must inform their workers that they may exercise their rights under the standard without fear of retaliation and advise them of acclimatization procedures and appropriate first aid and emergency responses to heat illness.

– – While several studies have found that increases in temperature lead to increases in injuries overall, a recent UCLA study that focused on California exclusively found that this phenomenon largely ceased following implementation of the Cal/OSHA Outdoor Heat Illness Prevention Standard in 2005.

– – Outdoor agricultural workers have a workers’ compensation claim denial rate of 11.0%, which is lower than the 12.4% to 13.3% denial rates for other outdoor occupations covered by the Cal/OSHA outdoor heat standard, and lower than the 14.7% denial rate for all claims.

– – The presumption created by SB 1299 would shift the initial determination of whether a Cal/OSHA heat injury illness standard violation occurred from the Occupational Safety and Health Appeals Board to the Workers’ Compensation Appeals Board (WCAB). Given the lack of subject matter expertise on the part of WCAB judges, and the challenge of determining violations without citations from Cal/OSHA, the administrative burden and frictional costs of SB 1299 would be significant.

Workers’ compensation presumptions shift the burden of proof that a claim is work-related from the employee to the employer. Because they represent an exception to the grand bargain of workers’ compensation, they have historically been limited to police and firefighters for specific injuries such as cancer or heart disease that that may arise from the unique risks inherent in their public service jobs, and even then, only when there is clear and compelling evidence of a lack of hazard abatement, a high incidence of injury, and a high denial rate. In the case of SB 1299, which would open the door to private sector presumptions, CWCI’s analysis indicates such evidence is lacking. The Institute has issued its analysis as an Impact Analysis report that is available for free under the Research tab at www.cwci.org.

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Cal. Supreme Ct. Clarifies Vertical v Horizontal Integration of Excess Insurance

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From 1944 through the 1970s, Kaiser Cement and Gypsum Corporation manufactured asbestos-containing products at numerous different facilities. By 2004, more than 24,000 claimants had filed product liability suits against Kaiser alleging that they had suffered bodily injury (primarily asbestosis or cancer) as a result of exposure to Kaiser’s asbestos products. Truck Insurance Exchange, is a primary insurer for Kaiser.

Kaiser tendered these claims to Truck, one of several primary insurers that had issued commercial general liability (CGL) policies to Kaiser during this time period. The subsequent litigation has generated multiple appellate decisions that have addressed a wide range of complex questions regarding insurance coverage and policy interpretation.

In 2001, Truck initiated this insurance coverage action to determine its indemnity and defense obligations to Kaiser. Several years later, Truck amended its complaint to add a cause of action for contribution against several of Kaiser’s excess insurers that had issued first-level excess policies to Kaiser for policy years where the directly underlying primary policy had been exhausted.

Relying on the California Supreme Court’s reasoning in Montrose Chemical Corp. of California v. Superior Court (2020) 9 Cal.5th 215 (Montrose III), Truck argued that the excess insurers’ indemnity obligations were triggered immediately upon exhaustion of the directly underlying primary policies. Truck further reasoned that because the excess insurers owed a coverage duty to Kaiser, they were effectively responsible for indemnifying the same loss as Truck and should therefore be required to contribute to Truck’s coverage costs.

According to the excess insurers, Montrose III’s analysis is limited to excess policies that sit over other excess policies, not first-level excess policies that sit over primary insurance.

The Court of Appeal agreed with the excess insurers that Montrose III did not extend to excess policies that sit over primary insurance, which has characteristics that are distinct from excess insurance including immediate coverage and defense obligations. In so ruling, the court rejected SantaFe Braun, Inc. v. Insurance Co. of North America (2020) 52 Cal.App.5th 19 (SantaFe), which held that Montrose III’s reasoning does apply in the context of first-level excess policies. The court further concluded that because the excess insurers had no coverage obligation under their policies until all primary insurance had been exhausted (including Truck’s primary policy), Truck was not entitled to contribution.

The appeal of this decision to the California Supreme Court required it to resolve the question that it left open in Montrose III: whether standard language in commercial general liability policies that are excess to primary insurance policies should be interpreted to require vertical or horizontal exhaustion. In other words, can an insured access a first-level excess insurance policy upon exhaustion of underlying primary insurance obtained for the same policy period (vertical exhaustion), or is the insured required to exhaust all primary policies issued during the continuous period of damage (horizontal exhaustion)?

