A new partially published case from the Court of Appeal addresses the circumstances under which a safety consultant retained by a California employer owes a duty of care to the employer’s workers.

Plaintiffs are the parents of Oscar Peredia, Jr., who was 19 years old on September 20, 2012, when he was killed while working at Double Diamond’s dairy. When Oscar Jr. was sweeping the feed slab that morning, he was hit by the front-end loader on a John Deere tractor, knocked down, and run over by the right front wheel of the tractor.

Double Diamond began its dairy business in 1998. At the time of the incident, the dairy occupied 220 acres, had approximately 4,800 milking cows, a total of 9,500 animals, and about 50 employees. Approximately 3,000 acres of farmland support the dairy, and Double Diamond’s farming operations employ another 20 workers.

Double Diamond engaged defendant HR Mobile Services, Inc. to assist it with human resources, training, loss prevention, and workers’ compensation issues. The contractual relationship between Double Diamond and HR Mobile was established by a handshake and was not set forth in a written document signed by the parties. Double Diamond paid HR Mobile $24,000 per year for services related to the dairy.

HR Mobile requested Boretti, Inc., one of its vendors, to provide a form of injury and illness prevention plan (IIPP). HR Mobile asserts that when it obtained the IIPP from Boretti, Inc., it believed the IIPP complied with California’s basic statutory and regulatory requirements for dairy IIPP’s and was based on current occupational and health standards and requirements and on accepted industrial safety and health principles and practices.

Plaintiffs contend HR Mobile’s belief was not reasonable because, among other things, HR Mobile neglected to analyze the dairy’s previous IIPP or the one obtained from Boretti, Inc. to ensure the new IIPP complied with occupational and health standards and requirements. Plaintiffs assert the subsequent citations issued by California’s Division of Occupational Safety and Health (CalOSHA) establish the IIPP was not compliant.

The trial court granted summary judgment to the safety consultant on the ground the consultant owed no duty of care to the employees because the consultant’s allegedly negligent omissions were not affirmative misfeasance and, therefore, were not acts “wrongful in their nature” for purposes of Civil Code section 2343. The Court of Appeal disagreed, and reversed in the partially published case of Peredia v HR Mobile Services.

California recognizes the common law theory of negligent undertaking, which is described in section 324A of the Restatement Second of Torts. Our Supreme Court set forth the five elements of a negligent undertaking cause of action in Artiglio v. Corning Inc. (1998) 18 Cal.4th 604 (Artiglio), three of which are related to the duty of care. A safety consultant is liable to an employee of the firm that hired the safety consultant when the employee establishes the elements of a negligent undertaking claim set forth by  the California Supreme Court in Artiglio.

On June 26, the Division of Workers’ Compensation (DWC) adopted an order adjusting the Official Medical Fee Schedule to conform to changes in the Medicare Physician Fee Schedule payment system’s July 1, 2018 quarterly update. The June 26 Order included adoption of updates to the National Correct Coding Initiative “Medically Unlikely Edits” (MUE).

The MUE edits file sets forth the maximum number of units of service related to a specific procedure that are medically likely to be reported by a treating physician. It serves as a useful screening tool to identify possible billing errors for many procedure codes.

However, evaluation of the July 1, 2018 MUE file reveals that many codes are listed as zero value due to Medicare coverage rules that do not apply to the scope of workers’ compensation medical care. For example, acupuncture codes and hearing aid examination codes were added to the file with a value of “zero” because they are not Medicare benefits; however, they are covered services for workers’ compensation patients when medically necessary. The fee schedule regulation provides that the correct coding edits, including the MUE, do not apply where workers’ compensation payment rules differ from Medicare rules.  

In order to avoid possible confusion and inappropriate denials of bills for medically necessary care, DWC has determined that the codes listed in the MUE with a value of zero should not be included in the MUE file adopted for workers’ compensation.

Therefore, the DWC has adopted a revised Physician and Non-Physician Practitioner fee schedule update Order for services rendered on or after July 1, 2018. The revised Order adopts an Excerpt of the MUE file, which deletes codes listed with a zero value.

The exclusion of the zero value codes from the MUE file does not mean that all of the deleted codes are payable. It should be noted that some of the MUE zero value codes would not be payable in workers’ compensation, in particular the codes that are identified as Status Code B (bundled) in the Relative Value Unit File and codes specifically identified in the fee schedule regulation as not payable.  Although the Status Code B bundled codes, and the workers’ compensation “not payable” codes, will not be identified by the MUE, the payer may apply other edits to identify those non-payable codes.

