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Tag: 2020 News

Court Rules Exclusive Remedy Applies to COVID-19 Civil Action

This illustrative case of Brooks v. Corecivic of Tennessee arises in the employment context, and asks whether the workplace conditions inside a detention facility were so unsafe and unhealthy that Plaintiff, Erica Brooks, had no reasonable alternative except to resign, resulting in her wrongful constructive termination from her employment.

Her employer Corecivic, is a private operator of correctional facilities with contracts for services with United States Immigration and Customs Enforcement and the United States Marshals Service. She worked for them as a Detention Officer at the Otay Mesa Detention Center (“OMDC”) starting February 3, 2019, and worked in that capacity until her resignation on April 12, 2020.

In her lawsuit against the employer she alleges that her employer “failed to adequately respond to the COVID-19 pandemic,” and lists several examples. And claims they support her lawsuit for wrongful constructive termination in violation of public policy, as well as claims for negligent supervision and intentional infliction of emotional distress. She brings her claims to federal court based on diversity jurisdiction, and thus California law applies.

The employer moved to dismiss the Complaint. It argues Brooks has not plead facts supporting the elements of wrongful constructive termination or negligent supervision, and that the negligent supervision and intentional infliction claims are barred by workers compensation exclusivity.

The court ruled that Plaintiff may state a constructive discharge claim based on an alleged failure to maintain a safe work environment. And the Court rejected Defendant’s argument that Plaintiff has failed to allege facts sufficient to show a constructive discharge.

The court went on to say that “Although pandemics themselves are generally uncommon events, that does not mean Defendant’s response to the pandemic falls outside the risk inherent in the employment relationship. On the contrary, one would expect employers to have some type of protocol in place to deal with this kind of catastrophic event. This is especially so considering Defendant is engaged in the operation and management of detention facilities, which are particularly susceptible to the spread of infectious diseases, such as COVID-19.”

Because the obligation to provide a safe and healthy workplace is inextricably part of the compensation bargain, Plaintiff’s negligent supervision and intentional infliction of emotional distress claims are barred by workers’ compensation exclusivity. Accordingly, the Court grants the motion to dismiss these claims.

Specifically, the Court granted the motion as to Plaintiff’s claims for negligent supervision and intentional infliction of emotional distress, and denied the motion as to Plaintiff’s wrongful constructive termination claims.

Physicians Sentenced in $65M Compound Meds Fraud Case

Two doctors, Susan Vergot and Carl Lindblad, were sentenced in a San Diego federal court for participating in a health care fraud scheme that bilked TRICARE – the health care program that covers United States service members – out of tens of millions of dollars by prescribing thousands of exorbitantly expensive compounded drugs to patients they never saw or examined.

Dr. Vergot and Dr. Lindblad were sentenced to 24 and 28 months in custody, respectively. The custodial portion of each defendant’s sentence will be split between prison and home confinement. Each was also sentenced to pay a $15,000 fine.

This conspiracy inflicted nearly $65 million in actual losses to TRICARE, the health care benefits program relied upon by millions of our military members and their families,” said U.S. Attorney Robert Brewer. “It is hard to imagine a more outrageous example of selfish doctors stealing from the U.S. health care system believing they were exempt from providing necessary care.”

Compounded medications are specialty medications mixed by a pharmacist to meet the specific medical needs of an individual patient. Although compounded drugs are not approved by the Food and Drug Administration (FDA), they are properly prescribed when a physician determines that an FDA-approved medication does not meet the health needs of a particular patient, such as if a patient requires a particular dosage or application or is allergic to a dye or other ingredient.

According to the sentencing memorandum, as part of this conspiracy a team of individuals worked to recruit and pay Marines, primarily from the San Diego area, and their dependents – all TRICARE beneficiaries – to obtain compounded medications that would be paid for by TRICARE. This information was sent to Choice MD, the Tennessee medical clinic that employed Dr. Vergot and Dr. Lindblad.

Dr. Vergot and Dr. Lindblad then wrote prescriptions for the TRICARE beneficiaries, despite never examining the patients. Once signed by the doctors, these prescriptions were not given to the straw beneficiaries, but sent directly to particular pharmacies controlled by co-conspirators, most often a small pharmacy, The Medicine Shoppe in Bountiful, Utah, which filled the prescriptions and mailed the drugs to the patients in California.