Contrary to the Court of Appeal reasoning, the California Supreme Court in Truck Ins. Exchange v. Kaiser Cement & Gypsum Corp.-S273179 (June 2024) concluded that its analysis in Montrose III applies equally here and reversed the Court of Appeal.

In the context of standard “occurrence based” CGL insurance policies, California has adopted what is known as the “all-sums-with-stacking” approach to continuous injuries. This approach has three primary components. First, in Montrose Chemical Corp. v. Admiral Ins. Co. (1995) 10 Cal.4th 645, 656 (Montrose I), the Supreme Court adopted the “continuous injury trigger of coverage” principle (id. at p. 685), under which “bodily injury and property damage that is continuous or progressively deteriorating throughout several policy periods is potentially covered by all policies in effect during those periods.” (Id. at p. 655.) In other words, the insured may call upon any policy that was in effect during the continuous period of injury.

Second, in Aerojet-General Corp. v. Transport Indemnity Co. (1997) 17 Cal.4th 38, the Supreme Court adopted “the ‘all sums’ rule” (State of California v. Continental Ins. Co. (2012) 55 Cal.4th 186, 191 (Continental)), pursuant to which each policy triggered during a long-tail injury is potentially liable for the total amount of the loss, regardless of whether a portion of the loss occurred outside the policy’s coverage period. The rule “envisions that each successive insurer is potentially liable for the entire loss up to its policy limits. When the entire loss is within the limits of one policy, the insured can recover from that insurer, which may then seek contribution from the other insurers on the risk during the same loss.” (Id. at p. 200.)

Third, in Continental, supra, 55 Cal.4th 186, the Supreme Court construed language in standard CGL policies to permit “stacking,” which allows an insured “to add together the maximum limits of all consecutive policies that [were] in place during the [period of continuous injury].” (12 Couch on Insurance (3d ed. 2010) § 169:5; see Continental, at p. 200 [“stacking’ generally refers to the stacking of policy limits across multiple policy periods that were on a particular risk”].) In other words, ” ‘[w]hen the policy limits of a given insurer are exhausted, [the insured] is entitled to seek indemnification from any of the remaining insurers [that were] on the risk [during the continuous period of injury].’ ” (Continental, at p. 200.) If, for example, an insured purchased 10 annual policies that each had a coverage limit of $1 million, and all the policies were triggered by a continuous injury, the insured would be permitted to stack all of the policies to collect up to $10 million in total coverage.

In this current case involving Kaiser, the language of the first-level excess policies is essentially identical – and in some cases actually identical – to the policy language in the higher-level excess policies that the Supreme Court considered in Montrose III. The policies also share many of the same characteristics that it found “strongly suggest[ive]” of vertical, rather than horizontal, exhaustion.

“Thus, as in Montrose III, we believe the first-level excess policies are most reasonably construed as requiring only vertical exhaustion.”

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CEO and President of ADHD Telehealth Company Arrested for $100M Fraud

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The founder and CEO of a California-based digital health company and its clinical president were just arrested in connection with their alleged participation in a scheme to distribute Adderall over the internet, conspire to commit health care fraud in connection with the submission of false and fraudulent claims for reimbursement for Adderall and other stimulants, and obstruct justice.

Ruthia He,also known as Rujia He, the founder and CEO of Done Global Inc., was arrested in Los Angeles and was expected to make her initial appearance in a Los Angeles federal court.

David Brody M.D., the clinical president of Done Health P.C. (collectively, Done), was arrested in San Rafael, California, and will make his initial appearance in San Francisco, California. Brody is a psychiatrist who maintained a DEA registration number and was authorized to prescribe controlled substances in the State of California.

The charges coincide with an ongoing shortage of several stimulant medications commonly prescribed to treat ADHD, according to the U.S. Centers for Disease Control and Prevention. A disruption “involving this large telehealth company could impact as many as 30,000 to 50,000 patients ages 18 years and older across all 50 U.S. states,” the agency said.

