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Death by a Thousand Cuts – Another Employer Leaves California

For years, Andrew F. Puzder, the CEO of CKE Restaurants, the parent company of the Carl’s Jr. and Hardee’s fast-food chains, has been telling the world that while the U.S. government makes life needlessly miserable for businesses, and California, where it has been headquartered, is exponentially worse.

This week, CKE announced that it is moving its headquarters to Nashville, Tennessee. In June 2013, Puzder told the Wall Street Journal that his chain would not expand in California because the state “is not interested in having businesses grow,” noting among many other things that it takes 285 days to get a building permit after signing a lease. This means the chain has to pay rent for over nine months, plus the time needed to build, while not earning any revenues.

Puzder also wrote roughly 15 columns at Human Events in 2012, most of them bemoaning the sluggish U.S. economy and onerous U.S. government policies and regulations.

The company appears to have planned to move its headquarters to Nashville for years. This would explain why it has gone to the franchising model almost everywhere except Nashville. It can use its company-owned stores there to test new menu items and concepts before making them available to franchisees. CKE could have chosen any large metro area for this strategy, including the area surrounding its current California headquarters. But it did not. Nation’s Restaurant News specifically notes that “Among the refranchised units are restaurants in Hardee’s headquarters city of St. Louis and in Santa Barbara County, Calif., where Carl’s Jr.’s home office in Carpinteria is located.” Why did management clearly choose to go elsewhere? Among other things, Puzder told the Journal in 2013 that the Golden State’s labor laws are intolerable.

And Car’s Jr. joins a long list of California companies with an exit strategy. Some of them are big employers. In 2014, Toyota announced plans to move most of the 5,000 managers and employees from Toyota’s Torrance, Calif., headquarters to Plano Texas. Toyota has enjoyed a deep relationship with Texas through its $2.2-billion truck-assembly complex near San Antonio.

And remember many decades ago when General Motors had an assembly plant in Van Nuys. Southern California’s long history as an auto manufacturing center ended in 1992 when a flame-red Chevrolet Camaro rolled off the assembly line, the last of 6.3 million vehicles built there over 45 years. The Van Nuys factory, which also made Pontiac Firebirds, was the last auto plant in Southern California. Its demise -announced to the plant’s 2,600 workers – follows the closure in the early 1980s of a Ford Motor Co. plant in Pico Rivera and a GM plant in South Gate and the 1971 shutdown of a Chrysler Corp. plant in City of Commerce.

A recent published study of “California divestment events” – business decisions to shun the state paint a grim picture. These come in three types: companies that left the state entirely; companies that expanded in other states rather than in California; and a few companies that had planned to grow in the Golden State but changed their minds. The study found records of 1,510 divestment events occurring in California between 2008 and 2014, but that number is an incomplete accounting of the situation. “Experts in site selection generally agree that at least five events fail to become public knowledge for every one that does,” giving rise to the conclusion that the real total is probably more than 9,000 divestment events for this period.

We can say goodbye to number 9001, the Carl’s Jr. headquarters.

WCRI Says Physician Financial Incentives Cause “Case Shifting” to Comp

An article in Business Insurance claims that higher fee schedules generally result in cases being shifted from group health coverage to workers compensation. This conclusion was based on preliminary findings by the Workers Compensation Research Institute.

Depending on the injury, decisions about whether an injury is related to work may rely heavily on treating physician assessments, WCRI President and CEO Dr. John Ruser said Thursday during the Cambridge, Massachusetts-based group’s 2016 WCRI Annual Issues & Research Conference in Boston.

With fractures, contusions and lacerations, for example, it’s usually clear whether an injury occurred on the job, Dr. Ruser said of the study of injuries originating between 2008 and 2010. Causation is less obvious for soft tissue injuries such as knee and shoulder strains, giving doctors more discretion, he said. “It’s not about fraud,” Dr. Ruser said. “It’s about uncertainty, and financial incentives could influence that decision.”

According to WCRI’s preliminary findings on how fee schedules affect case-shifting, increasing workers comp reimbursement rates by 20% for physician services associated with office visits increases the odds that a soft tissue injury will be considered work-related by 6%. “It doesn’t sound like a lot, but it’s more than you think,” Dr. Ruser said, adding that the 6% increase in comp-related soft tissue injuries leads to a 1.5% increase in overall workers comp costs.

He said there was no evidence of case-shifting for patients with fractures, lacerations, contusions or traumatic injuries by trauma in all 50 states studied.