Between November 2014 and June 2015, Drs. Vergot and Lindblad authorized 6,694 prescriptions, for which their co-conspirators billed TRICARE a staggering $89,725,000. Of this amount, over $65 million was for prescriptions written for straw TRICARE beneficiaries in the Southern District of California.

Defendants Vergot and Lindblad are the second and third defendants sentenced in this matter. CFK, Inc., the corporate owner of The Medicine Shoppe, was sentenced previously. A nurse practitioner, Candace Craven, previously pleaded guilty, as have the patient recruiters, including Joshua Morgan, Kyle Adams, Daniel Castro, Jeremy Syto, and Bradely White. All await sentencing.

Jimmy and Ashley Collins, the owners of Choice MD, were charged by Superseding Indictment in June 2020. Their case remains pending.

Restaurant Server to Encouraged Drink Within Exclusive Remedy

Contreras Curiel Corporation owns and operates a restaurant, Karina’s Mexican Seafood. The restaurant employed Raeanne Angelina Cruz as a server. After working an evening shift, Cruz was fatally injured in a single-car rollover accident.

Cruz left behind a young son, who filed this lawsuit against Contreras Curiel for wrongful death. He alleged Cruz became grossly intoxicated during her shift at the restaurant, based on its practice of allowing and encouraging servers to drink alcohol with restaurant customers.

Contreras Curiel moved for summary judgment on the grounds that his claims were barred by workers’ compensation exclusivity. The trial court denied the motion.

Contreras Curiel petitioned the Court of Appeal for a writ of mandate directing the trial court to vacate its order denying the motion and enter an order granting it. It relies on the same grounds as in the trial court.

The Court of Appeal granted the petition in the unpublished case of Contreras Curiel Corp. v. Superior Court.

Workers’ compensation exclusivity is founded on a presumed compensation bargain, pursuant to which the employer assumes liability for industrial personal injury or death without regard to fault in exchange for limitations on the amount of that liability. The employee is afforded relatively swift and certain payment of benefits to cure or relieve the effects of industrial injury without having to prove fault but, in exchange, gives up the wider range of damages potentially available in tort.

Exclusivity will not apply where an employer engages in conduct that is outside its proper role as an employer or that has a questionable relationship to the worker’s employment.

Such conduct includes certain intentional torts and criminal acts, as well as causes of action whose motive element violates a fundamental public policy of this state.

The evidence, viewed in the light most favorable to her son shows that Contreras Curiel allowed and encouraged its servers to consume alcohol with customers during their shifts.

While this conduct may have been reckless and appears to violate state alcoholic beverage regulations, it is akin to other conduct that creates or exacerbates workplace hazards.

It is not the type of intentional tort or criminal act that removes an employer’s conduct from the scope of workers’ compensation exclusivity. Nor do the claims incorporate a motive element that violates a fundamental public policy of this state, such as racial or gender discrimination.

CWCI Reports 2020 IMR Requests Fell Sharply

According to the latest tally by the California Workers Compensation Institute, the number of independent medical reviews used to resolve California workers’ compensation medical disputes fell sharply in the first half of 2020.

Under California law every workers’ comp claims administrator must have a Utilization Review program to assure that the care provided to injured workers is supported by clinical evidence outlined in medical guidelines adopted by the state. Most treatment requests are approved by UR, but in 2012 state lawmakers adopted IMR to give injured workers a chance to get an independent medical opinion on treatment requests that UR physicians deny or modify.

IMR took effect for all claims in July 2013 so CWCI began monitoring IMR activity in 2014.

In its latest review, the Institute tallied 70,273 IMR decision letters issued in the first half of 2020 in response to applications submitted to the state, compared to 85,318 letters issued in the first six months of 2019 (-17.6%). Once again, about 40% of the letters included decisions on multiple services, but with the decline in letter volume, the total number of primary service decisions fell by 19.3% from 148,069 in the first half of 2019 to 119,514 in the first half of 2020.

While IMR volume was down, a review of IMR outcomes in the first half of this year noted little change. After reviewing the medical records and other information provided to support a disputed treatment request, IMR doctors upheld the UR physician’s modification or denial of the service in 88.8 percent of the IMRs in the first half of this year compared to the 88.2 percent uphold rate from 2019.