Back in September 2022 The Wall Street Journal and people familiar with the inquiries claimed that U.S. Drug Enforcement Administration agents have questioned people about telehealth company Done Global Inc.’s practices for prescribing controlled substances.

According to court documents, He and Brody allegedly conspired with others to provide easy access to Adderall and other stimulants in exchange for payment of a monthly subscription fee. The indictment alleges that the conspiracy’s purpose was for the defendants to unlawfully enrich themselves by, among other things, by increasing monthly subscription revenue and thus increasing the value of the company. Done allegedly arranged for the prescription of over 40 million pills of Adderall and other stimulants, and obtained over $100 million in revenue.

He and Brody allegedly obtained subscribers by targeting drug seekers and spending tens of millions of dollars on deceptive advertisements on social media networks.

They also allegedly intentionally structured the Done platform to facilitate access to Adderall and other stimulants, including by limiting the information available to Done prescribers, instructing Done prescribers to prescribe Adderall and other stimulants even if the Done member did not qualify, and mandating that initial encounters would be under 30 minutes. To maximize profits, He allegedly put in a place an “auto-refill” function that allowed Done subscribers to elect to have a message requesting a refill be auto-generated every month. He wrote that Done sought to “use the comp structure to dis-encourage follow-up” medical care by refusing to pay Done prescribers for any medical visits, telemedicine consultation, or time spent caring for patients after an initial consultation, and instead paying solely based on the number of patients who received prescriptions.

He and Brody allegedly persisted in the conspiracy even after being made aware that material was posted on online social networks about how to use Done to obtain easy access to Adderall and other stimulants, and that Done members had overdosed and died. They also allegedly concealed and disguised the conspiracy by making fraudulent representations to media outlets to forestall government investigations and action and induce third parties to continue doing business with Done.

He, Brody, and others also conspired to defraud pharmacies and Medicare, Medicaid, and the commercial insurers to cause the pharmacies to dispense Adderall and other stimulants to Done members in violation of their corresponding responsibility; Medicare, Medicaid, and the commercial insurers to pay for the cost of these drugs; and Done members to continue to pay subscription fees to Done. He and others allegedly made false and fraudulent representations about Done’s prescription policies and practices to induce the pharmacies to fill Done’s prescriptions. As a result, Medicare, Medicaid, and the commercial insurers paid in excess of approximately $14 million.

The indictment also alleges that He and Brody conspired to obstruct justice after a grand jury subpoena was issued to another telehealth company and in anticipation of a subpoena being issued to Done, including by deleting documents and communications, using encrypted messaging platforms instead of company email, and ultimately failing to produce documents in response to a subpoena issued to Done by a federal grand jury.

If convicted, He and Brody each face a maximum penalty of 20 years in prison on the conspiracy to distribute controlled substances and distribution of controlled substances counts.

Any patient of Done or medical professional who has been involved with the allegedly illegal conduct should call to report this conduct to the DEA hotline at 646-466-5159.

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California Chamber of Commerce “Job Killer Bills” Miss Key Deadline

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Last April, the California Chamber of Commerce released its initial 2024 job killer list which, at the time, included nine bills dealing with labor and employment, taxation, unemployment insurance, environmental and health care issues. Subsequently, additions and deletions were made to the list as legislative activity progressed.  Three of the five remaining California Chamber of Commerce Job Killer bills missed the end of May deadline to pass the house in which they were introduced.

Stalled Bills: The following job killer bills failed to pass before Friday’s deadline:

– – ACA 16 (Bryan; D-Los Angeles): Has far-reaching negative consequences that would impair government operations, stunt development for new housing, infrastructure and clean energy project development and the strong potential to destabilize California’s economy. This constitutional amendment still is likely to come up for a vote in the next couple of weeks.
– – SB 1327 (Glazer; D-Contra Costa): Implements a discriminatory 7.25% tax on the revenue generated from the sale of digital advertising. The bill is likely unconstitutional and will lead to costly litigation for the state.
– – SB 1497 (Menjivar; D-Los Angeles): Imposes an ill-defined tax on a broad set of entities that will increase costs for goods and services in California.

