Tag: 2017 News

A 2013 start-up, Zenefits is a San Francisco based company whose business model was to provide online HR services to businesses and then encourage those same businesses to use Zenefits as an insurance broker selling lines of insurance needed by HR departments.

The company was started by funding from well known gurus such as David Sacks who made his first fortune as an early executive at PayPal, then a second as the co-founder of Yammer, a social network for businesses, which he sold to Microsoft in 2012 for $1.2 billion. He then became an early investor in Uber and SpaceX.

Zenefits launched in April 2013 through startup incubator Y Combinator. Within eight months it was on track to make about $1 million in recurring annual revenue. It moved into a highrise in San Francisco’s SoMa district and expanded from fewer than 20 people to roughly 500, many on the sales side. By the end of 2014, Zenefits hit it’s $20 million recurring revenue goal and was making good on its promises to shake up the insurance brokerage business.

Soon, Zenefits ran into snags. The Utah Insurance Department banned it from operating in the state because the agency considered the free HR software to be in violation of a law against offering rebates to customers. Still, Zenefits kept growing. By the middle of 2015 it was serving 14,000 businesses and in the process of hiring more than 1,000 additional employees.

But in Novermber 2016 the California Department of Insurance announced that the enforcement action taken against Zenefits for multiple insurance broker license violations resulted in a $7 million penalty.

Zenefits was charged with allowing unlicensed employees to transact insurance and circumventing insurance agent education requirements. This was the largest penalty assessed by any commissioner against Zenefits and one of the largest penalties for licensing violations ever assessed in the California department’s history.

Shortly after the California investigation into Zenefits’ business practices and compliance began, the company announced publicly that they were not complying with insurance laws and regulations, which was followed by the resignation of Zenefits’ CEO, Parker Conrad.

The 2016 settlement agreement obtained by the California insurance commissioner included a $3 million penalty for licensing violations, including allowing unlicensed employees to transact insurance, a $4 million penalty for subverting the pre-licensing education and study-hour requirements for agent and broker licensing, and a $160,000 payment to reimburse the Department of Insurance for investigation and examination expenses.

Zenefits has been investigated and fined in other states for similar compliance issues, including Texas, Massachusetts, Tennessee and Washington. In July 2016 Zenefits reached a settlement with the Tennessee Department of Insurance and Commerce, agreeing to pay a fine of $62,500. And the Texas insurance regulators have fined Zenefits, $550,000 for its past use of unlicensed health insurance brokers. BuzzFeed published a series of articles about Zenefits’ use of unlicensed brokers. And details of how the company devised schemes to circumvent broker licensing laws have been reported by Bloomberg Businessweek.

Jay Fulcher the former CEO of Ooyala and Agile Software was ultimately appointed its new CEO, Since then, Fulcher has been trying to re-orient Zenefits into something that’s seen as compliant and business-friendly – and away from the chaotic culture that it had under the prior CEO Parker Conrad who was shown the door.

Fulcher and the company have come out this week with two big announcements: first, the name isn’t going anywhere while the brand gets a makeover; and second, that it’s getting out of the insurance brokerage business and leaving that up to new partners. By doing that, Zenefits hopes to become an all-in-one HR tool for small businesses while leaving insurance brokerage deals to partners.

Initially, Zenefits will partner with OneDigital, an employee benefits company, as it starts to expand to partner with more regional and local brokers that have the expertise for various companies’ needs.

Three Laotian correctional officers, Va Ly, Travis Herr and Pao Yang, were allegedly subjected to racial and national origin discrimination, harassment and retaliation by their employer, the County of Fresno, and its employees. The three filed suit against the County pursuant to the Fair Employment and Housing Act (FEHA), Government Code section 12900 et seq., while simultaneously pursuing their workers’ compensation remedies.

Prior to commencing the FEHA action, each plaintiff filed a workers’ compensation claim with the Department of Industrial Relations, Workers’ Compensation Appeals Board, for psychiatric injuries arising from the discrimination, harassment and retaliation.

