TOP CALIFORNIA WORKERS’ COMP DEVELOPMENTS—1ST HALF OF 2023

September 2023

By Julius Young, Esq.
Partner, Boxer Gerson, Oakland, CA

At mid-2023, it’s time to examine the most important developments in California workers’ compensation so far this year.

If one tried to separate the wheat from the chaff, what is significant? Here, in no particular order, are my picks:

1.Bills sponsored by labor groups, applicant attorneys and employee advocates continued to advance through the legislature

The California Assembly has a new majority leader. Robert Rivas (D-Hollister) has succeeded Anthony Rendon as Speaker.

Many stakeholders believe that the current Democratic legislative supermajority is much more sympathetic to tweaking the 2004 and 2012 California workers’ comp reforms than in recent years. Several of the bills in play would either tweak prior comp reforms or expand benefits to selected public safety personnel and state employees.

In the following list I’ve included other pending bills that while not strictly speaking workers’ comp bills, do pertain to employee rights/employer obligations and thus may come into play in some work injury situations. Some would expand employee rights in specified situations.

As of early July 2023, the following bills have passed either the California Assembly or Senate and appear in play:

• AB 1213 (Ortega) (waives cap on temporary disability benefits for periods treatment denied when UR denial is overturned by IMR). This bill is celebrated by work advocates as a measure of fairness to workers. It is opposed by the insurer-employer coalition who cite a CWCI analysis that claims the limited number of cases that would benefit do not justify the expense.

• AB 1145 (Maienschein) (provides an industrial presumption for PTSD for certain employees of state hospitals and Department of Corrections 

• AB 623 (Laird) (extends peace officer PTSD presumption to 2032 and provides PTSD presumption for firefighters and emergency dispatchers)

• AB 621 (Irwin) (expanded special death benefit, allowing PERS special death benefit and workers comp death benefit)

• SB 391 (Blakespear) (skin cancer presumption for state Fish and Game and Parks and Recreation workers)

• SB 626 (Cortese) (requires UR physicians and psychologists to be licensed in California)

• SB 631 (Cortese) (upon appropriation funding by the Legislature, requires DWC and UC Berkeley-rather than CHSWC- to conduct an analysis of differences in workers’ comp benefits other than medical treatment provided to employees of different genders).

• SB 697 (Hurtado) (would require a DWC study of a value of care reimbursement system). Although this bill passed the California Senate, an Assembly hearing was canceled in late June.

• AB 336 (Cervantes) (requires contractors to certify workers’ comp insurance policy class codes when renewing their contractor licenses). As of late June this bill was placed in the California Senate Appropriations Committee suspense file as there may be issues about the cost impact to the state.

• AB 594 (Maienschein) (expands and strengthens the right of public prosecutors to enforce California labor laws such laws dealing with labor standards, wage theft, worker misclassification etc, but not workers’ comp laws)

• SB 731 (Ashby) (requires an employer, before requiring an employee who is working from home to return to work in person, to provide at least 30 calendar days written notice to the employee along with a statement about right to seek an accommodation)

• SB 553 (Cortese) (requires employer workplace violence prevention plans, prohibits retaliation if an employee seeks assistance from law enforcement or emergency services after a violent incident and allows a collective bargaining representative to file for a temporary restraining order on behalf of employee who has suffered unlawful violence or a credible threat of violence). Sponsored by the UFCW, this bill reflects rising concern about workplace violence against workers, including retail employees.

• SB 723 (Durazo) (modifies recall and reinstatement rights for laid-off employees in the hospitality, service and travel industries and deletes a prior sunset date)

• AB 1356 (Haney) (revises the WARN Act to include a “client employer” or a labor contractor in the definition of an employer and among other provisions increases from 60 days to 90 days the length of notice an employer must provide to employees prior to terminations, relocations or mass layoffs)

• SB 616 (Gonzalez) (among other things, expands the amount of paid sick leave employers are required to provide employees from three days to seven days)

• SB 627 (Smallwood-Cuevas) (creates a Displaced Worker Retention and Transfer Rights Act and prohibits chain employers from closing without giving a 60 day notice; also, requires a chain employer to provide transfer opportunity to other chain locations within 25 miles as positions become available)

2. In 2023 there are important workers’ comp and worker rights developments in the courts

Among the workers’ comp cases worthy of mentioning are the following:

• In early July the California Supreme Court released its decision in Kuciemba v. Victory Woodworks. Mr. Kuciemba’s wife had sued her husband’s employer after she claimed she contracted COVID from the husband’s alleged workplace exposure. The court framed the issues as follows:

“The questions are: (1) If an employee contracts COVID-19 at the workplace and brings the virus home to a spouse, does the California Workers’ Compensation Act (WCA; Lab. Code, § 3200 et seq.) bar the spouse’s negligence claim against the employer? (2) Does an employer owe a duty of care under California law to prevent the spread of COVID-19 to employees’ household members?”  