As has been the case since IMR was first adopted prescription drug requests accounted for the largest share of the January through June IMR decisions (39.8 percent), though that percentage is down from nearly half of all IMR disputes prior to the state’s adoption of the opioid and chronic pain treatment guidelines at the end of 2017 and the Medical Treatment Utilization Schedule Prescription Drug Formulary in January 2018.

Even with the guidelines and the formulary, opioids still accounted for 29.2 percent of the 2020 prescription drug IMRs – down only slightly from 30.9 percent in 2019.

Requests for physical therapy; injections; durable medical equipment, prosthetics, orthotics and supplies (DMEPOS); diagnostic imaging; and surgery together comprised 40 percent of the IMRs from the first half of 2020, while all other medical service categories combined accounted for 20.2 percent of the disputed requests. The 2020 uphold rates for the various service categories ranged from 80.1 percent for psych services to 91.3 percent for DMEPOS.

As in the past, a small number of physicians continued to account for most of the disputed medical services that went through IMR this year. The top 10 percent of physicians identified in the IMR decision letters issued in the 12 months ending in June 2020 accounted for 83 percent of the disputed service requests during that period, while the top 1 percent (97 providers) accounted for 40 percent of the disputed service requests.

Additional data and analyses on the IMR data through June 2020 has been published in a CWCI Bulletin, which CWCI members and subscribers will find under the Communications tab at www.cwci.org.

Newsom Signs COVID-19 Presumption Law

Gov. Gavin Newsom signed a new workers’ compensation presumption law Thursday, that will expand access to workers’ compensation for front-line workers affected by the coronavirus pandemic, and those who encounter an “outbreak” in the workplace.

Senate Bill 1159 creates a rebuttable presumption of infection for people like grocery store employees, health care workers, firefighters and law enforcement officers who believe they contracted the coronavirus at work. The new law also creates a presumption of infection whenever there is a workplace outbreak over a two-week span of time.

SB 1159 is effect immediately as an urgency statute and will remain in effect through Jan. 1, 2023.

SB 1159 imposes an onerous administrative burden on California employers, and their workers’ compensation claim administrators.

The third category of presumptions – the outbreak group (L.C. 3212.88) – works administratively by requiring every employer in the state with five or more employees to report information about any employee who tests positive for COVID-19, to their workers’ compensation claims administrator within three days.

The workers’ compensation claim administrator must use this information to keep a count on COVID-19 testing at each site location, and when the criteria of 4 or more (or 4% of the workforce) in 14 days is met, apply the presumption to the “outbreak group” of cases reported during that 14 day window.

There is a $10,000 penalty for failure to meet the three day reporting requirement or to provide a fraudulent report.

This new law applies “retroactively” to pending claims, which means that employers and claim administrators have to go back in time and collect this data from millions of California employers of more than 5 people immediately. They have 30 calendar days to report on the retroactive claims now that the bill has been signed.

In terms of the employers of first responder employees (L.C. 3212.87 the second group), although L.C. 3212.87 does not have a specific reporting requirement, those                             .

While for example a peace officer is not in the third “outbreak group” they may work side-by-side with non first responders.

It would appear reasonable that counting positive tests of first responders who work in the same setting as non-first responders would be an obligation in terms of applying the presumption standard to the outbreak group.

Newsom also signed a new law that will require employers to report coronavirus outbreaks to their local public health department within 48 hours and to employees who may have been exposed within one business day.

Assembly Bill 685 also gives the California Division of Occupational Safety and Health (Cal/OSHA) the authority to close a worksite or place of employment that is actively exposing workers to the risk of contracting the virus.

AB 685 will also remain in effect through Jan. 1, 2023.

AB-5 Exemption for Franchising in CA – Rejected

California franchisors and franchisees suffered setback when the legislature rejected a proposed franchise exemption to AB-5 in the recently passed clean up legislation.

When AB-5 was enacted in 2019, to the horror of the franchise industry, it appeared to create a presumption that the franchise business model created an employment relationship between franchisor and franchisee and franchisee’s employees.

The Bill’s sponsors in the Assembly disclaimed any intent to interfere with positive business relationships that allow small businesses, including franchised outlets, to continue and pledged to address the issue in future amendments to the law. The apologetic statement, promising amendments, temporarily calmed the waters.