Ly testified in the workers’ compensation case that he was subjected to racial discrimination and harassment when his requests to swap shifts with other officers were denied; he was moved out of his regular assignment and repeatedly reassigned to the main jail; and his sergeant, referred to him as “the Swap King,” which led to teasing by other officers. WCJ Geoffrey H. Sims found the denial of Ly’s swap request “as not a discriminatory action and was made as a good faith personnel action,”and the reassignments were due to business necessity and were not discriminatory actions and ordered that Ly take nothing by way of his application.

In Herr’s case, WCJ Thomas J. Heslin issued his decision, in which he found Herr did not sustain industrial injury to his psyche and ordered that he take nothing as a result of his claim. In response to a petition for reconsideration, the WCAB found that the actions of Herr’s supervisors “were good faith personnel actions” that “were taken in order to provide for the best and most effective staffing at the jail.”

In the Yang case, WCJ Dominic E. Marcelli issued his decision, in which he found Yang did not sustain “a compensable industrial injury to his psyche” and ordered he take nothing by way of his application. Marcelli determined the County’s actions were “lawful, non-discriminatory and done in good faith.” Yang filed a petition for reconsideration, which the WCAB dismissed as untimely.

The County moved for summary judgment of the new civil FEHA case based on the doctrines of res judicata and collateral estoppel, arguing the workers’ compensation decisions barred plaintiffs’ FEHA claims. The trial court granted summary judgment. The court of appeal affirmed in the unpublished case of Va Li et.al.v County of Fresno.

An employee who claims to have been discriminated against or harassed in the workplace has a choice of remedies: a claim may be made under the FEHA or under workers’ compensation. Here, plaintiffs elected to pursue both remedies. The workers’ compensation claims were resolved first, in the County’s favor.

The case is analogous to Busick v. Workmen’s Comp. Appeals Bd. (1972) 7 Cal.3d 967, 973-974. There, the petitioner was shot by her former employer when she was picking up her final paycheck. She filed both a workers’ compensation claim on the theory that her injury arose out of and in the course of her employment, and a superior court action for assault and battery. (Id. at p. 971.) The superior court action was resolved before the workers’ compensation case was final, with the court finding in her favor and awarding her damages.

The subsequent workers’ compensation decision which denied her compensation because the injury did not arise out of the course and scope of her employment. The Supreme Court concluded res judicata barred the workers’ compensation action. The Court concluded the workers’ compensation proceeding was brought on the same cause of action as in the superior court case, since in the latter, petitioner sought “redress for injuries suffered from one tortious act, the shooting incident. . . . Violation of one primary right in the [workers’ compensation] case constitutes a single cause of action even though two mutually exclusive remedies are available.” (Busick, supra, 7 Cal.3d at p. 975.)

In sum, plaintiffs had one primary right: their right to recover for an injury caused by discrimination, harassment and retaliation in the workplace. Two alternate forums were available to them to redress the injury. Plaintiffs proceeded first with their workers’ compensation remedy, even though the standard for recovery under FEHA may be broader. The workers’ compensation decisions are now final and binding. When two tribunals have jurisdiction and neither party objects to the jurisdiction of one or the other, then the first final judgment from one of the tribunals becomes conclusive and renders the same issue res judicata in the other court. (Busick, supra, 7 Cal.3d at p. 977.)

A California federal judge dismissed a fraud claim in a medical malpractice suit accusing a QME orthopedic surgeon of botching a man’s knee replacement surgery and fraudulently concealing an infection, saying there is no evidence that the doctor knew about the infection.

Before commencement of a jury trial, Law360 reports that U.S. Magistrate Judge Jacqueline Scott Corley granted partial summary judgment in favor of QME Dr. David Jupina and his practice group, Tri Valley Orthopedics & Sports Medicine Group Inc., in a suit brought by William Denis McCann accusing the health care providers of botching his total knee replacement surgery which purportedly resulted in a bacterial infection that ultimately required corrective surgery and replacement of the artificial joint.

