Tag: 2021 News

See’s Candies secured a victory when the California Court of Appeals rejected a proposed statewide employment class action based on alleged meal and rest period violations.

The lead plaintiff, Debbie Salazar, alleged claims for unpaid overtime, unpaid minimum wages, failure to provide rest and meal periods, failure to provide wage statements and to maintain payroll records, failure to timely pay wages on termination, and unfair and unlawful business practices under Business and Professions Code section 17200.

Salazar sought certification of two classes: a “single staffing class” and a “meal break class.” With respect to the meal break class,

Salazar acknowledges that See’s official meal break policy complies with California law. Salazar’s theory is that, despite that policy, See’s consistent practice was to deny second meal periods when shifts exceeded 10 hours. Salazar claims that she can prove this consistent practice, and therefore establish liability, through common proof.

In opposition to the motion, See’s argued that See’s did not rely only on the Scheduling Form to provide second meal breaks, but also provided employees with training on its policies and required its shop managers to implement those policies.

In support of its opposition, See’s submitted declarations from 55 employees, including both managers and shop employees. The managers testified generally about See’s policy of providing a second meal break for shifts over 10 hours. Most of the employee declarants testified that they were aware of this policy. More than half of the employee declarants had worked shifts longer than 10 hours, and almost all of these testified that they took second meal breaks during such shifts at least some of the time. Four employees testified that they occasionally chose not to take a second meal break so that they could leave work earlier or get overtime pay.

The trial court denied certification of the meal break class on two grounds. First, the court found that Salazar had failed to show that she could prove through common evidence that See’s had a consistent practice to deny second meal breaks. Second, the trial court found that Salazar’s proposed trial plan was inadequate to manage these individual issues.

The court of appeal affirmed denial of class certification in the published case of Salazar v Sees Candy.

Class actions are authorized “when the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court.” (Code Civ. Proc., § 382.) To certify a class, “[t]he party advocating class treatment must demonstrate the existence of an ascertainable and sufficiently numerous class, a well-defined community of interest, and substantial benefits from certification that render proceeding as a class superior to the alternatives.”

The community of interest factor in turn has three requirements: (1) common questions of fact or law that predominate over individual issues; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class.

Class certification is generally inappropriate if liability can be established only through individual proof. When common issues predominate over individual issues, a class should not be certified if there is no way to manage the remaining individual issues “fairly and efficiently.”

Under the substantial evidence standard, the court of appeal must credit the trial court’s reasonable inferences, even if a competing inference could be drawn.

The injured worker was employed by Applied Materials from 1996 until 2008. During that time, she claimed three industrial injuries: a specific injury to her neck and right upper extremity in 2001, a specific injury to her neck and both upper extremities in 2005, and a cumulative trauma injury to her neck, both upper extremities, and psyche ending on her last day worked in January 2008.

The worker later claimed that in 2013, she was sexually exploited by Dr. John Massey, (an anesthesiologist/pain specialist), the physician primarily responsible for the treatment of her industrial injuries after 2007. At the time, Massey was a member of the Bay Area Pain and Wellness Clinic (BAPWC). His license has since been revoked for his sexual misconduct by the California Medical Board.

She claimed that he touched her inappropriately on multiple occasions at his clinic and had sexual intercourse with her five times in her home. As a result of the doctor’s alleged misconduct, she claimed that she suffered a further injury to her psyche and was diagnosed with posttraumatic stress disorder (PTSD). Worker claimed her PTSD was industrial as a compensable consequence of the medical treatment her employer provided for all three of her industrial injuries.

Arrowood Indemnity Company was the workers’ compensation carrier for the 2001 specific injury claim. XL Specialty Insurance Company, as administered by Corvel Corporation was the workers’ compensation carrier for both the 2005 specific injury and the 2008 cumulative trauma injury claims.

Both insurers contended that Worker’s psychiatric injury resulting from her claimed sexual exploitation by Dr. Massey was not industrial because it was the result of a consensual sexual relationship and occurred at her home.

The case went to trial before a workers’ compensation judge in 2017. The WCJ found that all of Worker’s injury claims – including her depression, anxiety, and PTSD – were industrial, and awarded 100 percent permanent disability based on her PTSD alone retroactive to October 2010; found no apportionment; and concluded that the insurers were jointly and severally liable for the PD award since Dr. Massey treated all three of her industrial injuries.

In its June 2019 decision, the WCAB amended the amount of the weekly TD and PD rates as recommended by the WCJ, made an order regarding attorney fees that is not at issue here, and otherwise affirmed the WCJ’s findings and award.

The Court of Appeal affirmed the finding of psychiatric injury resulting from the sexual exploitation by Dr. Massey, but rejected the finding of total disability in the unpublished case of Applied Materials v. Workers’ Comp Appeals Board.

On the issue of industrial causation, the Court of Appeal concluded that the Worker met her burden of proving that her PTSD was a compensable consequence injury. It rejected Petitioners’ contention that the sexual conduct here was consensual, since as a matter of law a patient cannot consent to sexual contact with his or her physician (Bus. & Prof. Code, § 729, subd. (b)), as well as their contention that the PTSD is not compensable under the rules governing industrial injuries arising out of assaults by third parties.

It concluded that the 100 percent PD award must be annulled because: (a) the psychiatric reports that the WCAB relied on do not constitute substantial evidence since Dr. Sidle relied on an incorrect legal theory, the alternative path theory, that was rejected in Fitzpatrick, supra, 27 Cal.App.5th 607; and (b) Worker’s evidence was otherwise insufficient to rebut the scheduled rating for her psychiatric disability.

41 year old Carolyn Plaza, who lives in Fresno, self-surrendered after a warrant for her arrest was issued on six felony counts of insurance fraud.

