Rene Thomas Folse, JD, Ph.D. is the host for this edition which reports on the following news stories: Lawsuit Blocks Enforcement of New Calif Privacy Protection Agency Regs. Court Clears PAGA Action Over Non-Payment of Employee At-Home Expenses. 1996 Finance Agreement Binds Disneyland to a 2018 Living Wage Ordinance. Pain Clinic Chain to Pay $11.4 Million to Resolve False Claims Act. Lawyers Must Report Rogue Lawyers Under New State Bar Rule. Nine Pending Congressional Bills Heat Up PBM Wars and Caustic TV Ads. California Legislature Resurrects Dormant Industrial Welfare Commission. Studies Show Continued Growth in National Healthcare Expenditures. Governmental Immunity Does Not Protect Counties From Unpaid ER Bills. Bankruptcy Court Approves Beverly Community Hospital Sale.
A new California Workers’ Compensation Institute (CWCI) review of the Independent Medical Review (IMR) process shows that after hitting an all-time low high in 2022, the number of IMR decision letters rose 4.1% in the first six months of 2023 compared to the first half of 2022. However the number of letters and individual decisions remained below pre-pandemic levels.
CWCI’s review encompassed more than 1.3 million IMR decision letters issued from 2015 through June 2023 in response to applications submitted to the state after a Utilization Review (UR) physician modified or denied a workers’ comp medical service request.
As in prior reviews, Institute analysts tallied the number of letters issued each quarter based on the letter date; determined the distribution and uphold rates by medical service category for the disputed treatment requests, as well as the distribution and outcomes of pharmaceutical IMRs by major therapeutic drug group; and calculated the percentage of IMRs associated with high-volume medical providers.
The data show that total IMR volume trended down for four consecutive years (2019 through 2022), as the number of work injury claims fell during the pandemic and pharmaceutical disputes declined after the state adopted the evidence-based Medical Treatment Utilization Schedule (MTUS) Prescription Drug Formulary and Pain Management and Opioid Guidelines.
After climbing to a record 184,735 letters in 2018, IMR letter volume declined 31.1% over the next four years, falling to 127,215 letters in 2022. While IMR decisions were down across all medical service categories, the addition of the Pain Management and Opioid Guidelines into the MTUS in late 2017 and the implementation of the MTUS Formulary in January 2018 had a huge effect as prescription drug disputes fell from 47.3% of all IMRs in 2017 to 33.3% in 2022, while the initial data from 2023 show prescription drug disputes fell to 32.6% of the IMRs in of the first half of this year.
From 2018 through June of this year, opioids’ share of the pharmaceutical IMRs has dropped from nearly a third to less than a quarter of all prescription drug IMRs. With prescription drugs representing a smaller share of the IMR disputes, there has been a shift in the distribution of services submitted for IMR since 2018, with the biggest percentage increases noted in physical therapy, which jumped from 10.3% to 13.4% of the IMRs; injections, which increased from 9.0% to 12.1%; and durable medical equipment, prosthetics, orthotics and supplies (DMEPOS), which rose from 7.1% to 8.9% of the IMRs over the past 5-1/2 years.
As in previous reviews, the latest data show that a small number of physicians continue to drive much of the IMR activity, with the top 1% of requesting physicians (80 doctors) accounting for 40.3% of the disputed service requests that underwent IMR in the 12 months ending on June 30 of this year. The top 10 individual physicians alone accounted for 11.6% of the disputed requests, and notably, 9 of the 10 individual providers with the highest number of IMR requests a year earlier were still on the top 10 list in the latest review.
IMR outcomes remained fairly stable, with IMR physicians upholding UR doctors’ modifications or denials 89.2% of the time in the first half of 2023 versus 91.1% of the time in 2022. The 2023 uphold rates by type of service request ranged from 75.7% for evaluation/management services to 92.9% for acupuncture.
CWCI members and subscribers will find a more detailed summary of IMR experience through June 2023 in Bulletin 23-11 at www.cwci.org, and Institute members can also access updated IMR slides under the Research tab.