Amended to Remove Job Killer Tag

AB 2499 (Schiavo; D-Chatsworth) will be amended to remove certain qualifying reasons for leave that are not related to safety, narrow the accommodations provisions, and limit the amount of time off an employee can take for certain reasons. The Appropriations Committee had also amended the threshold of applicability to apply to employers with 25 or more employees, which is consistent with existing law. Before amendments, it significantly expanded the 12-week leave related to crimes and lowered the threshold of applicability to employers with just five employees.

Opposed Bills Stopped: Additionally, three CalChamber-opposed bills also failed to pass their house of origin on time. The following bills are dead for the year:

– – AB 2648 (Bennett; D-Ventura): Prohibits the state from purchasing and all food services inside state facilities from offering any single-use plastic bottled beverages despite this packaging having one of the highest recycling rates in the country and despite the negative impacts to both the environment and state budget from using less efficient and more expensive packaging.
– – AB 3155 (Friedman; D-Glendale): Sets disturbing precedent by creating liability without proof for oil well owners/operators if individuals who lived within 3,200 feet of a wellhead develop certain health conditions.
– – SB 1494 (Glazer; D-Contra Costa): Eliminates an important economic development tool by prohibiting local governments from entering into sales tax sharing agreements with businesses. SB 1494 failed passage on a vote of 17-11 on May 23; reconsideration was granted.

What Remains:

– – SB 1116 (Portantino; D-Burbank) Increased Unemployment Insurance Taxes to Subsidize Striking Workers. SB 1116 will allow striking workers to claim UI benefits when they choose to strike. Because the UI Fund is paid for entirely by employers, SB 1116 will effectively add more debt onto California employers. Moreover, SB 1116 will effectively force employers to subsidize strikes at completely unrelated businesses because the UI Fund’s debt adds taxes for all employers, regardless of whether they’ve had a strike.
– – SB 1327 (Glazer; D-Contra Costa) Tax on Digital Advertising Revenue. Implements a discriminatory 7.25% tax on the revenue generated from the sale of digital advertising. The bill targets taxpayers that annually make at least $2.5 billion of revenue from these services.

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The EEOC Sued 15 Employers for Failure to File EEO-1 Report

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Title VII of the Civil Rights Act of 1964 mandated employers to maintain records that could be used to identify potential discrimination in hiring practices.Following this, in 1966, the Equal Employment Opportunity Commission (EEOC) implemented a requirement for certain employers to report employee data categorized by job category, race, ethnicity, and sex. This data collection became known as “EEO-1.”

While EEO-1 data collection has been in place for decades, it wasn’t until 2020 that the current EEO-1 Component 1 report format was finalized. In 2016, the EEOC sought approval to collect this specific data set, which focuses on workforce demographics. After receiving final approval from the Office of Management and Budget (OMB) in June 2020, the EEO-1 Component 1 report became the official format for this mandatory data collection.

The EEO-1 Component 1 report is a mandatory annual data collection that requires all private sector employers with 100 or more employees, and federal contractors with 50 or more employees meeting certain criteria, to submit demographic workforce data to the EEOC.

The EEOC has the authority to compel employers to file EEO-1 reports through court order pursuant to Section 709(c) of Title VII of the Civil Rights Act.

The U.S. Equal Employment Opportunity Commission (EEOC) just announced it has filed suit against 15 employers in 10 states this week, alleging the companies failed to comply with mandatory federal reporting requirements. The list of employer includes companies from the retail, construction, restaurant, manufacturing, logistics, and service industries.

Federal law requires employers with 100 or more employees to submit workforce data to the EEOC. The data collected includes workforce information by job category and sex, race, or ethnicity. This workforce demographic data is used for a variety of purposes including enforcement, analytics and research, and employer self-assessment.

“This data collection is an important tool for ensuring compliance with Title VII’s prohibition on workplace discrimination,” said EEOC General Counsel Karla Gilbride. “Not only did Congress authorize the EEOC to collect this data, Congress also authorized the agency to go to court to obtain compliance when employers ignore their obligation to provide the required information.”

The 2023 EEO-1 Component 1 data collection is currently underway. The EEOC began collecting EEO-1 Component 1 data from employers for the 2023 reporting cycle on April 30, 2024. The published deadline to file the 2023 EEO-1 Component 1 report was June 4, 2024.