Though employers pay for both group health and workers comp, case-shifting leads to higher costs as workers comp typically pays higher prices for medical care, higher workers comp income benefits can cause cases to stay open longer, and income benefit payments often exceed nonoccupational disability insurance payments, which aren’t offered to everyone, Dr. Ruser said.

Patient incentives also can come into play, Dr. Ruser said, since there are no copays or deductibles in workers comp. “Everything else equal, the patient would be happy if a particular case was called work-related,” he said.

WCJ Ethics Advisory Committee Issues 2015 Annual Report

The Division of Workers’ Compensation has posted the 2015 ethics advisory committee’s annual report on its website. The ethics advisory committee is a state committee independent from the DWC that is charged with reviewing and monitoring complaints of misconduct filed against workers’ compensation administrative law judges.

The EAC is composed of nine members, each appointed by the administrative director of the DWC for a term of four years. The composition of the EAC reflects the constituencies within the California workers’ compensation community. The EAC meets four times a year at the DWC headquarters. Although EAC meetings are open to the public, the Committee meets in executive session when it engages in the review and discussion of actual complaints, and that portion of the proceedings is closed to the public.The ethics advisory committee is required to make a public report each year summarizing activities in the previous calendar year. Anyone may file a complaint with the EAC. Complaints may be submitted anonymously, but all complaints must be presented in writing.

The 2015 annual report may be viewed or downloaded at the DWC website. In this report, the EAC considered a total of 38 of the 44 new complaints it received in calendar year 2015, in addition to 6 complaints pending from 2014. The complaints set forth a wide variety of grievances. A large proportion of the complaints alleged legal error not involving judicial misconduct or expressed dissatisfaction with a judge’s decision. The majority of complaints were filed by unrepresented employees.

The EAC recommended that “further action be taken” in three lien cases. (cases 9, 10 and 26 in the report) All three complained about a lack of courtesy, dignity, and rudeness on the part of the WCJ, and threatening and intimidating behavior. Cases 9, and 10 were the same case reported by two people. The dispute involved allegations that the WCJ called a doctor’s office and ordered that the doctor appear at a hearing that day. The doctor responded that he was observing a three day religious holiday and could not appear before that was over. The WCJ allegedly responded “I don’t believe you.” The second complaint was filed by a witness at that hearing. “The complainant alleged that the judge appeared smug, negative, and downright abusive to all the parties.” In both cases the EAC “recommended to the CJ that further action be taken and recommended that this matter be referred to personnel.”

In case 26, he complainant, a lien claimant, alleged that the judge displayed rude, abusive, undignified, ill-mannered, intemperate, disrespectful, and discourteous conduct by yelling at the complainant and imposing sanctions for not producing the lien claimant representative at the hearing, even though no subpoena had been served. The complainant filed a Petition for Reconsideration. The Petition was granted for further review. The complainant also attached three panel decisions in different cases that found that the judge engaged in abuse of discretion. Following its review of the investigation, the committee recommended further action and referred this matter to personnel.

Kim Kardashian Target of Subrogation Lawsuit

Kim Kardashian was sued Tuesday by the workers’ compensation carrier for a company that employed a man who says he was injured in a 2014 Beverly Hills collision involving a car driven by the reality star. Applied Risk Services Inc. filed the lawsuit in Los Angeles Superior Court, seeking unspecified damages. Applied Risk Services is the TPA for California Insurance Company, the workers’ compensation carrier for John Paul Co. Inc. of Van Nuys, which employed Rafael Antonio Linares of Moreno Valley at the time of the collision.

Linares sued Kardashian in a separate complaint filed March 1, which says the crash occurred on Sunset Boulevard near Benedict Canyon Drive on March 11, 2014. Linares has had to seek medical care and his car was damaged and is now worth less than before the collision, according to his court papers. Kardashian reportedly collided with Linares’ silver sedan while turning left in her black Mercedes G Wagon. Though some reports claim that the mother-of-two had her turn signal on at the time, Linares maintains that Kardashian was driving recklessly.

Linares and Kardashian were both able to drive their vehicles to the nearby Beverly Hills Hotel, Gossip Cop reported, where “they exchanged information and even hugged.” There were no tickets issued at the time of the incident.

In reporting the Kim Kardashian lawsuit Tuesday, TMZ shared a photo of the damage to Kim’s G-Wagon after the incident and notes that sources close to Kim called the damage to her vehicle “minimal.” The TMZ photo shows a small scuff on the bumper of the star’s SUV.

The Applied Risk Services suit seeks recovery from the 35-year-old Kardashian of all workers’ compensation benefits paid to Linares as a result of his injuries from the accident.

