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SCOTUS Declines Review of California AB 5 – Few Cases Remain

Signed into law in September 2018, Assembly Bill 5, has generated outrage from a wide range of Californians, from musicians to therapists to truckers and freelance journalists. The new law codified the more expansive ABC test previously set forth in Dynamex Operations West, Inc. v. Superior Court of Los Angeles, 416 P.3d 1 (Cal. 2018), for ascertaining whether workers are classified as employees or independent contractors.

AB5 and its subsequent amendments, now codified in Labor Code 2778 requires businesses to classify more workers as employees entitled to benefits like sick leave and overtime pay. But some workers affected by AB 5 say it’s caused them nothing but grief and anxiety.

Thus, the American Society of Journalists and Authors and the National Press Photographers Association filed a federal lawsuit challenging the new law on First Amendment and Equal Protection grounds, The Society of Journalists and Authors (ASJA)is the nation’s largest professional organization of independent nonfiction writers. Its membership consists of more than 1,100 freelance writers.

The National Press Photographers Association (NPPA) is an American professional association made up of still photographers, television videographers, editors, and students in the journalism field. It was founded in 1946. As of 2017, NPPA had total membership at just over 6,000.

The lawsuit was dismissed by the trial court.. In a 3-0 ruling, the Ninth U.S. Circuit Court of Appeals in San Francisco in October 2021 said the California law regulates economic activity and does not interfere with freedom of speech or the press in the published case of ASJA v Bonta

The panel acknowledged that although the ABC classification may indeed impose greater costs on hiring entities, which in turn could mean fewer overall job opportunities for certain workers, but such an indirect impact on speech does not necessarily rise to the level of a First Amendment violation.

Addressing the Equal Protection challenge, the panel held that the legislature’s occupational distinctions were rationally related to a legitimate state purpose.

The Plaintiffs in that case file a Petition for Writ of Certiorari with the United States Supreme Court on February 22, 2022, hoping to overturn the decision of the 9th Circuit Court of Appeal

The Supreme Court, however, denied review without comment Monday of the appeal by the two organizations. For this reason the dismissal of their base by a federal judge and the approval of that dismissal by an appellate court has no further avenues in the judicial system.

The court’s decision to not hear our appeal is a loss for the thousands of freelancers who have built thriving careers through the freedom and flexibility that independent contracting provides,” said Jim Manley of the Pacific Legal Foundation, who represented the American Society of Journalists and Authors and the National Press Photographers Association.

Attorney General Rob Bonta’s office, in a filing defending the state law, told the court that AB5 “does not regulate speech or differentiate between speakers based on their message.”

In a separate case, the Supreme Court rejected an appeal last October by trucking companies challenging the classification of truck owner-operators as employees under AB5. An appeal by another trucking group is still pending before the high court.

The ride-hailing companies Uber and Lyft won an exemption from AB5 in November 2020 when state voters approved Proposition 22, allowing them to classify their drivers as contractors, after a campaign in which the companies spent more than $200 million.

But an Alameda County judge struck down Prop. 22 last August, saying the measure interfered with the Legislature’s authority under the state constitution to regulate workers’ compensation and also addressed multiple subjects, violating another constitutional standard. The case is now awaiting review by a state appellate court.

W.R. Berkley to Focus Coverage on Large California Businesses

W. R. Berkley Corporation is a commercial lines property & casualty insurance holding company organized in Delaware and based in Greenwich, Connecticut. It was founded in 1967 and has grown from a small investment management firm into one of the largest commercial lines property and casualty insurers in the United States. It is listed on the New York Stock Exchange, become a Fortune 500 company, joined the S&P 500, and seen gross written premiums exceed $10 billion.

The company now operates commercial insurance businesses in the United Kingdom, Continental Europe, South America, Canada, Mexico, Scandinavia, Asia and Australia and reinsurance businesses in the United States, United Kingdom, Continental Europe, Australia, the Asia-Pacific region and South Africa. The company is ranked 397th on the Fortune 500.

And there is new company activity here in California.

W. R. Berkley just announced the formation of Berkley Enterprise Risk Solutions, which will focus on providing workers’ compensation insurance to large businesses headquartered in California.