An early draft of AB-5 amendments included a franchise exemption, but the provision died as amending legislation made its way to enactment. Amplifying the AB-5 adversity is the risk that the Dynamex case, which presaged AB-5, will be applied retroactively, exposing those considered employers under the test codified in AB-5 to years of prior year employment tax exposure.

Franchisors and franchisees will need to again reassess their approach to franchising in California’s AB-5 environment. The lure of access to the fifth largest economy in the world enhances the risks inherent in making the wrong decision.

In a 2019 alert, “New California Law Imperils Franchise Model,” written by a member of Fox Rothschild, a 950-lawyer national law firm, the authors noted a few possible actions by franchisors and franchisees in the wake of AB-5, none of them palatable.

The firm said that franchisors and franchisees need to reconsider discouraging choices: (a) bow to pressure and change to an employment model; (b) cling to the franchise model, but redefine obligations and change the financial model; (c) withdraw from California.

Now, with no apparent hope that a franchise business model and AB-5 can co-exist, will franchisors begin the agony of decision-making?

What is the future of the thousands of California franchisees and their tens of thousands of employees in the process? Millions are unemployed in the wake of COVID; is now the time to add thousands more to the ranks?

California Recovers $11.8M From Novartis $729M Kickback Case

Last July, Novartis agreed to pay over $729 million in separate settlements resolving claims that it violated the False Claims Act. The first settlement pertains to the company’s alleged illegal use of three foundations as conduits to pay the copayments of Medicare patients.. The second settlement resolves claims arising from the company’s alleged payments of kickbacks to doctors. The settlement was entered into in the US District Court for the Southern District of New York.

The total fine and penalty paid for illegal conduct inside the US was over double that paid by Novartis for its conduct outside the US. Novartis settled FCPA violations for foreign bribery for $337 million.

The California Attorney General just announced the trickle down effects, with its $11.8 million settlement against Novartis.

Novartis was accused of violating the federal Anti-Kickback Statute and False Claims Act, as well as the California False Claims Act, by offering payment in the form of cash, meals, and honoraria to healthcare practitioners who spoke at or attended Novartis speaker events, roundtables, speaker training meetings or lunch-n-learns to encourage them to prescribe certain Novartis drug products to recipients of Medicare and Medicaid.

Novartis sales representatives conducted speaker programs and roundtables at some of the most expensive restaurants in the United States, including Masa, Daniel, Gramercy Tavern, II Mulino, Babbo, Peter Luger, Le Bernardin, and Eleven Madison Park in New York City; Charlie Palmer’s in Washington, D.C.; Morton’s Steakhouse and the Four Seasons in Chicago, Illinois; Joe’s Stone Crab in Miami; Abacus, Nobu and the Four Seasons in Dallas; Gary Danko in San Francisco; Patina and Matsuhisa in Los Angeles; Grill 225 in South Carolina; and Commander’s Palace in New Orleans.

Some Novartis sales representatives conducted speaker programs and roundtables at venues where the focus was on entertainment, including fishing trips, sporting events, wine tastings, and hibachi tables. Novartis conducted hundreds of events at wineries and golf clubs. Sales representatives also conducted roundtables at Hooters.

The California settlement is a result of a whistleblower case filed in the United States District Court for the Southern District of New York in 2011. As part of the agreement, Novartis is required to pay California $11.8 million, which will be split between the General Fund and Medi-Cal.

This settlement agreement is a part of the work of the California Department of Justice’s Bureau of Medi-Cal Fraud and Elder Abuse (BMFEA). The BMFEA receives 75 percent of its funding from the U.S. Department of Health and Human Services under a grant award totaling $42,322,848 for Federal fiscal year 2019-20. The remaining 25 percent, totaling $14,107,616 for fiscal year 2019-20, is funded by the State of California.

Remote Work Incentives Encourage California Exodus

The Covid-19 pandemic has forced companies to rethink the way people work. To stem the spread of the disease, companies recognized the need to decentralize their staff. Working from home became the new standard. One major corporation after another announced their plans for remote work. Some companies, such as Twitter, provided the chance for staff to work remotely forever.

Maintaining large office spaces in cities, such as New York and San Francisco, is extremely expensive and the taxes are astronomical. Having people work from their own homes or in lower-cost cities is an attractive option for the chief financial officers to shave off large expenditures and save money.