U.S. Senators Susan Collins (R-ME), Amy Klobuchar (D-MN), Jacky Rosen (D-NV), and Thom Tillis (R-NC) introduced bipartisan legislation to build the healthcare workforce in rural and medically underserved areas. The Conrad State 30 and Physician Access Reauthorization Act, cosponsored by Senator Angus King (I-ME), would allow international doctors to remain in the U.S. upon completing their residency under the condition that they practice in areas experiencing doctor shortages.
The legislation is endorsed by the American Medical Association, the American Hospital Association, the Federation of American Hospitals, the National Rural Health Association, the Niskanen Center, the American Academy of Neurology, and the Public Affairs Alliance of Iranian Americans.
The Conrad State 30 and Physician Access Reauthorization Act extends the Conrad 30 program for three years, improves the process for obtaining a visa, and allows for the program to be expanded beyond 30 slots if certain thresholds are met. The bill also provides worker protections to prevent doctors from being mistreated. A version of the bill was included as an amendment to the comprehensive immigration bill that passed the Senate in 2013.
The Conrad 30 Waiver program allows states to waive the two-year home residency requirement for J-1 visa holders who agree to practice medicine in an underserved area for at least three years. Under the bill, the number of waivers that a state can obtain each year would be increased from 30 to 35, and the program would be extended for three years.
“As we work to address medical workforce shortages, it’s critical that we make sure talented doctors trained and educated here in the U.S. can remain in our country,” said Senator Klobuchar. “The Conrad 30 program has brought nearly 20,000 physicians to underserved areas, filling a critical need for quality health care in our rural communities. Our bipartisan bill to reauthorize this program would encourage doctors to use their talents and training in underserved communities, improving health care for families across the nation and boosting our rural medical workforce.”
The bill would also make a number of other changes to the Conrad 30 Waiver program, including:
– – Allowing alien physicians to be employed at an academic medical center to meet the program’s employment requirements if the alien’s work is in the public interest, even if the medical center is not in an underserved area.
– – Requiring employment contracts for alien physicians under the Conrad program to contain certain information, such as the maximum number of on-call hours per week the physician shall have to work.
– – Allowing states to use waivers to recruit and retain physicians who have already practiced in underserved areas for at least three years.
The bill has not yet been passed by the Senate, but it is expected to be considered in the coming months.
Nursing turnover continues to be a substantial challenge for healthcare organizations as the nursing shortage remains high nationwide, and in California, with no particular solution on the horizon.
A study from Nursing Solutions Inc. (NSI) showed that actual reported hospital and staff RN turnover increased from 18 percent in fiscal year 2020 to 27 percent in fiscal year 2021; the same March 2022 study reported that the workforce lost about 2.5 percent of RNs in 2021. In the latest NSI report (March 2023), turnover reduced to 23 percent in fiscal year 2022 but still remains elevated compared with prepandemic levels.
A Health Affairs study published in April 2022 found that the RN workforce fell by about 100,000 by the end of 2021, which is a “far greater drop than ever observed over the past four decades.” This decline was particularly pronounced among midtenure nurses (aged 35 to 49).
Career satisfaction, intention to leave jobs, and mental health and wellbeing issues among registered nurses have gotten significantly worse since the midst of the COVID-19 pandemic, according to the AMN Healthcare 2023 Survey of Registered Nurses.
The AMN Healthcare 2023 Survey of Registered Nurses, based on responses from more than 18,000 nurses in January 2023, found that career satisfaction dropped by 10 percentage points since the middle of the pandemic in 2021. In addition, the likelihood of encouraging others to become a nurse declined 14 points since 2021.
So this data begs the question about possible solutions.
In 2022, the US Department of Labor budgeted $80 million to encourage not-for-profit organizations, educational institutions, and tribal organizations to apply for grants of up to $6 million each to train current and former nurses to become nursing educators and frontline healthcare workers to train for nursing careers.
