In 2022 the United States Supreme Court issued its opinion in Southwest Airlines Co. v. Saxon, 142 S. Ct. 1783 (2022), a closely watched employment law case involving arbitration clauses in employment contracts. The opinion was a divergence from the Court’s tendency in recent years to favor arbitration. Instead of a company or industry wide exemption for mandatory arbitration, courts must instead use a fact-specific test focused on actual job duties of employees.

In the 2022 case, Latrice Saxon, was a ramp supervisor for Southwest Airlines at Chicago Midway International Airport. SCOTUS ruled that Saxon belongs to a “class of workers engaged in foreign or interstate commerce” to which the Federal Arbitration Act §1’s exemption applies. However, the Supreme Court rejected the contention that all airline workers are exempt from the FAA and instead used a fact-specific test focused on actual job duties.

California is home to over 1.5 million transportation workers. Of these workers, about 312,080 are truck drivers in a variety of industries, and many of these workers are directly related to the movement of goods, even if they do not directly work for a trucking company.  For these many California transportation workers, this week’s unanimous United States Supreme Court decision in the case of Bissonnette v. LePage Bakeries Park St., LLC, et al., clarified the scope of the exemption under the FAA will have a substantial impact on employment law litigation with many of these transportation workers. .

In this new case SCOTUS reversed the Court of Appeals for the Second Circuit and held that transportation workers do not need to work in the transportation industry to be exempt from the Federal Arbitration Act’s (FAA) arbitration requirements.

The employer in this case is Flowers Foods, Inc., is a multibillion-dollar producer and marketer of baked goods. that are distributed nationwide. It is the second-largest producer and marketer of packaged bakery foods in the United States It employs approximately 9300 workers. One of its flagship products is Wonder Bread,

Flowers also makes and markets other baked goods such as tortillas, bagels, Butterscotch Krimpets, and Jumbo Honey Buns in more than 40 bakeries located in 19 States. From there, these products are distributed across the country. Some of its subsidiaries use a direct-store-delivery” system in which franchisees buy the rights to distribute Flowers products in particular geographic territories. Those distributors purchase the baked goods from Flowers and then market, sell, and deliver them to retailers.

Neal Bissonnette and Tyler Wojnarowski were franchisees who owned the rights to distribute Flowers products in certain parts of Connecticut. Flowers baked the bread and buns and sent them to a warehouse in Waterbury. Bissonnette and Wojnarowski picked them up and distributed them to local shops. They allegedly spent at least forty hours a week delivering Flowers products in their territories. But their jobs extended beyond carrying the products from Point A to Point B. They also found new retail outlets, advertised, set up promotional displays, and maintained their customers’ inventories by ordering baked goods from Flowers, stocking shelves, and replacing expired products.

To purchase the rights to their territories, Bissonnette and Wojnarowski signed Distributor Agreements with Flowers. Those contracts incorporate separate Arbitration Agreements that require “any claim, dispute, and/or controversy” to be arbitrated under the Federal Arbitration Act.

In 2019, Bissonnette and Wojnarowski brought a putative class action claiming that Flowers had underpaid them in violation of state and federal law. Flowers moved to dismiss or to compel arbitration under the FAA, arguing that the contracts required the distributors to arbitrate their claims individually. The District Court dismissed the case in favor of arbitration. The Second Circuit Court of Appeals affirmed on the aground that Bissonnette and Wojnarowski” are in the bakery industry” and not the transportation industry. And under Circuit law, the panel explained, §1 of the FAA exempts only ” ‘workers involved in the transportation industries.’ “

A month after the Second Circuit decided the appeal in Flowers, SCOTUS decided Southwest Airlines Co. v. Saxon, 596 U. S. 450 (2022). In that case, SCOTUS determined that a ramp supervisor who “frequently load[ed] and unload[ed] cargo” from airplanes belonged to a “class of workers engaged in foreign or interstate commerce.” Id., at 463. It held that a “class of workers” is properly defined based on what a worker does for an employer, “not what [the employer] does generally.” Id., at 456.

The Second Circuit granted panel rehearing in the Flowers case – in light of Saxon – but adhered to its prior decision.

In the present Flowers case, SCOTUS again was asked to consider the scope of the FAA §1 exclusion clause as it did in Saxon, where it expressly declined to adopt an “industry wide” approach of the sort Flowers advances here.

It concluded “A transportation worker need not work in the transportation industry to fall within the exemption from the FAA provided by §1 of the Act. The Second Circuit accordingly erred in compelling arbitration on the basis that petitioners work in the bakery industry.”

“In other words, any exempt worker ‘must at least play a direct and ‘necessary role in the free flow of goods’ across borders.- 596 U. S., at 458 (quoting Circuit City, 532 U. S., at 121). These requirements “undermine[] any attempt to give the provision a sweeping, open-ended construction,” instead limiting §1 to its appropriately “narrow” scope. Id., at 118. * *

“The judgment of the Second Circuit is vacated, and the case is remanded for further proceedings consistent with this opinion.”