The EEOC publishes an Instruction Booklet for employers to assist them in complying with this mandatory reporting requirement, which is available at https://www.eeocdata.org/eeo1

For more information on EEO data collection, please visit https://www.eeoc.gov/data/eeo-data-collections.

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Coalition of 36 State Attorney Generals Urge SCOTUS to Limit PBMs

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In Oklahoma, a law called the Patient’s Right to Pharmacy Choice Act aimed to give patients more control over where they could get their prescriptions filled. This act clashed with the federal Employee Retirement Income Security Act (ERISA) and Medicare Part D.

The Pharmaceutical Care Management Association (PCMA), an industry group representing pharmacy benefit managers (PBMs), sued to block the Oklahoma law. In Pharmaceutical Care v. Mulready, et al., No. 22-6074 (10th Cir. 2023), PCMA alleged that federal laws, Medicare Part D and the Employee Retirement Income Security Act (ERISA), preempt Oklahoma’s laws.

The federal district court rejected PCMA’s claims but in August 2023, the Tenth Circuit reversed, holding that ERISA and Medicare preempt Oklahoma’s laws.

In an amicus brief to the U.S. Supreme Court, a coalition of 36 state Attorney Generals (including California’s) asks the Court to grant Oklahoma’s request that the Court review a decision from the U.S. Court of Appeals for the Tenth Circuit.

According to its amicus brief “states have a compelling interest in preserving their traditional authority to protect their residents’ access to healthcare and to regulate business practices in their states. To advance these interests, all states regulate [PBMs] to some degree.” PCMA and the Tenth Circuit’s broad approach to federal preemption, however, would “severely and unduly impede states’ abilities to protect their residents and regulate businesses.”

The challenge to Oklahoma’s laws is the latest of a string of lawsuits by the PBM industry’s national lobbying association, Pharmaceutical Care Management Association (PCMA). Mulready marked the second case to reach a federal court of appeals since the U.S. Supreme Court addressed state regulation of PBMs in Rutledge v. Pharmaceutical Care Management Association 592 U.S. 80 (2020).

SCOTUS ruled 8-0 that the Employee Retirement Income Security Act (ERISA) did not preempt Arkansas’s law regulating pharmacy benefit managers (PBMs), the intermediaries that administer prescription drug benefits for health plans.

In Rutledge, Justice Sonia Sotomayor spoke for the unanimous Court in holding that a state law requiring PBMs to pay pharmacies no less than their acquisition costs for prescription drugs was not preempted by ERISA, the federal statute governing employee benefits. The Court concluded, “ERISA does not pre-empt state rate regulations that merely increase costs or alter incentives for ERISA plans without forcing plans to adopt any particular scheme of substantive coverage.”

In their current brief to the Supreme Court, the states argue that the “Court should grant certiorari review for two key reasons. First, the Tenth Circuit decided important questions of federal law in a manner that conflicts with the Eighth Circuit’s resolution of the same issues. Sup. Ct. R. 10(a). Second, the Tenth Circuit’s decision conflicts with this Court’s precedent. Id. 10(c). States have a significant interest in knowing the extent to which ERISA and Medicare may preempt their regulations of PBMs. By contradicting the Eighth Circuit’s holdings and adopting a substantially broader view of ERISA preemption than what this Court endorsed in Rutledge, the Tenth Circuit’s decision throws that knowledge into substantial doubt. The result is nationwide uncertainty for regulators, a corresponding increase in consumer harms, and a substantial likelihood of continued litigation on the topic in light of the deep circuit split. The Court should grant review to put an end to that uncertainty and its corresponding harms.”

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Farm Labor Contracting Companies Face $30M Payroll Fraud Charges

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Ruben Perez Mireles Jr., 49, of Clovis, and his business associate, John Mena, 29, of Lemoore, were arraigned  on multiple felony counts including insurance fraud, grand theft, and tax fraud after a task force investigation led by the California Department of Insurance found they allegedly underreported over $29.2 million in payroll for multiple businesses to illegally save on workers’ compensation insurance premium and taxes.