The judge said McCann’s fraudulent concealment claim fails since the patient didn’t prove that Jupina knew that McCann had a deep tissue infection, only that he had a superficial infection that was treated with antibiotics.

“Based on the record before the court, no reasonable trier of fact could find that Dr. Jupina knew plaintiff had a deep tissue infection,” Judge Corley wrote in a six-page order. “No test result told Dr. Jupina that plaintiff had a deep tissue infection; – No expert has opined that based on what Dr. Jupina observed he had to know that plaintiff had an infection despite not having any test results.”

A fraudulent concealment claim requires that the doctor has a duty to disclose certain facts, and the judge said the claim fails without evidence the doctor had knowledge of those facts.

“A duty cannot arise when the fact is not actually known to the defendant,” she said.

Judge Corley said the fact that Jupina referred McCann to another doctor for a second opinion and informed the patient he didn’t know what was wrong with his knee undermines McCann’s argument that the doctor knew he had a deep tissue infection and wanted to hide that fact from the patient.

The suit was filed in June 2016 and seeks more than $500,000 in damages. A jury trial is set for November on the remaining claims, according to court records. The case is William Denis McCann v. David Jupina et al., case number 3:16-cv-03244, in the U.S. District Court for the Northern District of California.

Dr. Jupina joined the Tri-Valley Orthopedic group in 1998. He is currently team physician for local Foothill High School athletes, and Orthopedic Surgery Consultant to the Federal Correctional Institution in Dublin, CA. He performs surgery at ValleyCare Hospital, San Ramon Regional Medical Center, Hacienda Surgery Center and Pleasanton Surgery Center.

The DWC lists him as a QME with offices in ten locations in Northern California

Declarations and brief continue to be filed in federal court for and against imposing a preliminary injunction halting the implementation of newly adopted SB 1160. This new law provides for a stay on lien claims filed by indicted medical providers until after their case has been resolved.

Dr. Eduardo Anguizola who is facing multiple counts of insurance fraud filed by Orange County prosecutors is the lead plaintiff who claims Labor Code 4615 violates the procedural component of the due process clause because it immediately stays all liens without notice or a hearing.

The defendants responded that Section 4615 affords sufficient process because Plaintiffs still have the same rights afforded to them by the workers’ compensation scheme generally. The Defense filed a 117 page Declaration of Workers’ Compensation Chief Judge Paige Levy that articulated how lien claimants subject to 4615 have rights to due process under the new law, and indeed attached several illustrative cases on the stay law that have been decided by either Removal or Reconsideration by the WCAB.

Essentially she pointed out several panel decisions that have held that any lien claimant who asserts they do not fall subject to the stay have the right to have their argument heard and decided upon filing a DOR on the issue. Any WCJ that had refused to do so was overturned. Judge Levy pointed out the statutory and regulatory provisions that allowed lien claimants to challenge the application of the “automatic stay” to their individual cases.

The plaintiffs were given time to rebut Judge Levy, and filed a brief and many declarations accordingly. They claim these documents “address the seriously misleading declaration of Judge Levy.”

They argue “Now, faced with the State-submitted declaration of Paige S. Levy, the Chief Judge of the California Division of Workers’ Compensation, the Court gave the Plaintiffs a fair chance to reveal what is occurring in the California workers’ compensation courts and to address the seriously misleading declaration of Judge Levy.”

They say “Judge Levy offers only anecdotal references to a handful of cases to support the State’s claim that workers’ compensation judges are providing due process to claimants affected by Section 4615. Judge Levy’s declaration is wholly refuted by the detailed declarations submitted concurrently with this brief and is contravened by the DIR and WCAB’s own publications, guidelines, procedures, manuals, recent public admissions, website, and press releases.”