While the decision holds that California workers’ compensation does not bar such an action, the employer does not have a duty of care given the circumstances of the COVID pandemic.  The court reasoned as follows:

“a duty of care to nonemployees in this context would impose an intolerable burden on employers and society in contravention of public policy. These and other policy considerations lead us to conclude that employers do not owe a tort-based duty to nonemployees to prevent the spread of COVID-19.“

• The California Supreme Court announced on June 28 that they have agreed to hear Castellanos v. State of California (Protect App-Based Drivers and Services). The gig employers such as Uber, Lyft, Doordash, etc. who sponsored Prop 22 had largely prevailed at the First District Court of Appeal in Hector Castellanos v. State of California.

• Grace Nunes v. State of California and Dept. of Motor Vehicles (WCAB en banc)  While it is not an appellate court decision, this en banc ruling is important as it sets forth rules regarding use of vocational expert opinion in cases where apportionment is an issue, and indicates that medical apportionment is the standard under Labor Code 4663 not “vocational apportionment”. This decision may affect a number of cases currently in litigation, as parties may need to seek clarification from QMEs, AMEs and retained vocational experts. The Nunes decision can be seen here:

https://www.dir.ca.gov/wcab/EnBancdecisions2023/Nunes-Grace.pdf

• State of California ex rel. Anna Maria Christina Sills v. Bahar Gharib-Danesh (2nd DCA) (qui tam action arising out of alleged workers’ comp provider fraud not barred by “five year rule” where the case was under seal during part of that time)

• Adolph V. Uber Technologies (case argued at California Supreme Court in May 2023 and pending at time of this blog post)  Although this is not a workers’ compensation case, it does deal with issues that are important to workers and employers. At issue is whether under the 2004 Private Attorneys General Act (PAGA), employees can sue employers either individually or collectively for labor law violations and how state law fits with the Federal Arbitration Act.

3. COVID impact on California receded and emergency regs expired

The official COVID state of emergency ended February 2023. But as of mid-June 2023, 320,714 COVID claims had been filed and there were 1,641 reported work-related death claims during the course of the pandemic. In May 2023 there were 841 reported claims of alleged work-caused COVID, as reported COVID claims declined each month in 2023. However, the COVID presumptions of industrial causation enacted as AB 1751 are still in effect and expire as of January 1, 2024.

Meanwhile COVID-specific sick pay requirements (under prior SB 114, AB 152 and Cal/OSHA regulations) have expired.

And Cal/OSHA has adopted non-emergency COVID prevention rules. On December 15, 2022, the Occupational Safety and Health Standards Board voted to establish non-emergency COVID-19 prevention regulations. Those regulations are effective February 3, 2023:

https://www.dir.ca.gov/dosh/coronavirus/Non_Emergency_Regulations/

A link to COVID claims stats can be found here:

https://cwci.org/CV19claims.html

A June 2023 WCIRB study of “Long-Term COVID” analyzed the extent of long COVID in the California system and the impacts of long COVID on permanent disability. They noted that “13% of COVID-19 claims with medical payments received treatments for long COVID symptoms in the workers compensation system”.  They found that “the average incurred medical costs for long COVID claims involving PD benefits are almost three times as high as other COVID-19 claims involving PD benefits“.

4. Regulatory activity by the DWC in the first half of 2023 was modest

In February 2023 the DWC adopted QME regulations which essentially continue allowance for remote telehealth QME evaluations as long as an in-person hands-on eval is not necessary and certain requirements are met.

The February 2023 QME regs also loosen time frame requirements for QMEs to schedule appointments, loosening the time to 90 days from the appointment request (or up to 120 days if the 90 days is waived):

https://www.dir.ca.gov/dwc/DWCPropRegs/2021/QME-Regulations/Index.htm

While some workers’ comp stakeholders believe the amended scheduling rules will decrease the need for replacement panels, many applicant attorneys are concerned that the longer allowed scheduling time frames will simply add to delays in obtaining benefits for clients and lengthen the time to process cases.