Kent Bo Fridolfsson, 67, of Benicia, pleaded guilty to six charges of insurance fraud and grand theft after a joint investigation with the California Department of Insurance, Solano County District Attorney’s Office and the Employment Development Department (EDD) revealed he underreported payroll by nearly $1 million to illegally save on workers’ compensation insurance and taxes.

Fridolfsson was placed on formal probation, ordered to pay over $725,000 in restitution, and ordered to surrender his contractor’s license.

The joint investigation began after one of Fridolfsson’s employees sustained a work-related injury and contacted State Compensation Insurance Fund (State Fund), who provided insurance coverage to Fridolfsson’s business. Fridolfsson was the former president and owner of the construction company Diversified Specialists and had been a licensed contractor in California since 1986.

Fridolfsson had insurance coverage with State Fund from 2010 to 2021 and was required to report payroll during each policy period. From 2010 to 2019 Fridolfsson reported zero payroll to State Fund; however, in January 2019 one of his employees contacted State Fund after sustaining a work-related injury. After being contacted by State Fund, the Contractors State License Board conducted a site inspection of Fridolfsson’s business and interviewed a number of his employees.

The joint investigation found that Fridolfsson underreported his payroll by $989,823. The failure to report employee payroll resulted in the illegal reduction of workers’ compensation insurance premiums, leading to approximately $382,104 in premium owed to State Fund.

The underreported payroll also resulted in an unpaid payroll tax to Employment Development Department of approximately $347,520.

Fridolfsson was convicted on April 5, 2024. This case was prosecuted by the Solano County District Attorney’s Office.

NuSil Technologies manufactures silicone and resins. NuSil utilized hazardous chemicals in the production and manufacture of products at its facility in Bakersfield, California. NuSil posted material safety data sheets with information about dangerous chemicals used at the facility.

Kevin O’Bryan worked for NuSil from 2006 to May 2016 at its facility in Bakersfield. O’Bryan’s work duties necessitated exposure to hazardous chemicals. NuSil provided training to O’Bryan about the chemicals he worked with and the use of personal protective equipment. Those trainings did not address formaldehyde. None of the material safety data sheets provided by NuSil mentioned formaldehyde.

In 2009, O’Bryan expressed concern to his supervisor about being exposed to chemicals. Around 2011 or 2012, O’Bryan again expressed concern about exposure to chemicals and was issued a full-face respirator. In 2013, O’Bryan’s doctor diagnosed him with “problems” that caused O’Bryan to be concerned about his workplace exposure. Around 2013, O’Bryan complained to the manufacturing supervisor about swelling and numbness in his hands, as well as extreme fatigue.

At some time between 2013 and May 11, 2016, O’Bryan complained to the site manager, that he believed formaldehyde was being generated by the distillation column on process at the facility. O’Bryan assumed there was formaldehyde because the smell was like “at the mortuary.

On May 11, 2016, O’Bryan took a disability leave of absence from work due to health symptoms he attributed to chemical exposure in the workplace at NuSil.O’Bryan filed a workers’ compensation claim against NuSil on June 27, 2016, alleging a cumulative trauma injury through May 10, 2016, to his hands, head, joints, respiratory system, central nervous system, and circulatory system from “exposure to toxic chemicals.”

At some point, O’Bryan filed a complaint about NuSil to California’s Division of Occupational Safety and Health. In its report, OSHA cited NuSil based on its finding that employees worked with formaldehyde in manufacturing rooms at the facility. O’Bryan was unaware of the presence of formaldehyde at the facility prior to OSHA’s report and learned of the presence of formaldehyde in approximately “May[ or] June” of 2017.

On September 18, 2018, O’Bryan settled his workers’ compensation claim for $235,000 by compromise and release which “does not resolve (or affect) any civil action (or right) applicant (may bring forth against NuSil) regarding this claim.”

On January 17, 2019, the O’Bryans filed a complaint against NuSil alleging two causes of action: fraudulent concealment on behalf of O’Bryan and loss of consortium on behalf of Tiffany O’Bryan. NuSil raised several affirmative defenses in its answer including that the claims were barred by the statute of limitations.

The parties stipulated and the trial court agreed to bifurcate the issues and try NuSil’s statute of limitations defense in a bench trial before trying the remaining issues. On July 1, 2022, “[p]hase 1” of the bench trial was conducted on the sole issue of the statute of limitations.The O’Bryans’ counsel conceded during closing argument that the applicable statute of limitations for the fraudulent concealment claim is two years.

On July 27, 2022, the trial court entered judgment for NuSil against the O’Bryans on “all claims in Plaintiffs’ Complaint in its entirety.” The Court of Appeal affirmed the trial court in the unpublished case of O’Bryan v. NuSil Technology -F084899 (April 2024).