At the local level, CalMatters reports that the California Legislature is looking at several ideas to address the nursing shortage by bringing more early-career nurses into the field. But so far, the groups with most to gain – or lose – are at odds over how to solve the staffing problems afflicting California’s health care workforce.
Labor organizations and hospitals want nursing schools to prioritize certain applicants for admission, such as people who already have experience in the industry. But the schools say that won’t help them graduate more nurses. They need more faculty and more hands-on training opportunities to increase class sizes.
Hospitals and unions say they don’t have much time to waste. Estimates show California faces a shortage of about 36,000 licensed nurses, according to the UC San Francisco Health Workforce Research Center on Long-Term Care.
Labor advocates say the nursing shortage creates a vicious cycle. The nurses on shift wind up doing more work. They get burned out and flee the industry, worsening the problem.
Service Employees International Union (SEIU) and the United Nurses Associations of California/Union of Health Care Professionals turned their attention to the state’s community college system, where graduates can earn degrees to become nursing assistants, licensed vocational nurses or registered nurses. Both groups say community colleges offer the most affordable and efficient way to earn a nursing degree.
But community college and some university nursing school leaders contend they cannot boost the number of graduates. Nursing programs are full, they say, and the proposals do nothing to expand the number of admission slots.
About 14,000 new students enrolled in nursing programs during the 2020-21 school year, according to the Board of Registered Nursing’s annual school report. That’s about 1,000 fewer students than the previous two years due to smaller class sizes, but schools across the state received more than 55,000 applications, a 10-year record.
United Nurses Associations of California/United Health Care Professionals lobbied for a $300 million investment over five years to double the state’s nursing school capacity. It was included in the state budget Gov. Gavin Newsom signed earlier this summer. The details of how the money will be spent have not been decided.
Jimmy and Ashley Collins, the husband-and-wife owners of a Tennessee medical practice have pleaded guilty to charges that they used Marines and sailors in San Diego County as pawns in a nearly $66 million medical insurance scheme. They are the last members of the major conspiracy to plead guilty.
The married couple living in Birchwood, admitting that they worked with others to recruit TRICARE beneficiaries who were willing to sign up to receive expensive compounded medications, even though the beneficiaries did not really need the medications.
The beneficiaries’ information was sent to Choice MD, a Tennessee medical clinic co-owned and operated by the Collinses. Doctors and medical professionals employed by the Collinses at Choice MD, including Dr. Susan Vergot, Dr. Carl Lindblad, and nurse practitioner Candace Craven, then wrote prescriptions for the TRICARE beneficiaries, despite never conducting a medical review or examination of the patients in person.
Once signed by the doctors, these prescriptions were not given to the straw beneficiaries, but sent directly to The Medicine Shoppe, a pharmacy in Bountiful, Utah, which filled the prescriptions and received massive reimbursement from TRICARE.
Between December 2014 and May 9, 2015 – the day that TRICARE stopped reimbursing for compounded medications – the doctors working for the Collinses at Choice MD authorized 4,442 prescriptions and billed TRICARE $65,679,512 for these prescriptions.
The owners of The Medicine Shoppe then paid kickbacks to the Collinses based on a percentage of the TRICARE reimbursement paid for the prescriptions referred by the Collinses’ recruiter network. Between February and July 2015, these kickback payments to the Collinses totaled at least $45.7 million dollars.
The Collinses, in turn, paid kickbacks to the recruiters working as part of their network, including defendants Josh Morgan, Kyle Adams, and Daniel Castro, among others.
The United States has seized property and items purchased by the Collinses and others with the proceeds of the scheme. Included among these items is an 82-foot yacht; multiple luxury vehicles, including two Aston-Martins; a multimillion-dollar investment annuity; dozens of pieces of farm equipment and tractor-trailer trucks; and three pieces of Tennessee real estate.