Another Contractor Gets Sentenced for Premium Fraud

Forty-seven-year-old William Alan Huffman pled guilty to felony insurance fraud and tax evasion charges arising from his ownership of Capitol City Construction Company.

For more than three years, Huffman falsely reported to his workers’ compensation insurance carriers that he had either no employees or very few, when in fact he often had several employees. This allowed him to avoid having to pay the insurance premiums he actually owed.

During the same period, he paid his employees in cash or otherwise failed to collect and turn over the required unemployment insurance deductions to the California Employment Development Department (EDD). From February 1, 2012 through June 30, 2015, Huffman underreported his payroll by an estimated $1,092,842, defrauding his insurance companies, Zurich Insurance and Wesco Insurance, of a combined $187,757 in premiums and $115,922 owed to EDD.

Under the terms of the plea agreement, Huffman will be ordered to serve 1 year in county jail, be on formal probation for 5 years, and pay restitution in the amount of $303,680. Sentencing is set for March 24, 2016, in Department 63 before the Honorable Jaime Román.

Paraplegic Correctional Officer Sent to Jail for Fake Industrial Injury

The Honorable James McFetridge sentenced John Smiley and Cynthia Biasi-Smiley to 240 days in county jail, 5 years formal probation, and ordered them to pay $38,206.70 in restitution to the State Compensation Insurance Fund. On February 9, 2016, the Smileys were convicted of multiple insurance fraud felonies. The charges stem from their fraudulent workers’ compensation claim that John Smiley suffered an “on duty” injury when he was shot and paralyzed while in San Francisco. The claim would have qualified them for compensation from State Compensation Insurance Fund and CalPers. The Smileys had previously been convicted of attempted perjury in an earlier court proceeding.

On April 27, 2008, the Smileys went to a swinger’s club in San Francisco. An argument ensued and the Smileys left the club. As they walked to their car, John was shot in the back by the male who threatened him after he had relations with his wife inside the club. John was left a paraplegic. In recorded statements to the San Francisco Police Department shortly after the shooting, the Smileys stated they did not recognize or know the male or female, and had never seen either of them prior to that night. No one has ever been arrested in connection with the shooting.

Approximately 11 months later, John filed a claim for workers’ compensation benefits and Cynthia filed a lien for workers’ compensation benefits based on her care of her husband. John also filed for an Industrial Disability Retirement with CalPERS. In their claims, the Smileys testified under oath at a deposition that they could not remember the club/restaurant they were leaving when the shooting occurred, and could think of no reason why the man would have wanted to kill John. They testified that neither of them ever touched, spoke to, bumped into or danced with either the unknown female or unknown male. John even testified he never “looked” at the female even though he told SFPD he had sexual intercourse with her.

In an effort to make the injury “work related” so he could collect workers’ compensation and Industrial Disability benefits, John claimed he recognized the shooter as a parolee he had once transported. However, when questioned by SFPD immediately after the shooting, John indicated the shooting had nothing to do with his work as a correctional officer and that neither of the Smileys recognized or knew the shooter or his “wife.”

Had their fraud been successful, John would have received $3,002 a month for life, untaxed. Upon John’s death, Cynthia would have continued receiving the benefit as his surviving spouse. John’s initial demand to the State Compensation Insurance Fund was for $4 million. Cynthia demanded $271,000 for her services as her husband’s caregiver during the previous two years, and indicated this amount was growing every day.

5814 Penalties Do Not Apply to Delay in Sheriff’s Disability Retirement Advances

Rebecca Gage sustained industrial injury to her lumbar spine while employed by the County of Sacramento as a deputy sheriff in 2011. A stipulated award as approved by the WCJ in 2014.

On March 6, 2015, Gage applied to the Sacramento County Employees’ Retirement System (SCERS) for a service-connected disability retirement, and the application was acknowledged by SCERS on June 3, 2015. On July 2, 2015, the Count y initiated payment of disability retirement advances to applicant pursuant to section 4850.4.

Applicant claimed that the County’s delay in initiating disability retirement advances entitles her to recover a penalty pursuant to section 5814. The WCJ found that disability retirement advances pursuant to section 4850.4 are “compensation” as described in section 3207, and for that reason an unreasonable delay in making such advances is subject to a penalty under section 5814. The WCAB reversed in the split panel decision of Gage v County of Sacramento.