An employee injured during the course of employment is generally limited to remedies available under the Workers’ Compensation Act. Certain types of injurious employer conduct bring the employee outside the compensation bargain. One exception to the exclusive remedy rule was identified by our Supreme Court in Johns-Manville Products Corp. v. Superior Court (1980) 27 Cal.3d 465.

The fraudulent concealment exception outlined in Johns-Manville was codified in 1982 as Labor Code section 3602, subdivision (b)(2). This statutory subdivision allows a civil suit “[w]here the employee’s injury is aggravated by the employer’s fraudulent concealment of the existence of the injury and its connection with the employment, in which case the employer’s liability shall be limited to those damages proximately caused by the aggravation.” (Lab. Code, § 3602, subd. (b)(2).).

A fraudulent concealment claim under Labor Code section 3602, subdivision (b)(2) requires the employee show three conditions: “(1) the employer must have concealed ‘the existence of the injury’; (2) the employer must have concealed the connection between the injury and the employment; and (3) the injury must have been aggravated following the concealment.” (Jensen v. Amgen Inc. (2003) 105 Cal.App.4th 1322.)

The parties agree the statute of limitations for the O’Bryans’ fraudulent concealment claim is two years pursuant to Code of Civil Procedure section 335.1. The question of when a “cause of action accrued is a mixed question of law and fact.” The O’Bryans filed their initial complaint on January 17, 2019. Thus, the O’Bryans’ cause of action was time-barred if all the elements of their fraudulent concealment claim accrued prior to January 17, 2017, absent an applicable exception to the general rule of accrual.

Here, O’Bryan suspected NuSil’s alleged wrongful conduct had injured him well before filing his civil complaint. By at least May 11, 2016, O’Bryan knew his health had been damaged by toxic chemical exposure at NuSil and suspected this exposure included formaldehyde, a chemical that was purportedly not being produced at the facility. At multiple times before May 11, 2016, O’Bryan expressed concern that his health was at risk from chemical exposure during his employment at NuSil.

The Court of Appeal rejected the O’Bryans’ contentions they could not assert their cause of action until the May 30, 2017 OSHA report confirmed the presence of formaldehyde at NuSil’s facility. This argument misapprehends the necessary facts to assert a cause of action. “A plaintiff need not be aware of the specific ‘facts’ necessary to establish the claim; that is a process contemplated by pretrial discovery.”

The WCAB just published en banc orders that involve a course of conduct that appears to have occurred across eight (8) cases, involving attorney Susan Garrett and hearing representative Lance Garrett’s representation of seven applicants and one lien claimant.

“It appears that in each of these cases Garrett Law Group through Susan Garrett or its hearing representative Lance Garrett, while supervised by attorney Susan Garrett, requested a series of continuances of multiple trial dates. However, the requests for continuance due to calendar conflict were not filed when the notice of hearing was issued. Instead, they waited until days before trial to request a continuance.”

“When the WCJ denied the request for continuance, they waited until the day of trial to file petitions for reconsideration in lieu of appearing for trial and to prevent the matters from proceeding, even though they were given notice by the Appeals Board in a prior decision that reconsideration is not proper from an order setting the matter for trial.”

“That is, based upon the timing of their filings, it appears that they filed the petitions for reconsideration solely to delay the trial proceedings in each case, as evidenced by their action of not appearing at trial in each case and not ensuring that their client appeared.”

“We emphasize that filing a petition for reconsideration does not by itself excuse any party from appearing at a properly noticed hearing because only the Workers’ Compensation Appeals Board can excuse an appearance. Moreover, their delay in seeking a continuance and filing for removal on or near the day of trial would not have provided sufficient time for the Appeals Board to act.”

Consequently, on April 10, 2024, the Appeals Board issued an en banc order consolidating eight cases and issued a notice of intention to impose costs and sanctions collectively up to $20,000.00 against attorney Susan Garrett (CA BAR #195580) in eight (8) instances where it appeared that she filed petitions for reconsideration with willful intent to disrupt or delay the proceedings of the Workers’ Compensation Appeals Board or with an improper motive, or where it appeared that such actions were indisputably without merit.

The Appeals Board issued a second notice of intention to impose costs and sanctions collectively up to $20,000.00 against hearing representative Lance Garrett in eight (8) instances where it appeared that he filed petitions for reconsideration with willful intent to disrupt or delay the proceedings of the Workers’ Compensation Appeals Board or with an improper motive, or where it appeared that such actions were indisputably without merit.

In the en banc notice of intent, the Appeals Board makes clear that a request for a continuance is not a final order as it does not resolve any threshold issue. Where a party files a petition for reconsideration without good cause, a notice of intent to impose sanctions may issue.