Mireles and Mena operated two Kings County farm labor contracting companies, Vista Pacific Labor Solutions, Inc. and Calzona Ag Management, Inc. The investigation by the Central Valley Workers’ Compensation Fraud Task Force found that Mireles, owner of Vista Pacific Labor Solutions, Inc, underreported $7.6 million in employee payroll to his workers’ compensation insurance carrier for the period of September 2019 through August 2020. This underreporting resulted in a premium loss of $1.7 million.

The investigation revealed Mireles then created another farm labor contracting company, Calzona Ag Management, Inc. Mireles recruited Mena and together they shifted payroll to this new company to avoid an increased assessment of the business’ workplace safety, which would have more than doubled the insurance premium. Together, they underreported $8.8 million in employee payroll for the period of December 2019 through December 2021, resulting in an additional premium loss of $1.8 million.

Additionally, the task force investigation found Mireles underreported $12.8 million in employee payroll to the Employment Development Department and failed to report personal income to the Franchise Tax Board. This underreporting resulted in a combined loss of approximately $3 million for unpaid tax liability, penalties, and interest. Mireles and Mena’s fraud scheme defrauded their insurance carries, EDD, and FTB out of over $6.5 million.

Investigators also discovered that Mireles fraudulently obtained a COVID-19 Paycheck Protection Program loan. After an investigation led by the FBI, Mireles pleaded guilty and was sentenced to one year in prison. Mireles is also in court today on additional felony charges for his role in an earlier workers’ compensation insurance fraud scheme, also uncovered by the task force.

Mireles has been charged with eight felony counts including workers’ compensation insurance fraud, grand theft, unemployment insurance fraud, and tax fraud. Mena has been charged with three felony counts of workers’ compensation insurance fraud and one felony count of grand theft.

The Central Valley Workers’ Compensation Fraud Task Force is an inter-agency anti-fraud partnership with members from the California Department of Insurance, the California Employment Development Department, the California Franchise Tax Board, the Kings County District Attorney’s Office, the Fresno County District Attorney’s Office, the Kern County District Attorney’s Office, the Madera County District Attorney’s Office, the Merced County District Attorney’s Office, the San Luis Obispo County District Attorney’s Office, and the Tulare County District Attorney’s Office.

The case is being prosecuted by Kings County District Attorney Sarah Hacker.

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WCAB En Banc Clarifies Confusion on Use of “Kite” Based CVC Rebuttal

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On June 10, 2024, the Appeals Board issued a combined en banc decision and panel decision clarifying the known methods of rebutting the Combined Values Chart (CVC). In this case Sammy Vigil was employed by the County of Kern as a maintenance painter, and he claimed injury to his hips and back on December 7, 2017 and also injury caused by continuous trauma.

Following trial, his cumulative injury was found to be industrial, and the WCJ found, that applicant sustained 68% permanent partial disability by adding the impairment to applicant’s left and right hip pursuant to East Bay Municipal Utility District v. Workers’ Compensation Appeals Board (Kite) (2013) 78 Cal.Comp.Cases 213 (writ den.). The WCJ further found that apportionment to the hips was not permissible pursuant to Hikida v. Workers’ Comp. Appeals Bd. (2017) 12 Cal.App.5th 1249 [82 Cal.Comp.Cases 679] because the disability was caused by hip replacement surgery.

The employer filed a Petition for Reconsideration and argued that the WCJ misapplied the analysis in the Kite decision because the opinion of the qualified medical evaluator (QME) was not substantial evidence and does not support rebuttal of the Combined Values Chart (CVC). Next, it contends that the WCJ erred in applying Hikida, because applicant’s hip surgeries were successful and did not cause any increase in impairment.

In its Decision After Reconsideration (En Banc), the WCAB rescinded the WCJ’s F&A and returned this matter to the trial level for further proceedings consistent with the opinion in the case of Vigil v County of Kern 2024-EB-03 (June 2024)

Applicant was evaluated by QME Peter Newton, M.D., who authored four reports in evidence and was deposed. He assigned 15% whole-person impairment (WPI) to the right hip, 15% WPI to the left hip, and 7% WPI to applicant’s lumbar spine. 15% of this applicant’s lumbar spine and right and left hip condition/disability/impairment was apportioned to age-appropriate and age-related degenerative changes and 85% to the continuous trauma of his work through 03/26/18.