Forbes reports that Stripe, the fast-growing fintech payments company, has an interesting deal for its employees. They could be paid $20,000 to relocate from high-priced cities to lower-cost locations. Sounds good, right? Here’s the catch – the workers who take up the offer will have to take a 10% cut to their compensation.

In addition to Stripe, other companies have made similar-type offers. VMware – a California-based publicly traded software company that provides cloud computing and virtualization software and services – announced that employees who work remotely will get a pay cut if they move out of Silicon Valley to live in less-costly cities.

According to Bloomberg, “employees who worked at VMware’s Palo Alto, California, headquarters and go to Denver, for example, must accept an 18% salary reduction. Leaving Silicon Valley for Los Angeles or San Diego means relinquishing 8% of their annual pay.” Rich Lang, VMware’s senior vice president of human resources, offered a positive alternative. When a person relocates and works remotely, they “could get a raise if they chose to move to a larger or more expensive city.”

Facebook CEO Mark Zuckerberg vowed to allow his employees to continue working remotely. Zuckerberg said, “We’re going to be the most forward-leaning company on remote work at our scale.” Employees will have to tell their bosses if they move to a different location. Zuckerberg forewarned his personnel, saying those who flee to lower-cost cities “may have their compensation adjusted based on their new locations.” The chief executive added, “We’ll adjust salary to your location at that point. There’ll be severe ramifications for people who are not honest about this.”

Just as there is heated debate over reopening the economy too quickly, there are contradicting actions of leading corporations that reflect a reticence to fully embracing the work-from-home revolution. Google, Amazon and Facebook have recently leased, built or purchased corporate real estate, bucking the remote movement. They are playing it safe by both offering people the chance to work from home, but also expanding their office footprint – in case the work-from-home trend slowly dissipates.

Agoura Hills Psychiatrist Pleads Guilty in Kickback Case

Two California men admitted to participating in a conspiracy to broker patients as part of a multi-state patient scheme in which one of them directed recruiters to bribe drug-addicted individuals to enroll in drug rehabilitation and the other paid referral fees from his rehabilitation center in exchange for those patient referrals.

Dr. Akikur Mohammad, 57, of West Hills, California pleaded guilty to one count of conspiracy to violate the Eliminating Kickbacks in Recovery Act (EKRA). Kevin M. Dickau, 32, of Tustin, California pleaded guilty to one count of conspiracy to commit health care fraud.

According to the Medical Board of California records, Mohammad is a board certified psychiatrist specializing in addiction. He has a private practice seeing mostly patients suffering from addiction or a dual diagnosis of addiction and another psychiatric disorder. In addition to his private practice, he founded two drug rehabilitation facilities, one in Agoura Hills, and the other in Malibu.

EKRA, enacted by Congress in October 2018 as part of a broader package of legislation aimed at combatting the opioid crisis, bars the payment of kickbacks in exchange for the referral of patients to drug treatment facilities. Mohammad’s EKRA conviction is among the first such convictions in the country using the new charge.

Three other individuals have previously pleaded guilty for their roles in the scheme: Peter Costas, of Red Bank, New Jersey, pleaded guilty to conspiracy to commit health care fraud in May 2020; Seth Logan Welsh, of Forest Hill, Maryland, and John C. Devlin, of Baltimore, Maryland, pleaded guilty to the same charge on Sept. 8, 2020.

Dickau, Welsh, Devlin, and their conspirators owned and operated a marketing company in California. They used the marketing company to help orchestrate a scheme in New Jersey, Maryland, California, and other states that involved bribing individuals addicted to heroin and other drugs to enter into drug rehabilitation centers so they could generate referral fees from those facilities. One facility in California that paid such referral fees was owned and operated by Mohammad.

The marketing company maintained contractual relationships with drug treatment facilities around the country, including the one run by Mohammad. The marketing company also engaged a nationwide network of recruiters – including Costas in New Jersey – to identify and recruit potential patients, from New Jersey and other states, who were addicted to heroin or other drugs and who had robust private health insurance.

To convince drug-addicted individuals to travel to and enroll in rehabilitation when they otherwise would not have, Costas and other recruiters offered to bribe them – often as much as several thousand dollars – with the approval of Dickau, Welsh, and Devlin.