Section 4850.4 provides for advanced payment of disability retirement benefits to certain public safety employees who are covered by the Public Employees’ Retirement System (PERS), the County Employees Retirement Law of 1937, or the Los Angeles City Employees’ Retirement System. The provision of that special benefit for those public safety employees is similar to the special payments provided for public safety employees under section 4850.

Earlier panels of the Appeals Board found that delayed payment of the special benefits under section 4850 is not subject to a penalty under section 5814. (Citations Omitted) Moreover, the payment of disability retirement advances is not the payment of workers’ compensation benefits. In this way, section 4850.4 differs from the statutory provision for payment of industrial disability leave (IDL) under Government Code section l 9870(a) to certain state workers as “temporary disability” for an industrial injury. This distinction was recognized by the Supreme Court when it held in State of California v. Workers’ Comp. Appeals Bd. (Ellison) (1996) 44 Cal.App.4th 128 [61Cal.Comp.Cases 325] (Ellison) that a section 5814 penalty could be imposed for unreasonable delay in payment of IDL pursuant to Government Code section l 9870(a) because IDL is a form of temporary disability indemnity.

Turning to the facts in this case, the panel majority held that there is no regular workers’ compensation benefit equivalent to the disability retirement advances provided for certain public employees by section 4850.4. To the contrary, entitlement to receive disability retirement benefits is governed by a separate statutory system apart from workers’ compensation, and the retirement system is administered by an independent retirement board outside of the workers’ compensation system.

Commissioner Marguerite Sweeney wrote a dissenting opinion, and would have sustained the penalty. She said section 3207 plainly defines “compensation” as including “every benefit or payment conferred by this [Division 4] upon an injured employee.” Thus, the County is obligated to pay applicant the “compensation” due under section 4850.4 as conferred by Division 4 of the Labor Code, and the WCAB has jurisdiction to enforce that obligation.

Doctors Ignore CMS Opioid Over Prescribing Warning Letters

Government letters informing doctors they’re prescribing vastly more addictive drugs than their peers fall on deaf ears, according to a new study published in Health Affairs and summarized by Reuters Health. The doctors in the study were all writing far more prescriptions for drugs like opioid painkillers than doctors in similar specialties practicing nearby – but the letters didn’t lead to changes in prescribing.

Still, the study’s lead author said the results will help researchers who are studying ways to get doctors to pay attention. “I think if there is a way to make these letters effective it may be one tool in the arsenal to curb the high rate of opioid deaths,” said Adam Sacarny, of the Mailman School of Public Health at Columbia University in New York City.

The use and abuse of opioid pain relievers – like Vicodin and OxyContin – have risen dramatically since the late 1990s, with overdose death rates quadrupling between 1999 and 2014, the researchers write in Health Affairs. They point out that seniors are often prescribed benzodiazepines or “benzos” – like Xanax and Valium – for long periods of time, but these drugs can increase their risk for falls.

Previous research on the effectiveness of letters has found that comparisons to peers can encourage doctors to vaccinate their patients and people to pay their taxes, Sacarny told Reuters Health. To see if letters could do the same for the overprescription of addicting drugs, the researchers used 2011-2013 data from Medicare, the joint federal and state health insurance program for seniors and the disabled.

They identified 1,525 outlier healthcare providers prescribing Schedule II controlled substances, which carry the potential for abuse and dependence, at much higher rates than their peers. The providers were prescribing under the program’s prescription program known as Medicare Part D. An average outlier provider was responsible for 406 percent more prescription drug fills than comparable peers, who were matched by state and specialty. In 2013, the average outlier provider was each tied to about 1,444 Schedule II prescriptions, which adds up to almost $200,000.

The outliers were randomly assigned to two groups. In September 2014, providers in one group received letters from the Centers for Medicare and Medicaid Services (CMS) informing them of how much more they were prescribing addicting drugs in relation to their peers across the state and nation.

After 90 days, there were no significant differences in prescribing patterns between the group that received the letter and the group that didn’t.

Smartphone App Created for Day Laborers to Anonymously Report Employers

The New York Times reports that after three years of planning, an immigrant rights group is set to start a smartphone app for day laborers, a new digital tool with many uses: Workers will be able to rate employers (think Yelp or Uber), log their hours and wages, take pictures of job sites and help identify, down to the color and make of a car, employers with a history of withholding wages. They will also be able to send instant alerts to other workers. The advocacy group will safeguard the information and work with lawyers to negotiate payment. Not mentioned in the story is the opportunity for workers’ compensation carriers to recover lost premium.