In his deposition he applied Kite when he said “Somebody with limitations due to both hips is going to have significantly more limitations than if somebody had one normal hip and one hip that they had surgery on.”

Impairments to two or more body parts are usually expected to have an overlapping effect upon the activities of daily living, so that generally, under the AMA Guides and the PDRS, the two impairments are combined to eliminate this overlap.As an element of the PDRS, the CVC may also be rebutted, and when the CVC is rebutted, those impairments may simply be added.

“In our panel decisions, two methods have been used to rebut the CVC to date. In the first approach, the CVC has been rebutted where there was evidence showing no actual overlap between the effects on ADLs as between the body parts rated. In the second approach, the CVC has also been rebutted where there is overlap, but the overlap creates a synergistic effect upon the ADLs.”

“We believe that one significant point of confusion on the issue of overlap is that the analysis should focus on overlapping ADLs, not body parts.”

“The Combined Values Chart (CVC) in the Permanent Disability Ratings Schedule (PDRS) may be rebutted and impairments may be added where an applicant establishes the impact of each impairment on the activities of daily living (ADLs) and that either: (a) there is no overlap between the effects on ADLs as between the body parts rated; or (b) there is overlap, but the overlap increases or amplifies the impact on the overlapping ADLs.”

The Appeals Board emphasized that rebuttal of the CVC requires a critical analysis of the impacts upon applicant’s ADLs and is not automatically triggered by use of the word “synergy”. “Here, Dr. Newton’s testimony does not appear to be based upon no overlap, but instead appears to argue for CVC rebuttal based upon a synergistic effect between the two hips.”

“The term ‘synergy’ is not a ‘magic word’ that immediately rebuts the use of the CVC. Instead, a physician must set forth a reasoned analysis explaining how and why synergistic ADL overlap exists. If parties are searching for a magic word to use during a doctor’s deposition, that word is “Why?’ “. Rather than focusing on whether a specific term, including the term synergy, was used, it is imperative that parties focus on an analysis that applies critical thinking based on the principles articulated in Escobedo to support a conclusion based on the facts of the case. Such an analysis must include a detailed description of the impact of ADLs and how those ADLs interact.”

After reviewing the record and noting that the qualified medical evaluator failed to discuss the impact of applicant’s impairments upon the ADLs, the Appeals Board reversed the finding of the workers’ compensation judge and returned the matter for further development of the record.

Section III of this decision is not en banc and is not citeable as an en banc opinion.

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AB 5 Survives Uber and Postmates’ Constitutional Challenge

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Concerned with the widespread misclassification of workers, the legislature enacted A.B. 5 in 2019. A.B. 5 codified the California Supreme Court’s Dynamex Operations W., Inc. v. Superior Ct., 416 P.3d 1, 5 (Cal. 2018) decision and extended the application of the ABC test beyond wage orders to other labor and employment legislation, including workers’ compensation, unemployment insurance, and disability insurance.

On December 30, 2019, Lydia Olson, Miguel Perez, Uber Technologies, Inc., and Postmates, Inc.jointly filed a complaint against the State of California and the Attorney General of California (collectively seeking declaratory, injunctive, and other relief based on their allegations that A.B. 5 violates the Equal Protection Clauses, the Due Process Clauses, and the Contract Clauses of the United States and California Constitutions. They sought a preliminary injunction to prevent Defendants from enforcing A.B. 5.

The district court denied Plaintiffs’ motion for preliminary injunctive relief. Plaintiffs appealed the district court’s denial of the preliminary injunction. In November 2020, shortly before the 9th Circuit Court of Appeals heard argument in that appeal, California voters approved Proposition 22, a ballot initiative that classifies rideshare and delivery drivers – like Plaintiffs Olson and Perez – as independent contractors, notwithstanding A.B. 5 or any other provision of law. Prop. 22 took effect on December 16, 2020, in accordance with the default rule provided by the California Constitution.

After Prop. 22 passed, but before the Court of Appeals issued a decision in the appeal of the preliminary injunction, Plaintiffs filed the operative Second Amended Complaint. Defendants moved to dismiss the Second Amended Complaint for failure to state a claim. The district court granted the motion. The district court determined that Plaintiffs’ new allegations concerning the amendments to A.B. 5 and Prop. 22 did not rescue their claims.Plaintiffs timely appealed that order.