The Collinses are the last members of the conspiracy to plead guilty. The doctors and nurse practitioner who prescribed these unnecessary prescriptions, the corporate owner of the pharmacy that filled these unneeded prescriptions, and the patient recruiters have all pleaded guilty for their roles in the conspiracy to commit healthcare fraud and admitted their roles in this fraudulent scheme.
Jimmy and Ashley Collins are scheduled to be sentenced on October 27 at 9 a.m. before U.S. District Judge Janis L. Sammartino.
The two doctors, Susan Vergot and Carl Lindblad, were previously sentenced to 24 and 28 months in custody, respectively. in a San Diego federal court for participating in the health care fraud scheme.
The new 93 page working paper – Temperature, Workplace Safety, and Labor Market Inequality – by researchers from the University of California, Los Angeles and Stanford University documents, for the first time, the growing safety risks of excessive heat for U.S. workers in occupations not just where the work is mostly outside but also indoors.
The researchers examined 11,146,912 confidential records of workplace injuries in California from the Department of Workers’ Compensation (DWC) over the period 2001 to 2018 combined with zip code level information on daily temperature from the same period. The data also included the medically determined cause (e.g. fall), type (e.g. strain), and body parts affected (e.g. knee) by the incident, as well as some limited demographic information including age and gender for each claim.
They found that hotter temperature significantly increases the likelihood of injury on the job. A day with high temperatures between 85 and 90 leads to a 5 to 7 percent increase in same-day injury risk, relative to a day in the 60’s. A day above 100 leads to a 10 to 15 percent increase. Causal identification relies on the premise that idiosyncratic variation in daily temperature within a given zip code-month is plausibly exogenous, and that the resulting effect on injuries is not driven by potential endogenous changes in labor inputs.
Higher temperatures also increase injuries in some industries where work typically occurs indoors. In manufacturing, for instance, a day with highs above 95 increases injury risk by approximately 7 percent relative to a day in the low 60’s. In wholesale, the effect is nearly 10 percent. They also found that claims for many injuries not typically considered heat-related rise on hotter days. These include injuries caused by falling from heights, being struck by a moving vehicle, or mishandling dangerous machinery. The increase in injuries affects a wide range of body parts, suggesting that the mechanisms may not be limited to heat-illnesses such as heat stroke or heat syncope.
The risks are “substantially larger for men versus women; for younger versus older workers; and for workers at the lower end of the income distribution.“
“These are previously undocumented facts with possibly significant policy implications, given the nearly exclusive attention to date on outdoor workers and heat illnesses: i.e. incidents that are medically coded as due to heat exposure.”
The researcher estimated that hotter temperature has caused approximately 360,000 additional injuries in California over the period 2001-2018, or roughly 20,000 per year relative to a hypothetical benchmark in which all workers experience only optimal temperatures.
“For perspective, this is roughly eleven times the number of workplace concussions, and at least nineteen times the annual number of workplace injuries the worker compensation microdata records as caused by extreme temperature.”
They estimate the socioeconomic costs of these injuries are on the order of $525 million to $875 million per year, given the costs of healthcare, lost wages and productivity, and other knock-on costs such as work disruptions and potential permanent disability.
However researchers also found evidence of significant adaptation potential, as they noted that the effect of temperature on injuries falls significantly during the study period. For instance, the effect of a day above 90 falls by roughly a third between 2000 and 2018, and the effect of days above 100 is statistically indistinguishable from zero after 2005. The temporal profile of heat’s effects on injuries coincides with the introduction of what was at the time the nation’s first heat safety mandate, the California Heat Illness Prevention Standard (Q3 2005), which applied only to outdoor workplaces.
“While we remain agnostic to the source of the decline in heat-related injuries, our findings are consistent more broadly with the possibility of adaptation using existing technologies.”
A new AB 1643 – California Heat Study: Advisory Committee is set to use this data as part of a roadmap to tackle hot workplace issues. The group of state agency staffers and scholars will examine persistent problems with underreported heat-related illness and injuries, as well as gaps in data collection and the financial toll on workers and businesses when temperatures rise and production falls.