In addition, the Order adopts revisions to conform to current Medicare terminology, as the “Physician CCI Edits” are now entitled “Practitioner PTP Edits.”

If a medical provider believes a medical bill has been inappropriately denied based upon the application of the MUE, he or she may submit a request for second bill review to the claims administrator.

The order, revised regulation text and the MUE Excerpt file are effective for services rendered on or after July 1, 2018 and can be found on the DWC website.

The FDA issued a Complete Response Letter (CRL) to Phoenix, Arizona-based Insys Therapeutics for its buprenorphine sublingual spray for moderate-to-severe acute pain.

The product rejected by the FDA was an under-the-tongue spray formulation of buprenorphine, an opioid. Although the data submitted with the company’s drug application indicated all three proposed doses of the drug showed statistically significant pain relief compared to placebo, the FDA indicated concerns over safety.

Steve Sherman, Insys’ senior vice president of regulatory affairs, said in a statement, “We appreciate the panelists’ perspective and guidance. Believing that our sublingual delivery technology could contribute significantly to bring value to patients, we will continue to work with the FDA in the coming months to discuss the path forward for our buprenorphine product candidate and to build on the current body of evidence for its efficacy and safety.”

Reuters notes that while this product has been pending at the FDA, “Insys has been embroiled in investigations related to its opioid cancer pain medication, Subsys. Last year, the company’s billionaire founder John Kapoor was charged with participating in a scheme to bribe doctors to prescribe Subsys and to defraud insurers into paying for it.”

In March, Jerrold Rosenberg, a physician in Rhode Island who took kickbacks from Insys, lost his medical license and was fired from his professorship at Brown University after pleading guilty to taking more than $188,000 in kickbacks in the form of speaker fees. He also made false patient records to defraud insurers into paying for Subsys. He was sentenced to more than four years in prison and ordered to pay $754,000 in restitution.

U.S. District Judge John J. McConnell Jr. said at the sentencing, “You in effect sold your medical license to a pharmaceutical company. That’s intolerable.”

Rosenberg was the fourth physician to be jailed over Insys bribes after a federal investigation that indicted John Kapoor and six other executives. Fortune wrote, “Federal prosecutors told the court Rosenberg ignored and bullied patients who resisted staying on the powerful pain-killing spray. At least one of Rosenberg’s patients suffered an overdose and was ‘near death’ as a result of his wrongdoing, the government said in court filings.”

Kapoor is scheduled for trial in 2019 for charges of racketeering and conspiracy. Both he and the other Insys executives have pleaded not guilty.

A large wage theft case that unfolded in a Southern California federal court, offers a picture of the car wash mogul’s businesses and raises ethical question concerning his lawyers at Littler Mendelson, the nation’s largest management-side employment firm. At the center of the case is the companies owner, Vahid David Delrahim.

Through one of his companies, Platinum Energy, which is headquartered in Agoura Hills, Delrahim was named last November as the buyer of a $9.1 million home in Hidden Hills, the neighborhood that also houses Kim Kardashian and Miley Cyrus.

The U.S. Department of Labor announced that the workers at Delrahim’s two dozen Southland car washes will receive the back pay under a consent agreement reached with Delrahim and filed in Los Angeles federal court. The car wash magnate has been ordered to pay $4.2 million in back wages and damages to more than 800 employees.

According to the complaint filed in a Los Angeles federal court, Delrahim’s mostly Latino employees were required to report to work at a certain time but directed not to clock in until customers arrived. And when business slowed down, they were told to clock out but remain on the job.

The Delrahim investigation, which began in June 2015 with 63 current and former workers of a single facility, the Brea Car Wash & Detail Center, turned into a fierce legal slugfest. Three of his Agoura Hills-based companies are also defendants: Southwest Fuel Management, Goldenwest Solutions Group and California Payroll Group.

Prosecutors added  Delrahim’s daughter, Shannon Delrahim, as a defendant. Littler Mendelson had argued that Shannon was a 21-year-old “part-time marketing intern,” enrolled full time at Pepperdine University. But documents subpoenaed from Pepperdine showed that Shannon was actually 26,  had listed her job as HR director for her father’s companies since 2009, and attended classes only at night and on weekends.