Once the patients agreed to enroll in drug rehabilitation in exchange for the offered bribe, Dickau, Welsh, Devlin, and Costas would arrange and pay for cross-country travel to the drug treatment centers in California and other states, in concert with the owners of the facilities themselves, including Mohammad.

Costas would stay in touch with the New Jersey patients at the facilities and specifically instruct them to stay at the facilities long enough to generate referral payments, and he would pass along information to Dickau, Welsh, and Devlin about the patients’ status at the facilities.

Dickau, Welsh, and Devlin would monitor the other patients they brokered by speaking to other recruiters or to the owners and employees of the drug treatment facilities themselves.

Mohammad’s drug treatment facility had a contract with the marketing company. His facility and other facilities typically paid the marketing company a fee of $5,000 to $10,000 per patient referral.

Dickau, Welsh, Devlin, and their conspirators divvied that money among themselves. Costas and other recruiters received approximately half that amount for each patient they brokered. They brokered scores of patients to drug treatment facilities around the country, including the one run by Mohammad, and the conspiracy caused millions of dollars of losses for health insurers.

Dickau faces a maximum potential penalty of 10 years in prison and a $250,000 fine, or twice the gross gain or loss from the offense. Mohammad faces a maximum potential penalty of five years in prison and a $250,000 fine, or twice the gross gain or loss from the offense. Sentencing for both defendants is scheduled for Jan. 20, 2021.

CWCI Reports on Impact of 20 Years of Medical Reforms

The average number of visits for Evaluation and Management (E&M) and Physical Medicine services in the California workers’ compensation system has continued to edge down since the enactment of SB 863 in 2012, but with the adoption of the RBRVS fee schedule, evidence-based medicine standards, mandatory Utilization Review and Independent Medical Review, and other reforms, E&M and Physical Medicine payments have increased from 33 percent to 47 percent of the total medical reimbursements in the system.

The finding is one of the results of a new California Workers’ Compensation Institute (CWCI) study that measures changes in the volume and reimbursement of different types of medical services provided to injured workers in the wake of incremental reforms to the California workers’ compensation system enacted over the past 20 years.

The study, based on indemnity claims data from CWCI’s IRIS database, tracks medical service utilization (percent of claims with a given service and the number of visits per claim) and total amounts paid per claim for medical services delivered within the first 24 months of treatment, with results broken out by medical service category (e.g., physical medicine, major surgery, mental health, pharmaceuticals, and clinical lab services which consist primarily of drug testing).

California has enacted multiple legislative and regulatory reforms affecting workers’ comp medical benefit delivery over the past two decades, so the study examines and compares data from claims with initial treatment dates within an 18-year span (2000 through 2017).

Because the study focuses on medical services in the first 24 months of treatment, there were years in which the results were influenced by reforms from multiple periods, so the report highlights changes in medical treatment utilization and payments for claims in which the initial service was rendered during three distinct non-transitional periods: 2000 to 2001 (Pre-2004 reforms); 2004 to 2010 (Post-SB 228 and SB 899); and 2013 to 2017 (Post-SB 863, AB 1244, and AB 1124).

The study also provides data on regional variations in medical services over time, including changes in the average number of E&M services and physical medicine visits, and in the proportion of claims that involved physical medicine. Focusing on the most recent post-reform period, the authors also analyzed four claim characteristics that impact medical service utilization: opioid use; major surgery; the injured worker’s age; and the industry in which they were employed at the time of injury.

Here, for example, the study found that the average age of a California injured worker has increased from 38.9 years in 2000 to 43.9 years in 2017, a notable finding given that the likelihood of having major surgery within the first 24 months of treatment increases with age, and the study shows workers over 40 also have significantly higher E&M and Physical Medicine utilization rates.

The full study has been released in a CWCI Research Note, “Changes in Medical Treatment Trends After 20 Years of Incremental Workers’ Compensation Reform,” which includes background on the reforms enacted over the past two decades, plus exhibits and analyses summarizing the results.

Appendices to the report include tables showing the changes in the percentage of indemnity claims that involved services from 12 different medical service categories at 24 months; the mean, median and 95th percentile service counts for the service categories; and the mean, median, and 95th percentile payment amounts for those services.

CWCI members and subscribers can access the report at the CWCI website.