U.S. workers compensation insurers were able to underwrite profitably between 2019 and 2022 even as significant changes occurred in the nation’s workforce due to the pandemic, according to a new report by the Insurance Information Institute.
“Overall, we see a healthy and strong workers compensation system,” said NCCI’s chief actuary, Donna Glenn, FCAS, MAAA. “Premiums written have returned to pre-pandemic levels, and claims frequency has resumed a long-term average decline.”
Workers comp net written premiums improved in 2022, with an 11.2 percent increase, compared with 8.4 percent for the overall industry.
Since 2014, workers compensation insurers cumulatively saw a net combined ratio of below 100 and, since 2017, that figure has consistently stayed below 90, with a 2022 net combined ratio of 87.4 for workers compensation insurers (when including state funds, in comparison to 84.0 for private carriers only). U.S. auto, home, and business insurers, across all insurance lines, had a net combined ratio last year of 102.4, according to Triple-I’s Issues Brief.
“Commercial lines achieved lower net combined ratios than personal lines in both 2021 and 2022, and we forecast that to continue through at least 2025,” said Dale Porfilio, FCAS, MAAA, chief insurance officer, Triple-I. “Workers comp had the lowest combined ratio among major product lines in 2021 and 2022, resulting from many years of deliberate efforts by insurance carriers and their policyholders to improve workplace safety.”
Claim frequency is the main cost driver in workers comp. Due to improved workplace safety and increased use of automation, frequency has been low – averaging 3 percent declines annually over the past 20 years. After an 8.3 percent decline in 2020, frequency rebounded by exactly the same amount in 2021, reflecting the impact of the pandemic and the subsequent recovery.
From 2019 to 2021, claim frequency fell slightly (0.7 percent), reflecting rises in the Manufacturing (5.2 percent) and Miscellaneous (6.7 percent) industry groups, offset by a 12.1 percent drop in the Office and Clerical group. Manufacturing and Miscellaneous – which includes package delivery, warehousing, and transportation – are groups that have seen a great deal of new hiring, so it’s possible these increases reflect accidents related to employee inexperience and insufficient training during the pandemic. The drop in Office and Clerical claim frequency almost certainly is due to the pandemicdriven rise in remote work. NCCI estimates that claim frequency for 2022 is consistent with the long-term downward trend.
Unlike claim frequency, medical and indemnity severity have increased about 60 percent over the past two decades. In 2022, indemnity severity rose 6 percent, and medical severity was up 5 percent.
Workers compensation has benefited from a generally strong economy in recent years, most notably due to the growth in payrolls, the Issues Brief states. Private employment surpassed its pre-pandemic level in 2022 and employment growth remains faster than pre-pandemic norms, according to the U.S. Department of Labor’s Bureau of Labor Statistics.
Improved workplace safety, coupled with more employers allowing remote work arrangements, have combined to drive down the number of workers compensation insurance claims filed annually since 2021, Triple-I found. Moreover, many states have medical fee schedules, reducing medical inflation as insurers and medical providers set fixed prices for the services and products needed by injured workers.
Brian Hill, 64, and Leslie Hill, 68, a husband and wife from Bakersfield, have been charged with multiple felony counts of insurance fraud and conspiracy after a Department of Insurance investigation found the couple under-reported over $4 million in employee payroll for the construction company they owned.
The Department began an investigation into Brian Hill Construction, Inc., owned by the Hills, after receiving information that the company paid an employee with a combination of check and cash, and that the cash pay was not reported to the company’s workers’ compensation carrier.
Between July 2017 and October 2019 Brian Hill Construction Inc. held a workers’ compensation insurance policy through State Compensation Insurance Fund and between October 2019 and October 2020 held a workers’ compensation insurance policy through Benchmark Insurance.
An investigation into Brian Hill Construction, Inc., revealed the company reported approximately $135,667 in employee payroll between July 2017 and October 2019 to State Compensation Insurance Fund. However, an audit by the Department revealed the business actually had over $3.6 million in employee payroll for the same time period.