“It will change my life and my colleagues’ lives a good deal,” Omar Trinidad, a Mexican immigrant, said in Spanish through an interpreter. Mr. Trinidad is the lead organizer who helped develop the app. “Presently, there is a lot of wage theft,” he said. “There has always been wage theft, and the truth is we’re going to put a stop to that.” Mr. Trinidad, suggested the name for the app – Jornalero, which means day laborer in Spanish.

The app had its soft launch on Tuesday night, with beta testing to be held later this month at the Jackson Heights section of New York City day laborer stop that stretches for a mile along 69th Street. Day laborer centers in Brooklyn and on Staten Island will also be testing the product, which is available in Spanish and English.

The plan is for the app to spread to all 70 of the city’s day laborer stops, and then to workers in all kinds of jobs across the country. The Jornalero app began as a project of New Immigrant Community Empowerment, known as NICE, in Jackson Heights, and then expanded in scope when the group’s parent organization, the National Day Laborer Organizing Network, based in Los Angeles, secured more funding.

“It’s going to be a gift that the day laborers are going to give to the working class in America,” said Pablo Alvarado, the executive director of the national day laborer group.

The project has been a collaboration of workers, artists, organizers, lawyers, unions and academics. Sol Aramendi, a photographer based in Queens and an activist with NICE, first joined Hana Georg, a local electrician, to propose the idea to construction laborers, who were immediately enthusiastic. The Worker Institute, a program within the School of Industrial and Labor Relations at Cornell University, ran forums for workers across New York City to see what they most needed in an app. The workers wanted an easy way to track payments, record details about unsafe work sites and share pictures to identify employers. Most of all, they wanted to do it all anonymously.

Alyx Baldwin, a designer who had established a mesh network that kept the Red Hook section of Brooklyn connected to the Internet after Hurricane Sandy, began the design work with those priorities in mind.

A San Francisco group, Rebel Idealist, took over the design at the beginning of this year, after the International Union of Painters and Allied Trades pledged $25,000 to support the app. Mr. Alvarado said his organization also received $15,000 from the Ford Foundation.

The app has workers record their hours and wages, which are then saved in a profile. That profile, which lists a phone number but no name, is linked to the organization’s database. If a worker reports not being paid or being underpaid, NICE will contact the employer. If necessary, lawyers from the Urban Justice Center, who conduct monthly clinics at NICE, will help recover lost wages. It is not hard to imagine how the app can help worker’s compensation carriers recover lost premium, and for authorities to discover and prosecute employers who commit workers’ compensation premium fraud.

CWCI Reports Steady Decline in Comp Hospitalizations and Spine Surgeries

The number of inpatient hospitalizations in California workers’ compensation fell 22.8% between 2008 and 2014, exceeding the declines noted for California hospital stays paid under Medicare and private coverage, and in sharp contrast to the growth in Medi-Cal inpatient hospitalizations that followed the introduction of the Affordable Care Act and Medi-Cal’s absorption of the Healthy Families Program.

The new figures come from a California Workers’ Compensation Institute (CWCI) study that quantifies and compares the use of inpatient services and procedures in different systems using data compiled by the state on more than 24 million hospitalizations from 2008 through 2014. Workers’ compensation is by far the smallest program analyzed, accounting for just 151,545 (0.6 percent) of the inpatient stays over the 7-year study period.

The number of hospital stays by discharge year for workers’ compensation cases steadily declined from a high of 24,093 in 2008 to 18,593 in 2014. This was an overall change of -22.8%. By comparison, this out paced the steady decline under private coverage of -17.8% and Medicare of -1.8%, and the steady increase in Medi-Cal hospitalizations.

In addition to quantifying reductions in workers’ compensation inpatient hospitalizations in 2014 and over the past 7 years, the study identifies the 10 most common inpatient diagnosis-related group codes (MS-DRGs) in workers’ comp for 2013 and 2014; calculates the average charged and paid amounts for the top 10 workers’ comp MS-DRGs; and measures changes in the volume of implant-eligible spinal surgeries and in the proportion of spinal fusion MS-DRG discharges to total discharges across time for each payer group. That analysis found a 21 percent reduction in the number of California workers’ compensation implant-eligible spinal surgeries between 2012 and 2014, which coincided with continued development of evidence-based medicine, utilization review, and independent medical review, fee schedule changes, and the phase out and ultimate repeal of duplicate “pass-through” payments for hardware used in workers’ compensation spinal surgeries.

CWCI members and subscribers can access the report and a summary Bulletin at www.cwci.org, while others can purchase a copy for $19 at www.cwci.org/store.html.