Wayne Bryan has been named president of the new business, and Hale Johnston has been appointed chief operating officer. The appointments are effective immediately.

W. Robert Berkley, Jr., president and chief executive officer of W. R. Berkley Corporation, commented, “Berkley Enterprise Risk Solutions will offer specialized workers’ compensation solutions to California-based clients with sophisticated risk management capabilities and interests. We are pleased to be expanding our expertise to this segment of the market with dedicated capabilities and expertise. Wayne and Hale both have extensive backgrounds and a wealth of knowledge in the large account California workers’ compensation space. We are confident that they will provide outstanding leadership to their new team as they deliver exceptional solutions to the market. We are excited to welcome them to Berkley.”

Mr. Bryan brings nearly 35 years of California workers’ compensation experience to Berkley. Most recently, he led the enterprise large account business unit for a western-based, super-regional commercial insurance company and leading provider of workers’ compensation and commercial insurance solutions. Mr. Bryan holds a Bachelor of Arts degree from the University of San Francisco.

During his more than 30-year career in insurance, Mr. Johnston has held various executive and leadership positions in the insurance industry and has implemented new technology platforms, consolidated operations and introduced new streams of revenue. He has served on the Board of Governors for the Workers’ Compensation Insurance Rating Bureau of California (WCIRB) and as chairman of the Board of Directors for the California Workers’ Compensation Institute (CWCI). He is a graduate of William Jewell College in Liberty, Missouri.

Pacific Hospital of Long Beach Accountant to Serve 15 Months

An accountant who enabled the owner of a corrupt Long Beach hospital to pay more than $40 million in illegal kickbacks to doctors in exchange for them referring thousands of spinal surgery patients was sentenced  to 15 months in federal prison for a tax offense related to the scheme.

George William Hammer, 69, of Palm Desert, was sentenced by United States District Judge Josephine L. Staton, who also ordered Hammer to pay an $8,000 fine and forfeit $500,000 in proceeds from the scheme.

Hammer pleaded guilty in August 2018 to one count of filing a false tax return.

Hammer was the financial officer for various companies controlled by Michael D. Drobot, who owned Pacific Hospital in Long Beach.

Drobot conspired with doctors, chiropractors, and marketers to pay kickbacks in return for the referral of thousands of patients to Pacific Hospital for spinal surgeries and other medical services paid for primarily through the California workers’ compensation system.

During its final five years, the scheme resulted in the submission of more than $500 million in bills for kickback tainted surgeries. To date, 22 defendants have been convicted for participating in the kickback scheme.

Beginning in 1997, Hammer supported the kickback scheme by facilitating payments to individuals receiving bribes and kickbacks pursuant to sham contracts that were used to conceal the illicit payments. Hammer falsified tax returns by characterizing the bribes as legitimate business expenses.

“Through his role at the Drobot-controlled entities, [Hammer] ensured that doctors were paid more than $40 million….in kickbacks,” prosecutors argued in a sentencing memorandum. “The scheme was too complex for Drobot to do alone. It could not have been accomplished without complicit executives like [Hammer] who furthered the scheme.”

Hammer was a salaried employee and did not directly profit from the kickbacks and bribes.

In January 2018, Drobot was sentenced to five years in federal prison for his crimes in this matter and awaits a March 2023 sentencing hearing after pleading guilty to three criminal charges for violating a court forfeiture order in the Pacific Hospital case by illegally selling his luxury cars.

The FBI, IRS Criminal Investigation, the California Department of Insurance, and the United States Postal Service Office of Inspector General investigated this matter.

Assistant United States Attorneys Joseph T. McNally and Billy Joe McLain of the Violent and Organized Crime Section and Assistant United States Attorney Victor Rodgers of the Asset Forfeiture Section prosecuted this case.

DOL Announces $100M Workplace Safety Training Grants

The U.S. Department of Labor announced a funding opportunity for $11.7 million in Susan Harwood Training Grants to support the delivery of training and education to help workers and employers identify and prevent workplace safety and health hazards.