A three-judge panel reversed in part, concluding that the district court erred by dismissing Plaintiffs’ Equal Protection claims. The panel concluded that Plaintiffs plausibly alleged that “the exclusion of thousands of workers from the mandates of A.B. 5 is starkly inconsistent with the bill’s stated purpose of affording workers the ‘basic rights and protections they deserve.’ “

Upon the vote of a majority of nonrecused active judges, a rehearing en banc was granted and the three-judge panel decision. Olson v. California, 88 F.4th 781 (9th Cir. 2023).was vacated It then conducted a review de novo of the district court order granting a motion to dismiss for failure to state a claim.

“We must decide whether A.B. 5’s differential treatment of app-based work arrangements in the transportation and delivery service industry, on the one hand, and app-based work arrangements in other industries, on the other hand, survives rational basis review. In other words, we must determine whether it was rational for the California legislature to apply one test to determine the classification of Uber drivers and a different test to determine the classification of dogwalkers who provide services through Wag!, the “Uber for dogs.”

Under the deferential rational basis standard, the Court was required to approach A.B. 5 with “a strong presumption of validity,” and will invalidate it only if Plaintiffs negate “every conceivable basis” which might justify the lines it draws.

“Plaintiffs have failed to carry that burden here. There are plausible reasons for treating transportation and delivery referral companies differently from other types of referral companies, particularly where the legislature perceived transportation and delivery companies as the most significant perpetrators of the problem it sought to address – worker misclassification.”

Under the deferential rational basis standard, the en banc court in the published opinion of Olson et.,al, v State of California et. al. 21-55757 (June 2024) concluded that there were plausible reasons for treating transportation and delivery referral companies differently from other types of referral companies, particularly where the legislature perceived transportation and delivery companies as the most significant perpetrators of the problem it sought to address- worker misclassification.

That A.B. 5 may be underinclusive because it does not extend the ABC test to every industry and occupation that has historically contributed to California’s misclassification woes does not render it unconstitutionally irrational.

The en banc court did not disturb the prior panel’s disposition of plaintiffs’ Due Process, Contract Clause, and Bill of Attainder claims. Accordingly, the en banc court reinstated Parts III.B, III.C, and III.D of Olson v. California, 62 F.4th 1206, 1220–23 (9th Cir. 2023).

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DWC Sets Public Hearing for Proposed UR Regulation Changes

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The Division of Workers’ Compensation (DWC) has issued a notice of public hearing for regulations concerning the utilization review (UR) procedures under Labor Code section 4610. Additional regulatory changes related to physician reporting and coordination of care requirements are also included.

The proposed rulemaking primarily implements exemptions to prospective UR created under Senate Bill 1160 (for treatment rendered within the first 30 days from the initial date of injury) and Assembly Bill 1124 (for drugs listed as exempt on the drug formulary).

Additionally, the proposal implements the statutory accreditation requirement and DWC’s oversight of UR plans, which includes extensive changes to UR enforcement rules; makes changes to improve or fix issues related to coordination of medical treatment; and would add a physician reporting form, the PR-1, which combines other reports (the Form RFA and the PR-2) to centralize reporting duties of a treating physician.

Implementation of these regulations is anticipated to harmonize regulations with statutory changes from SB 1160 and AB 1124, and fix system inefficiencies with respect to the delivery of medical treatment.

Members of the public may attend the in-person public hearing on Thursday, July 25, 2024, at 11 a.m. at the:

Elihu Harris State Office Building – Auditorium
1515 Clay Street
Oakland, CA 94612

Written public comments can be submitted via US mail, facsimile transmission (FAX) or by email until the end of the day on Thursday, July 25, 2024 to the attention of:

Maureen Gray, Regulations Coordinator
Department of Industrial Relations
P.O. Box 420603
San Francisco, CA 94142
Fax: (510) 286-0687
Email: dwcrules@dir.ca.gov

DWC will consider all public comments. The notice of rulemaking, text of the regulations, and the initial statement of reasons can be found on the DIR website.

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