A criminal complaint filed on April 16 , alleges Plaza underreported more than $3 million in employee payroll in order to fraudulently reduce her company’s workers’ compensation insurance premium by nearly $1 million.

Plaza is the co-owner of Absolute Urethane, Inc., a construction contracting business serving the Fresno and surrounding Central Valley areas since 2006.

The California Department of Insurance began an investigation after receiving a tip from the State Compensation Insurance Fund alleging Plaza had manipulated payroll reports to avoid paying higher insurance premiums.

The Department of Insurance investigation uncovered that Plaza had provided false payroll records to State Fund for multiple policy years.

After comparing those payroll records to the records she reported to the Employment Development Department, the investigation discovered that Plaza underreported $3,146,863 in employee payroll over five years. Plaza’s underreporting resulted in a $985,091 loss in premium to State Fund.

Employers are required to maintain workers’ compensation insurance to cover their employees in the event of an accidental on-the-job injury. To ensure proper coverage, employers are required to accurately report the number of employees, job classifications, and the amount of payroll expended.

One of the common ways in which employers avoid paying insurance premiums is to underreport a business’s payroll by providing false payroll reports to their insurance company.

In this case, Plaza’s underreporting significantly lowered the premiums owed. Businesses that fraudulently lower their premiums benefit from an unfair market advantage, giving them the ability to charge less in labor costs, and thereby underbid businesses who pay the appropriate premiums.

Arraignment is scheduled for June 28, 2021, in the Fresno County Superior Court. The Fresno County District Attorney’s Office is prosecuting this case.

58 year old Katherine Zalewski, who lives in of Richmond, has been reappointed to the Workers’ Compensation Appeals Board, where she has served since 2014 when she was appointed by Governor Brown, and as Chair since 2017.

Zalewski was Chief Counsel at the California Department of Industrial Relations from 2012 to 2014, where she was a Workers’ Compensation Administrative Law Judge and Advisor to the Division of Workers’ Compensation from 2009 to 2011.

Prior to her appointment as a Workers’ Compensation Judge in 2009, Ms. Zalewski represented insurers and self-insured employers in workers’ compensation matters throughout Northern California.

She was Senior Associate at Schmit Law Office from 2000 to 2009 and Manager and an Attorney at Pacific Coast Services from 1998 to 2000 and at Express Network and Direct Legal Support Services from 1993 to 1998. She was an Attorney at Kinder and Wuerfel from 1990 to 1993, at Finnegan and Marks from 1988 to 1990 and at Foreman and Brasso from 1986 to 1988.

Ms. Zalewski received her B.A. from the University of California, Berkeley in 1983 and her J.D. from Hastings College of the Law in 1986.

This position requires Senate confirmation and the compensation is $164,122.

Zalewski is registered without party preference.

Underwriting profitability remained relatively stable in the U.S. workers’ compensation market in 2020 as the COVID-19 pandemic raged and premium volumes fell. But while the pandemic may be ebbing in the U.S. in 2021, the workers’ comp space cannot yet say it was unscathed.

The top 3 workers’ compensation players held their positions in 2020 despite seeing sharp falls in premium volume, S&P Global Market Intelligence data shows. The Travelers Cos. Inc. continued to rule the roost with control of 7.3% of the U.S. market, even though its direct premiums written fell 11.3% to $3.74 billion.

Changes further down the ranks were confined to one-position moves. Chubb Ltd. took fourth place from Liberty Mutual Group Inc., AF Group nudged State Insurance Fund Workers’ Compensation Fund out of the eighth spot and Old Republic International Corp. knocked American International Group Inc. out of the top 10.

Premium volume was down across the board as the pandemic kept workers at home or saw them furloughed or laid off. Direct written premiums were down 10.5% year over year to $31.41 billion for the top 20 and 9.2% to $51.06 billion for the industry.

However, underwriting profitability looks to have held up despite concerns about a flurry of losses from the introduction of rebuttable presumptions for pandemic-related workers’ compensation claims in several states, which shifts the burden of proof to the employer from the employee.

The workers’ compensation industry’s collective direct incurred loss ratio, prior to consideration of reinsurance, increased year over year, but only by 1.3 percentage points to 47.4%.

The combined ratio is likely to have seen a similar trend. Dan Aronson, U.S. casualty leader at insurance broker Marsh LLC, said during an April webinar that the industrywide private carrier combined ratio was estimated to be 86% for 2020, compared with 85% for 2019.

Workers’ compensation underwriting profitability has been “pretty solid” in recent years because of falling claims frequency, Sid Ghosh, vice president at Moody’s, said in an interview. The pandemic, which halted many business activities, has helped workers’ compensation claims frequency “tremendously,” he said.

There are signs that claims costs from workers catching COVID-19 will not be as high as feared. Dennis Tierney, Marsh’s director of workers’ compensation claims, on the webinar said one surprise was that the average COVID-19 claim cost less than $5,000, compared with around $20,000 for the typical workers’ compensation claim.

That said, the workers’ compensation market may not be done with the pandemic yet. Tierney said the potential for long-term health effects of COVID-19 is not yet fully known. As time goes on, the overall picture of the pandemic’s impact may change, he said.

Ghosh said another unknown is how working from home for a prolonged period of time may affect workers’ health in the long run. “We don’t know how that is going to evolve,” he said. He also noted that the claims frequency reductions were “a temporary benefit to the industry” that would be reversed as people return to work.

The introduction of new presumption rules in several states is “a worry for the workers’ comp industry,” Ghosh said, although Moody’s not aware of a material number of claims resulting from these changes so far. He added that some states were considering whether to expand the rules from essential workers to a wider group.