Administered by the department’s Occupational Safety and Health Administration, the grants will target disadvantaged, underserved, low-income, and other hard-to-reach, at-risk workers and employers. The grants are available to non-profit organizations, including community-based, faith-based, grassroots organizations, employer associations, labor unions, joint labor/management associations, Indian tribes, and public/state colleges and universities.

Applicants may apply in the following categories:

– – Targeted Topic Training: Support educational programs that identify and prevent workplace hazards and require applicants to conduct training on OSHA-designated workplace safety and health hazards.
– – Training and Educational Materials Development: Support the development of quality classroom-ready training and educational materials that identify and prevent workplace hazards.
– – Capacity Building: Allow organizations to develop a new training program to assess needs and formulate a plan for moving forward to a full-scale safety and health education program, expanding their capacity to provide occupational safety and health training, education, and related assistance to workers and employers.

Submit applications no later than 11:59 p.m. EDT on Aug. 1, 2022. Applicants must register with www.grants.gov and the System of Award Management to apply.

The grants honor the legacy and work of Dr. Susan Harwood who, during in her 17 years with OSHA, developed workplace safety guidelines for benzene, formaldehyde, bloodborne pathogens and lead in the construction industry. Harwood was also primary author of OSHA’s cotton dust standard which virtually eliminated byssinosis – a lung disease that causes asthma-like symptoms – among textile workers.

Supervisors’ Diverse Practices Do Not Rule Out PAGA Class Actions

Pacific Bell is a telecommunications corporation providing voice, video, data, internet and professional services to businesses, consumers, and government agencies. It has branches around the world, including in California.

Dave Meza filed a consolidated class action lawsuit against Pacific Bell. He alleged Pacific Bell violated California law by failing to provide lawful meal and rest periods and failing to provide lawful itemized wage statements among other Labor Code violations.

Meza appealed four trial court orders: (1) an order denying class certification to five meal and rest period classes (the class certification order); (2) an order granting summary adjudication of Meza’s claim relating to wage statements under section 226, subdivision (a)(9) (the wage statement order); (3) an order striking Meza’s claim under section 226, subdivision (a)(6) (the order to strike); and (4) an order granting summary adjudication of Meza’s claim under the Labor Code Private Attorneys General Act of 2004 (PAGA) (§ 2698 et seq.) (the PAGA order).

The Court of Appeal ruled on these four issues in the partially published case of Meza v Pacific Bell Telephone Company, B317199 (June 2022)

The court said that the orders were appealable under the “death knell doctrine,” which allows immediate appeals of certain interlocutory orders that resolve all representative claims but leave individual claims intact.

The court of appeal concluded that the trial court erred in refusing to certify the meal and rest period classes based on its conclusion that common issues do not predominate.

The trial court order denying class certification dealt with an often-litigated class certification issue: whether supervisors’ diverse practices with respect to uniform written policies makes class certification inappropriate. The trial court held that individualized issues predominated because the managers’ declarations indicated that “the actual management practices of [Pacific Bell]’s supervisors result[ed] in a diverse application of the company’s Premises Technician Guidelines.”

The California Supreme Court case of Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004 dealt with the issue of uniform corporate policies as a basis for class certification. The progeny of Brinker has dealt more directly with the question of class certification based on uniform policies that are allegedly applied by corporate managers in different ways. This has proved to be a tricky issue for the courts.

In general, cases following Brinker “have concluded . . . that when a court is considering the issue of class certification and is assessing whether common issues predominate over individual issues, the court must ‘focus on the policy itself’ and address whether the plaintiff’s theory as to the illegality of the policy can be resolved on a classwide basis.”

The trial court did not apply the proper legal framework when it denied class certification. Meza’s theory of liability is that the written guidelines for premises technicians were for the benefit of Pacific Bell and exerted substantial control over the premises technicians during their meal and rest periods in violation of the law.

Although the trial court acknowledged that “the policies are undisputed,” it concluded that the disparate manner in which employees experienced the policy through different managers rendered the claims unsuitable for class treatment.

However, “the employer’s liability arises by adopting a uniform policy that violates the wage and hour laws.” The “fact that individual inquiry might be necessary to determine whether individual employees were able to take breaks despite the defendant’s allegedly unlawful policy . . . is not a proper basis for denying certification.”