The investigation also revealed Brian Hill Construction, Inc. reported approximately $9,140 in employee payroll between October 2019 and June 2020 to Benchmark Insurance, but an additional Department audit revealed the company actually had over $500,000 in employee payroll for the same time period.
Over the course of three years, Brian and Leslie Hill failed to report over $4,025,250 in employee payroll to their insurance carriers. The hiding of employee payroll resulted in the illegal reduction of workers’ compensation insurance premiums paid and $2,542,365 in premium owed to the insurance companies.
The investigation also discovered one employee of Brian Hill Construction Inc. was injured on the job and sent to a local hospital where they received minimal medical treatment. By law the employer was required to file a workers’ compensation claim, but the Hills circumvented the workers’ compensation process by paying the medical facility directly and eliminating benefits the injured worker may have been entitled to.
Brian Hill was arraigned yesterday and Leslie Hill is scheduled to be arraigned on Thursday, July 27, 2023. The Kern County District Attorney’s Office is prosecuting this case.
On Aug. 1, 2023, U.S. Citizenship and Immigration Services will publish a revised version of Form I-9, Employment Eligibility Verification. Among the improvements to the form is a checkbox employers enrolled in E-Verify can use to indicate they remotely examined identity and employment authorization documents under an alternative procedure authorized by the Department of Homeland Security (DHS) described below.
On July 21, 2023, DHS announced a final rule in the Federal Register that recognizes the end of temporary COVID-19 flexibilities as of July 31 and provides DHS the authority to authorize optional alternatives for employers to examine Form I-9 documentation. At the same time, DHS also published an accompanying document in the Federal Register describing and authorizing employers enrolled in E-Verify the option to remotely examine their employees’ identity and employment authorization documents under a DHS-authorized alternative procedure.
The Federal Register document provides an alternative for certain employers to remotely examine Form I-9 documents, instead of the current requirement to examine documents in-person. To participate in the remote examination of Form I-9 documents under the DHS-authorized alternative procedure, employers must be enrolled in E-Verify, examine and retain copies of all documents, conduct a live video interaction with the employee, and create an E-Verify case if the employee is a new hire.
Employers who were participating in E-Verify and created a case for employees whose documents were examined during COVID-19 flexibilities (March 20, 2020 to July 31, 2023), may choose to use the new alternative procedure starting on August 1, 2023 to satisfy the physical document examination requirement by Aug. 30, 2023. Employers who were not enrolled in E-Verify during the COVID-19 flexibilities must complete an in-person physical examination by Aug. 30, 2023.
The revised Form I-9:
– – Reduces Sections 1 and 2 to a single-sided sheet;
– – Is designed to be a fillable form on tablets and mobile devices;
– – Moves the Section 1 Preparer/Translator Certification area to a separate, standalone supplement that employers can provide to employees when necessary;
– – Moves Section 3, Reverification and Rehire, to a standalone supplement that employers can print if or when rehire occurs or reverification is required;
– – Revises the Lists of Acceptable Documents page to include some acceptable receipts as well as guidance and links to information on automatic extensions of employment authorization documentation;
– – Reduces Form instructions from 15 pages to 8 pages; and
– – Includes a checkbox allowing employers to indicate they examined Form I-9 documentation remotely under a DHS-authorized alternative procedure rather than via physical examination.
The revised Form I-9 (edition date 08/01/23) will be published on uscis.gov on Aug. 1, 2023. Employers can use the current Form I-9 (edition date 10/21/19) through Oct. 31, 2023. Starting Nov. 1, 2023, all employers must use the new Form I-9.
Milan Cvejic worked for Skyview Capital LLC. He filed a lawsuit against them and others in state court after his termination of employment, claiming causes of action for employment law issues.
His employment agreement with them contained an arbitration clause. Thus Skyview moved to compel arbitration. The trial court granted the motion and stayed proceedings.
