Category: Daily News

California Labor Commissioner Julie A. Su issued more than $2.2 million in citations to the owners of three residential care facilities in San Diego County for what was characterized as “egregious wage theft violations.” The investigation revealed that nine caregivers were forced to work 24-hour shifts, six to seven days a week, for $1.25 to $1.80 per hour.

The citations were issued to Fairhill Castle LLC and its owners, Lamberto “June” and Jesusan Deleon of Spring Valley for minimum wage, overtime, meal period and workers’ compensation violations from September 2013 to August 2014. They must pay $1,332,129 for underpaid wages and premiums, $716,846 for liquidated damages and $171,305 in civil penalties.

Investigators discovered that the Deleons employed two people, typically a husband-wife team, at each of their facilities located on Fairhill Drive, Prather Place and San Diego Street in Spring Valley. They were charged to provide round-the-clock care for elderly residents who suffered from advanced stage dementia or Alzheimer’s, many of them bedridden or receiving hospice care. The caregivers worked 24-hour shifts, six to seven days a week, but were only paid between $900 and $1,300 each month in cash.

The investigation also found that the Deleons had neither reported wages to the proper state, federal and local agencies, nor did they have a history of workers’ compensation coverage during their eight years’ operating the facilities. Although the business entity is typically cited for labor law violations, in this case, Mr. Deleon, the LLC Managing Member, was also cited as an individual because he caused the violations through his daily control of the facilities’ operations.

Before the conclusion of the appeals hearing in this case earlier this year, the Deleons closed the residential care facilities under the Fairhill Castle business name. The Fairhill Drive location was subsequently reopened under a new name, Jade House, with their eldest daughter, Emmercelle M. DeLeon, named as the owner and sole proprietor.

“This is a classic example of the steps scofflaw employers will take to avoid paying exploited workers for wages owed,” said Labor Commissioner Julie Su. “That is why we are holding individuals who engage in wage theft responsible, so they cannot hide behind a corporate shell and will have a difficult time avoiding liability to workers.”

Among its wide-ranging enforcement responsibilities, the Labor Commissioner’s Office inspects workplaces for wage and hour violations, adjudicates wage claims, enforces prevailing wage rates and apprenticeship standards in public works projects, investigates retaliation complaints, issues licenses and registrations for businesses and educates the public on labor laws.

The Wage Theft is a Crime public awareness campaign, launched last year by DIR and its Labor Commissioner’s Office, has helped inform workers of their rights. The campaign includes multilingual print and outdoor advertising as well as radio commercials on ethnic stations in English, Spanish, Chinese, Vietnamese, Hmong and Tagalog.

The Salinas Californian reports that a Marina man has pleaded no contest to workers’ compensation insurance fraud and tax evasion in Monterey County Superior Court. Felipe DeJesus Olvera, 45, pleaded no contest to two felony counts of making a material misrepresentation in order to obtain a lower workers’ compensation insurance premium and one misdemeanor count of willfully failing to file payroll tax returns with intent to evade tax.

Sentencing is scheduled for Sept. 15 in front of Judge Julie R. Culver. Olvera faces a maximum sentence of six years in county jail for the felonies and up to one year for the misdemeanor, but he will initially be placed on probation.

On Oct. 16, the Monterey County District Attorney’s Office and the California Department of Insurance conducted an uninsured employer compliance sweep in Monterey County. While preparing for the sweep, the Employment Development Department screened targeted businesses to be inspected so it could be verified if they were registered as an employer, according to the district attorney’s office. Businesses were also checked for active workers’ compensation insurance policies.

Olvera was doing business as La Sirenita Tree Service at the time of this sweep. While the tree service business had a current workers’ compensation insurance policy with the State Compensation Insurance Fund, records showed that no employees and no payroll was reported to the State Fund.

A worksite inspection was conducted on the business where the defendant and two of his employees were working trimming trees on Monterey County property. Video of the employees working was taken, and the employees were interviewed along with Olvera, who admitted owning the business, according to the DA’s office.

The investigation also revealed that Olvera had contracted with multiple government agencies while continuing not to report his employees or wages to the State Compensation Insurance Fund.

Monterey County District Attorney Investigator George Costa investigated the case with assistance from California Department of Insurance detectives, Employment Development Department detectives and State Compensation Insurance Fund Investigator Denise Villapudua.

A Glendale man pleaded guilty to federal money laundering and tax charges related to a scheme in which he helped launder $1.1 million generated by a health care fraud scheme.

Khachatour Hakobyan, 47, pleaded guilty to conspiracy to commit money laundering and filing a false tax return. A second defendant in this case – Aram Aramyan, 59, also of Glendale – pleaded guilty on July 13 to the same two felony offenses.

In plea agreements filed in United States District Court, Hakobyan and Aramyan admitted that they deposited over $1.1 million in proceeds derived from a health care fraud scheme into bank accounts in the names of bogus corporations they established “primarily to launder money.” Once the proceeds were deposited, Hakobyan and Aramyan wrote checks from these corporations to themselves and their associates. Hakobyan and Aramyan further admitted that they cashed some of the checks – and directed their associates to cash others – and returned the cash to the medical entities, typically after deducting a 10 percent commission. In some cases, they deposited the checks into their personal accounts and used the money to pay personal expenses, such as mortgage payments, rent and home remodeling costs.

As part of their guilty pleas, Hakobyan and Aramyan each admitted that they failed to report all of their income from the corporations in their 2009 tax returns and have agreed to pay, respectively, $606,681 and $353,669 in back taxes for tax years 2007 through 2011.

As a result of their guilty pleas, Hakobyan and Aramyan each face a statutory maximum sentence of 23 years in federal prison. Judge Morrow is scheduled to sentence Hakobyan on November 16, and Aramyan on November 2.

There are three remaining defendants in this case: Edgar Hakobyan, 30, of Glendale; Karen Sarkissian, 43, of Glendale; and L’Tanya Smith, 57, of Ladera Park. They are currently scheduled to go on trial before Judge Morrow on February 2, 2016. Two of the defendants are also charged with health care fraud related to a clinic on Sunset Boulevard in Echo Park. The clinic was operated by Sarkissian and employed Smith, a physician’s assistant. Between July 2009 and March 2010, Smith allegedly prescribed or ordered medically unnecessary tests and services, some of which were never provided to the patients. Those prescriptions and orders led to more than $11 million in fraudulent claims.

The investigation in this case was conducted by the Federal Bureau of Investigation; the U.S. Department of Health and Human Services, Office of Inspector General; and IRS – Criminal Investigation.

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.