With respect to the other issues, the court affirmed the wage statement order and the PAGA order. In the published portion of the opinion, it explain that the trial court correctly granted summary adjudication of Meza’s wage statement claim because Pacific Bell’s wage statements do not violate the Labor Code. The trial court also correctly granted summary adjudication of the PAGA claim because it was barred by claim preclusion in light of the settlement and dismissal of a previous PAGA lawsuit. However Meza’s appeal of the order to strike was dismissed because Meza did not include it in his notice of appeal.

WCRI Study Finds Telemedicine Utilization Will Remain High

Although COVID-19 cases in the U.S. have plateaued, it is commonly anticipated that the utilization of telemedicine will remain at levels higher than pre-pandemic.

Multiple legislative actions at the federal and state level are being debated in order to streamline the process of delivering medical services via telemedicine and regulate the reimbursement for telemedicine services.

For these reasons, the utilization and prices of medical services delivered via telemedicine remain important measures to monitor in workers’ compensation.

A new WCRI FlashReport focuses on two types of medical services with the most prevalent use of telemedicine: evaluation and management (E&M) and physical medicine services.

It investigates the patterns of telemedicine utilization among these services in workers’ compensation during the first five quarters of the pandemic (primarily March 2020 -June 2021) across 28 states. It also examines the actual prices paid for the most frequent services delivered via telemedicine versus in person across the study states.

Research Questions:

– – What shares of E&M and physical medicine services were delivered to workers with injuries via telemedicine during the first year and a quarter of the pandemic (March 2020–June 2021)? Did the prevalence of telemedicine use vary across the study states?
– – How did prices paid for telemedicine compare with the prices paid for in-person services? Were there interstate variations in these price comparisons?
– – What percentage of non-COVID-19 claims received telemedicine services? Did this metric vary by state and over time? Did this metric vary by claim maturity?
– – Was telemedicine used for initial services only, or was it used for continuous treatment?
Was the time elapsed from injury to treatment shorter or longer for telemedicine, compared with in-person services?
– – Did telemedicine utilization patterns vary across medical conditions?

This report is based on a sample of workers’ compensation claims for private sector workers and local public employees (e.g., police and firefighters) from 28 states including . The states are Arizona, Arkansas, California, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Massachusetts, Michigan, Minnesota, Mississippi, Nevada, New Jersey, New Mexico, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, and Wisconsin. These study states represent 79 percent of the workers’ compensation benefits paid nationwide.

Google/Amazon Spending Billions Developing Healthcare Technology

America’s labyrinthine health-industrial complex consumes 17% of GDP, equivalent to $3.6 trillion a year.

The American system’s heft and inertia, perpetuated by the drugmakers, pharmacies, insurers, hospitals and others that benefit from it, have long protected it from disruption.

Its size and stodginess also explain why it is being covetously eyed by big tech. Few other industries offer a potential market large enough to move the needle for the trillion-dollar technology titans.

In a report titled “Alphabet is spending billions to become a force in health care,” the Economist reports that Google’s parent company Alphabet is spending billions to become a major player in the healthcare market.

Google’s parent company Alphabet remains the tech firm that has pushed its healthcare efforts the most. Between 2019 and 2021, Alphabet’s venture capital divisions, Google Ventures and Gradient Ventures, and Capital G, have made almost 100 deals in the life sciences and healthcare industry.

The Economist writes that so far this year, it has injected $1.7 billion into future health ideas, according to data provider, CB Insights, which, leaving its fellow tech giants, has spent nearly $100 million in the dust.

Alphabet is the fifth-highest-ranking business in the Nature Index, which measures the impact of scientific papers in the life sciences, behind four giant drugmakers and 20 places ahead of Microsoft, the only other tech giant in the running. The company has hired former senior health regulators to help navigate America’s health care bureaucracy.

Alphabet Health has dabbled in health since 2008, when Google introduced a service that allowed users to compile their health records in one place. That project was shut down in 2012, relaunched in 2018 as Google Health, which included Google’s other health ventures, and was scrapped again last year.