They further argue that “the regulations providing procedures like Petitions for Reconsideration and Petitions for Removal are inapplicable because they arise only after a Court has issued an order. However, Section 4615 stays are imposed not by judicial orders but by clerical actions performed in a backroom and distributed to WCAB judges, typically by “flagging” the liens on the EAMS system, resulting in their dismissal by operation of law, a situation in which the workers’ compensation court does not hear the matter at all.”

Plaintiffs attach numerous declarations by lien claimants who portray the situation for lien claimants quite differently from Judge Levy. One of them was from Attorney Marty Renetzky who started and ran Medical Collection Company for 6 years and 6 medical clinics for Dr. Floyd Cord from 1981 through 1983. He also started and ran Vista Bay Medical Group until 1991, started and ran Golden State Auto Appraisal Company for 7 years, and currently runs Crestview Medical Collections.

He says “American Allied Diagnostics Medical Group, Inc., has taken all steps to appropriately document and pursue its liens. This includes filing liens, paying activation fees and appearing at all relevant hearings.” Yet he says its liens ended up on the stayed liens list although they have not been charged with any crime. They were never given official notice of this, and he says they have no procedure to contest this status.

He does not say that any petition for reconsideration or removal has been filed or rejected, so he does not specifically show how Judge Levy was wrong or how the procedure outlined in her declaration does not work for this lien claimant.

Another court hearing is set for September 28, 2017 at 8:30 am. Judge Wu may make is ruling on a preliminary injunction at this next hearing.

The California Labor Commissioner’s Office cited 14 garment manufacturers and contractors $372,135 for labor law and garment registration violations, following inspections of 18 garment manufacturers last month in the Los Angeles area. The businesses cited employ 170 workers in the Los Angeles garment district.

The penalties included $275,835 in fines and stop orders for seven employers operating without workers’ compensation insurance coverage. Fourteen businesses were cited $34,300 for garment regulation violations, including failure to register as a garment manufacturer, display the garment registration or maintain required records. Investigators also confiscated 5,725 illegally manufactured garments with an estimated street value of $103,000 from six of the businesses.

“Garment manufacturers who thwart the law threaten workers’ rights and undermine honest employers in the industry, making it difficult for legitimate businesses to succeed,” said Labor Commissioner Julie A. Su. “These illegal entities should take note: We will shine a light on the underground economy and those who contract with unregistered contractors will also be held accountable.”

The Labor Commissioner’s office is also pursuing wage theft investigations on those employers who failed to pay proper wages under the California Labor Code.

The Garment Manufacturing Act of 1980 requires that all industry employers register with the Labor Commissioner and demonstrate adequate character, competency and responsibility, including workers’ compensation insurance coverage. Garment manufacturers who contract with unregistered entities are automatically deemed joint employers of the workers in the contract facility. Clothing confiscated from illegal operations cannot be sold, and will be donated to a non-profit agency that will provide the items to homeless and domestic violence shelters in the Los Angeles area.

The Labor Commissioner also administers a special wage claim adjudication process for garment workers pursuant to California’s AB 633, passed in 1999. This law provides not only an expedited process for garment workers to file wage claims but also provides a wage guarantee where garment manufacturers are responsible for wage theft at their contractors’ facilities.

The Labor Commissioner’s Office, officially known as the Division of Labor Standards Enforcement, is a division of the Department of Industrial Relations (DIR). Among its wide-ranging enforcement responsibilities, the Labor Commissioner’s Office inspects workplaces for wage and hour violations, adjudicates wage claims, investigates retaliation complaints and educates the public on labor laws.

In 2014, Commissioner Su launched the Wage Theft is a Crime multilingual public awareness campaign. The campaign defines wage theft and informs workers of their rights and the resources available to them to recover unpaid wages or report other labor law violations. Employees with work-related questions or complaints may contact DIR’s Call Center in English or Spanish at 844-LABOR-DIR (844-522-6734).