An employment law “wage theft” case can also be viewed as a scheme to avoid workers’ compensation insurance premium. Since premium is based on payroll, an illegal reduction in payroll by wage theft, also reduces the workers’ compensation premium that otherwise would have been paid. In cases such as this one, the potential to recover unpaid premium has yet to be fully developed by the worker’s compensation insurance industry.

In August 2016, investigators requested that the 58-year-old Delrahim and his company manager produce evidence such as surveillance footage, text messages and emails that related to employee work hours, wages, schedules, guidelines and gross business income. The defendants failed to provide the requested material.

Court documents showed that Delrahim and his manager, Martin Lizarraga, admitted they deleted emails and texts – and that company surveillance footage was not stored beyond 30 days. The defendants testified that the deletions were a regular occurrence and not a deliberate attempt to rebuff the Department of Labor’s request. Their lawyers stated that the video footage was “too burdensome and expensive to retain.”

Retired judge Rosalyn Chapman was appointed by the court to evaluate the claims. She ruled that Delrahim had purposely destroyed video evidence and that Littler Mendelson, the law firm representing Delrahim, was “deliberately and willfully stonewalling on discovery.”

Over the course of the case, Delrahim and Littler Mendelson have been sanctioned by the court five times for withholding documents and other “not substantially justified” delaying tactics. They have been ordered to reimburse the government $23,850 in legal fees.

The car wash industry has one of the highest levels of wage theft and workplace violations recorded by the California Division of Labor Standards Enforcement. In the past five years, inspectors have issued 1,423 citations for failing to pay workers compensation, minimum wage and overtime, refusing to provide itemized pay statements, denying rest and meal breaks and operating without a license.

In 2012, California Attorney General Kamala Harris announced a $1 million settlement in a lawsuit against a company that owned car washes in Santa Monica, Venice, Irvine, Laguna Niguel, Laguna Hills, Folsom, Fair Oaks and San Ramon. According to investigators, more than 80 workers were denied minimum wage, overtime, rest and meal breaks. The owner created false records.

Hundreds were charged by federal authorities across the United States last June,in cases that cumulatively allege $2 billion in bogus billings. The nationwide sweep includes charges against 165 doctors, nurses and other licensed medical professionals who allegedly participated in health care fraud schemes.

One of the indictments outlines a conspiracy that was responsible for more than $250 million in fraudulent claims for prescriptions that were filled by compounding pharmacies in Southern California and elsewhere.

The indictment charged Irena Shut, 41, an attorney who lives in Hidden Hills, with paying kickbacks to two podiatrists to authorize prescriptions written on pre-printed prescription pads designed to maximize insurance payments, regardless of the medical need for an expensive compounded formulary for each “patient.”

The charged podiatrists, Domenic Signorelli, 51, of Irvine, and Robert Joseph, 51, of Huntington Beach, along with several other unnamed co-conspirator doctors, allegedly received kickbacks for “writing” the prescriptions. Once the prescriptions were filled, members of the conspiracy  submitted fraudulent claims to federal, state and private insurers for the compounded drugs, prosecutors said.

Signorelli is currently listed as a QME in podiatry by the DIR with 9 offices in Southern California.

Signorelli agreed to change his plea to guilty when he signed a Plea Agreement on July 22. He agreed to cooperate with authorities, and to forfeit nearly $1M which he agreed he obtained as a result of the criminal conduct.

His 29 page Plea Agreement provides additional facts about his case. TYY Consulting, Inc. purported to provide “marketing consulting services” to pharmacies, specifically including Concierge Compounding Pharmaceuticals, Inc. and Precise Compounding Pharmacy, Inc.

Irena Shut, a Woodland Hills attorney (SBN 240662 ) was a TYY “marketing” representative, based in Los Angeles, California, who, through her entity, Mise Marketing, was paid percentage-based commissions for facilitating the referral of prescriptions for compounded drugs and other items reimbursed by health care benefit programs to the TYY-Affiliated Pharmacies.

Singorelli and Joseph were podiatrists licensed in California, who, in exchange for kickback and bribe payments from Shut, wrote prescriptions for compounded drugs that were routed to the TYY-Affiliated Pharmacies. Shut paid defendant approximately $955,000, concealed through various means, including payments to two members of defendant’s family, in exchange for authorizing prescriptions for compounded drugs that were dispensed at the TYY-Related Pharmacies.