Today Alphabet’s health adventures can be divided into four broad categories. These are in thick order of ambition: wearables, health records, health-related artificial intelligence (AI) and the ultimate challenge of increasing human longevity.

But Amazon launched an online pharmacy and telemedicine service almost everywhere in the United States.  And then last year Amazon announced the expansion of Amazon Care, which dispenses “high-quality medical care and advice “24 hours a day, 365 days a year,” with a goal of delivering the service through companies of all sizes to their employees nationwide.

This move has broader implications for the healthcare industry, says Jeff Becker, MBA, principal analyst, healthcare, with CB Insights. One of the chief impacts is that it brings a company with brand name recognition into an emerging marketplace of medical care solutions aimed at helping employers reduce healthcare costs.

Employers are ripe for services that can help reduce their healthcare expenditures, the second biggest line item on the balance sheet following salaries, Becker says.

“The economic lever that they are tackling is overuse of the ER and urgent care centers,” Becker says. By providing a mechanism to engage with employees early in the care-seeking process, individuals are directed to the most appropriate and cost-effective level of care, thereby saving employers money.

Startups that have gained traction in this space, he says, include DispatchHealth and Heal, which offer in-person and virtual services, as well as 98point6 and Buoy, which provide triage and telehealth services.

“The big race,” Becker says, “is going to become who can add diagnostic testing to these platforms so that we really start to get a full, end-to-end on-demand healthcare platform.”

EDD Announces Recovering $1.1B in Fraudulent Benefits

The California Employment Development Department (EDD) announced it has recovered $1.1 billion in unemployment insurance funds.

The recovered funds were located on approximately 780,000 inactivated benefit cards. Most of the recovered funds will return to the federal government because the fraudulent claims are from the emergency federal Pandemic Unemployment Assistance program, which was the primary target of fraud nationwide.

In July 2021, California hired McGregor Scott as EDD Fraud Special Counsel. Scott aids the state’s work with law enforcement to combat fraud – including supporting state, federal, and local investigations and prosecutions. Working with EDD, he has leveraged his experience to deliver leads and evidence to aid prosecutions and strengthen ongoing investigations.

We will continue working with law enforcement to put fraudsters behind bars and recover every stolen dollar that we can,” Scott stated.

Today’s billion-dollar recovery furthers the efforts of EDD and the California Governor’s Office of Emergency Services to investigate and prosecute criminals who defrauded federal emergency unemployment benefit programs.

Other actions California has taken to strengthen its fraud fighting include:

– – Stopping over $125 billion in attempted fraud by deploying a new identity verification system, ID.me, in 2020 and partnering with Thomson Reuters to help detect and prevent UI and PUA fraud.
– – Setting up the 1099-G call center to help victims of identity theft deal with any tax related questions – work that answered 24,000 calls. Fraud can be reported by selecting Form 1099G in Ask EDD or calling 1-866-401-2849.
– – Working with Bank of America to issue chip-enabled debit cards that enhance security and to strengthen fraud-prevention strategies.
– – Working with the California Office of Emergency Services Fraud Task Force on over a thousand active investigations, arrests, and prosecutions across California.
– – Creating law enforcement investigative guides and offering technical assistance to law enforcement partners who are working fraud investigation cases.
– – Setting up designated regional contacts for each division of the state and working with any agency that needs assistance with an unemployment insurance fraud case.
– – Continuing to issue consumer scam alerts throughout the pandemic that warn about cell phone and email phishing schemes designed to steal personal information.

In Tuesday’s announcement, state officials reported 1,525 cases investigated, 467 arrests, 162 convictions and $3.47 million seized in the last 15 months.

SCOTUS Overturns Washington State Workers’ Compensation Law

The U.S. Supreme Court unanimously overturned a Washington state workers’ compensation law designed for federal contractors working at a nuclear waste site

The state of Washington enacted a workers’ compensation law that applied only to certain workers at a federal facility in the state who were “engaged in the performance of work, either directly or indirectly, for the United States.” The facility, known as the Hanford site, was once used by the Federal Government to develop and produce nuclear weapons, and is now undergoing a complex decontamination process.