“In each of these cases, eight (8) instances total, attorney Susan Garrett and hearing representative Lance Garrett each appear to have engaged in the similar tactic of requesting trial continuances, then filing a petition for reconsideration of the order denying the trial continuance on or near the day of trial and then failing to appear at trial”.

Filing petitions for reconsideration designed to delay a trial can be described as frivolous and/or bad-faith conduct, which is sanctionable. (See United States Fire Ins. Co. v. Workers’ Comp. Appeals Bd. (Palafox) (2013), 78 Cal.Comp.Cases 1021 [2013 Cal. Wrk. Comp. LEXIS 137].) “Based upon our review of the record, it appears that the following same or similar sanctionable conduct has occurred in each of these cases.”

Both Susan and Lance Garrett have 20 plus 5 days to file a response to the notice.

En banc decisions of the Appeals Board are binding precedent on all Appeals Board panels and workers’ compensation administrative law judges. (Cal. Code Regs., tit. 8, § 10325; City of Long Beach v. Workers’ Comp. Appeals Bd. (Garcia) (2005) 126 Cal.App.4th 298, 316, fn. 5 [70 Cal.Comp.Cases 109]; Gee v. Workers’ Comp. Appeals Bd. (2002) 96 Cal.App.4th 1418, 1424, fn. 6 [67 Cal.Comp.Cases 236].) This en banc decision is also adopted as a precedent decision pursuant to Government Code section 11425.60(b).

It is interesting that the WCAB has elevated these cases to an en banc effort. One possible reason is that the WCAB intends to deal with frivilous petitions for reconsideration/removal more aggressively.

In May 2021, the Attorney General established the COVID-19 Fraud Enforcement Task Force to marshal the resources of the Justice Department in partnership with agencies across government to enhance efforts to combat and prevent pandemic-related fraud. The task force bolsters efforts to investigate and prosecute the most culpable domestic and international criminal actors and assists agencies tasked with administering relief programs to prevent fraud by, among other methods, augmenting and incorporating existing coordination mechanisms, identifying resources and techniques to uncover fraudulent actors and their schemes, and sharing and harnessing information and insights gained from prior enforcement efforts.

The Justice Department’s COVID-19 Fraud Enforcement Task Force (CFETF) just released its 2024 report detailing the efforts of the task force and its member agencies in response to widespread fraud involving many COVID-19 relief programs targeted by fraudsters and other criminals who sought to exploit the government’s relief efforts for their personal gain.

To date, the efforts of the task force’s member agencies has led to criminal charges against more than 3,500 defendants for losses of over $2 billion, civil enforcement actions resulting in more than 400 civil settlements and judgments of over $100 million, and over $1.4 billion seized or forfeited.

In addition to the efforts noted above, the CFETF has established five strike forces to focus on the most complex and harmful pandemic fraud – often committed by overseas, organized, or violent actors. Those strike forces, located in the U.S. Attorneys’ Offices across the country including the Districts of Maryland, New Jersey, Colorado, the Southern District of Florida, and a joint task force co-located in the Eastern and Central Districts of California, are responsible for indicting 250 defendants to date, including gang members, inveterate fraudsters, and overseas rings committing a myriad of cyber-enabled fraud against our citizens and government programs.

The Eastern and Central Districts of California joint COVID Fraud Strike Force was formed in August 2022. As strike force district, the Eastern and Central Districts of California oversee agents, analysts, and AUSAs to bring the most impactful criminal pandemic fraud cases, often involving multiple CARES Act programs, foreign actors, violent perpetrators, or large loss amounts.

Since the inception of the Strike Force, the Eastern District of California has criminally charged 17 cases with associated actual losses of over $20 million.

The Central District of California has joined with FBI, IRS CI, SBA-OIG, HHSOIG, DOL-OIG, TIGTA, USSS, and several local law enforcement agencies to initiate 37 criminal cases involving 72 individuals suspected of committing PPP, EIDL, UI, and ERC fraud, with losses identified of more than approximately $126 million. Approximately 15 of the 35 cases involve fraudulent UI claims with collective losses of more than $53 million. CDCA’s cases have covered a broad spectrum of criminal activity in its diverse population with a view

CFETF members also established the National Unemployment Insurance Fraud Task Force, a first-of-its-kind task force that developed a data sharing and lead development process within OCDETF’s International Organized Crime Intelligence Operation Center (IOC-2), using data from pandemic relief programs. The NUIFTF has used that process to disseminate over 100 leads and intelligence associated with over $3 billion in suspected pandemic fraud.

While this report highlights these accomplishments, much work remains in the fight against COVID-19 fraud. CFETF members have seen their budgets cut, straining resources to develop investigations and prosecute offenders. The first years of the pandemic fraud response were dedicated to coordination, data collection, and the establishment of interagency data sharing to generate actionable leads.