The case went before a panel of three arbitrators through the American Arbitration Association under the rules for commercial cases. After at least one continuance, the final hearing on the merits was set to begin August 5, 2021. Skyview had to pay arbitration fees ahead of the hearing. The fees were due June 4, 2021.
On July 7, 2021, Cvejic’s counsel asked the case manager whether Skyview had paid the deposits. On July 8, 2021, the case manager confirmed by email that Skyview had not paid. The manager scheduled a call to address the situation. During the call, Skyview’s counsel reported there was “no further explanation” for his clients’ failure to pay the fees. Cvejic reserved his rights to proceed under the Code of Civil Procedure. The panel stated “[t]he Hearing fees have been requested and the deadline for making the deposits has passed.” It set a new deadline of July 14th for payment of the fees.
Within about an hour of the call, Cvejic’s counsel wrote the panel to say Cvejic was withdrawing from the arbitration under Code of Civil Procedure section 1281.98. The panel chair responded that Cvejic’s request was “premature” – presumably because the deadline was now July 14th. Thereafter the panel ruled section 1281.98 was not in play because Skyview “came into compliance with the Panel’s Orders regarding posting deposits.” Skyview ultimately paid its fee by July 14th.
On July 21, 2021, Cvejic filed in the trial court a section 1281.98 Election to Withdraw from Arbitration. Soon after, he sought ex parte relief, which the court denied due to the absence of emergency. In December 2021, Cvejic refiled his section 1281.98 election, which included a request for sanctions under the statute and a motion to vacate the earlier order staying court proceedings. Skyview opposed the filing. The court’s February 2022 order granted Cvejic’s request to withdraw from arbitration, vacated the order staying proceedings, and awarded Cvejic reasonable expenses under section 1281.99.
The employer appealed the trial court Order. The Court of Appeal affirmed the trial court in the published case of Cvejic v. Seaview Capital LLC – B318880 (June, 2023).
The Legislature enacted section Code of Civil Procedure 1281.98 in 2019 to curb a particular arbitration abuse. The abuse was that a defendant could force a case into arbitration but, once there, could refuse to pay the arbitration fees, thus effectively stalling the matter and stymying the plaintiff’s effort to obtain relief. The Legislature called this “procedural limbo.” (Gallo v. Wood Ranch USA, Inc. (2022) 81 Cal.App.5th 621, 634 (Gallo) [quoting legislative history].) It has also been described as “procedural purgatory.” (Ibid.)
Subdivision (b) of the statute provides employees and consumers with a choice of forum upon breach: They may elect to “[w]ithdraw the claim from arbitration and proceed in a court of appropriate jurisdiction” or “[c]ontinue the arbitration proceeding” should the provider agree to continue. (§ 1281.98, subds. (b)(1) & (2).) The statute also empowers courts to award fees, costs, and sanctions.
After the current fee dispute arose, the Legislature amended both sections section 1281.97 along with section 1281.98 in 2021. The amendments added a new subdivision to section 1281.98 that compelled arbitrators to provide invoices to all parties, specified requirements for these invoices, and clarified the due date for fees.
The new subdivision also includes this new sentence: “Any extension of time for the due date shall be agreed upon by all parties.” (§ 1281.98, subd. (a)(2).) The amendments became effective January 1, 2022.
The Legislature sought a clear rule for determining whether the late payment of a fee by a drafting party constituted a material contract breach.
The Court of Appeal concluded by noting “Skyview’s fees were due June 4, 2021. By July 9th, Skyview had not paid. Skyview was in material breach of the parties’ arbitration agreement. Section 1281.98 entitled Cvejic to withdraw from the arbitration. It is that simple.”
“The statute does not empower an arbitrator to cure a party’s missed payment. There is no escape hatch for companies that may have an arbitrator’s favor. Nor is there a hatch for an arbitrator eager to keep hold of a matter. As the trial court observed, ‘If . . . the drafting party were permitted numerous continuances for failure to pay arbitration fees, therefore delaying the proceedings, C.C.P. section 1281.98 would have no meaning, force, or effect.’ ”