Most workers involved in this cleanup process are federal contract workers – people employed by private companies under contract with the Federal Government. A smaller number of workers involved in the cleanup include State employees, private employees, and federal employees who work directly for the Federal Government.

The Washington state law makes it easier for federal contract workers at Hanford to establish their entitlement to workers’ compensation, thus increasing workers’ compensation costs for the Federal Government.

The United States brought suit against Washington, arguing that Washington’s law violates the Supremacy Clause by discriminating against the Federal Government. The United States asserts that a ruling in its favor will allow it to recoup or to avoid paying millions of dollars in workers’ compensation claims.

The District Court concluded that the law was constitutional because it fell within the scope of a federal waiver of immunity contained in 40 U. S. C. §3172. The Ninth Circuit Court of Appeals affirmed.

In a unanimous 9-0 opinion, the Supreme Court of the United States reversed in the case of United States v Washington, 21-404 (June 2022).

Washington argues that Congress has waived federal immunity from state workers’ compensation laws on federal lands and projects through §3172(a). Section 3172(a) says that “[t]he state authority charged with enforcing and requiring compliance with the state workers’ compensation laws . . . may apply [those] laws to all land and premises in the State which the Federal Government owns,” as well as “to all projects, buildings, constructions, improvements, and property in the State and belonging to the Government, in the same way and to the same extent as if the premises were under the exclusive jurisdiction of the State.”

The U.S. Supreme Court has interpreted the Supremacy Clause of the Constitution as prohibiting States from interfering with or controlling the operations of the Federal Government. This constitutional doctrine – often called the intergovernmental immunity doctrine – has evolved to bar state laws that either regulate the United States directly or discriminate against the Federal Government or its contractors.

It said that “Washington’s law violates these principles by singling out the Federal Government for unfavorable treatment. The law explicitly treats federal workers differently than state or private workers, and imposes costs upon the Federal Government that state and private entities donot bear. The law thus violates the Supremacy Clause unless Congress has consented to such regulation through waiver.”

The Supreme Court concluded that “the statute thus does not clearly and unambiguously permit the discrimination contained in Washington’s ‘federal workers only’ law” and thus its argument was “unconvincing.”

NCCI Publishes COVID-19 National Presumptions Update Insight Report

The National Council on Compensation Insurance (NCCI) has just published itsWorkers Compensation Presumptions Update – Five Thinks You Need to Know” Insights Report.

Two years after the start of the pandemic, COVID-19 continues to be an important topic for workers compensation.

Who Established Presumptions? During 2020 and 2021, 18 states, including California, established COVID-19 presumptions via legislation, directives, emergency rules, and/or executive orders. Two additional states – Tennessee and Washington – established a more general “infectious disease presumption.”

Most of the COVID-19 workers compensation presumptions enacted or adopted in 2020 and 2021 contained expiration dates or sunset provisions tied to the end of the state of emergency or another specified date.

What States Might Extend Them? Several states that enacted presumptions in 2020 and 2021 considered, or are considering, legislation to extend the expiration date of the presumption to a later date and/or expand the COVID-19 presumption to additional categories of workers.

California AB 1751 would extend the expiration date for the COVID-19 presumption from January 1, 2023, to January 1, 2025. The bill passed the Assembly and is under consideration in the Senate.

What States Might go Beyond the Pandemic? Five states proposed legislation to create workers compensation presumptions that could be applicable beyond the current COVID-19 pandemic. These types of proposals may specifically mention COVID-19, but also contain terms such as “infectious disease”” “COVID-19 or similar disease,” or “other future qualifying pandemic.” And they might not include sunset provisions or expiration dates.

California SB 213 would establish a workers compensation presumption for infectious and respiratory diseases – both defined to include COVID-19 – for certain hospital employees. The proposal does not include an expiration date.

When will Existing Presumptions Expire?: Seven states have a COVID-19 or infectious disease presumption in effect as of June 1, 2022. The current California presumptions expire on January 1, 2023, unless extended.

The questions surrounding COVID-19 workers compensation presumptions are important for workers compensation stakeholders. As noted above, these presumptions have the potential to impact workers compensation system costs. The full report can be read online.