At mid-year another set of QME regulations were still in development, as a 15 day comment period ended in late May 2023 after a public hearing was held. Those regs would address a variety of issues, including revisions to QME continuing education requirements, QME reappointment rules, rules pertaining to QME discipline, and repeal of regs related to SJDB benefits. A link to the DWC regs page can be seen here:

:https://www.dir.ca.gov/dwc/DWCPropRegs/2023/QME/Index.htm

And the DWC has announced a July 18 public hearing “to hear input regarding an update to the Workers’ Compensation Audit Regulations”.

5. AB 5 and Prop 22 remained in issue in 2023

Although the California workers’ comp system has not been flooded with claims alleging that gig-workers are covered by California workers’ comp, system observers are keeping an eye on how uncertainty about AB 5 and Prop 22 play out.

The gig-worker companies won an appeal of an Alameda County Superior Court ruling that had held Prop 22 was unconstitutional as a violation of the single subject rule and a violation of the legislature’s plenary power over workers’ compensation under the California constitution. That 2-1 March 2023 decision, Hector Castellanos v. v. State of California/Protect App-Based Drivers and Services, did, however, find that certain provisions of Prop 22 are invalid because they intrude on the judiciary’s authority to determine what constitutes an amendment to Prop 22.

The 1st District Court of Appeal will not be the last word on the constitutionality of Prop 22. As noted above, the California Supreme Court has agreed to hear the Castellanos case.

But while labor advocates were attacking Prop 22, the gig platform companies have been attacking AB 5, which codified the California Supreme Court adoption of the “ABC employment test” in the Dynamex case. On March 17, 2023 the United States Court of Appeals for the 9th Circuit ruled in Lydia Olson V. California, a challenge to AB 5 filed by Postmates, Uber and two driver plaintiffs. That challenge had been dismissed by the Federal District Court, but the 9th Circuit panel found that AB 5 violated the equal protection clause, noting many legislative exemptions from AB 5 and media quotes from key legislators. In May 2023, California’s attorney general filed a request for a rehearing at the 9th Circuit.

Olson had a different result than the ruling in an earlier 9th Circuit Case, Mobilize the Message v. Bonta, where another 9th Circuit panel found 2-1 that AB 5 did not violate the free speech of ballot signature gatherers. In 2023 the U.S. Supreme Court refused to hear the case.

The case of Lawson V. Grubhub is an example of some of the legal uncertainty which has surrounded gig-workers. Grubhub initially won a U.S. District Court ruling that a driver was an independent contractor under the Borello case. At the 9th Circuit level Grubhub lost, as the 9th Circuit remanded for the court to apply the ABC test on the pre-Prop 22 claims. Upon remand, in 2023 the Federal District Court found that under the ABC test, the worker was not an independent contractor.

Future rulings in the Castellanos and Olson cases may well determine whether gig-worker claims come into the California workers’ comp system or whether many app-based drivers are only covered under the limited compensation provisions of Prop 22.

6. From a macro view, California’s workers’ comp system remained stable

Macro views of the system don’t tell the story of individuals who find themselves injured at work or involved in a litigation process. A work injury may destabilize the worker’s health, their economic future and create hardship for their families. So, we must always keep the impact on individuals in mind.

However, from a macro standpoint the system is stable.

Workers’ compensation insurance rates (both advisory rates and rates actually charged) have declined steadily since 2015. The WCIRB (Workers’ Compensation Insurance Rating Bureau) filed a request for an advisory rate of $150 per $100 of payroll and a Department of Insurance hearing on the request was held on June 7. At mid-year, Commissioner Lara had yet to make a ruling.

The WCIRB’s rate request was modest, as they seek a 0.3% increase in the advisory (non-binding) rate: https://www.wcirb.com/sites/default/files/documents/sept_1_2023_pp_rate_filing-complete.pdf

In a presentation the WCIRB noted the following factors:

• Modest downward indemnity loss development (permanent disability claims as share of indemnity claims at an all-time low)

• Stable medical loss development (medical utilization declined over the last decade and utilization declines have largely offset increases in cost per service)

• Claim frequency flat (claim frequency has declined 1% annually since 2007)

• Potential medical inflation

• COVID activity settling down

A link to the WCIRB’s charts can be seen here: https://www.wcirb.com/sites/default/files/documents/20230607_cdi_hearing_executive_summary.pdf

7. As always, there were studies of the California workers’ comp system

System studies are often cited by business journalists and used by policymakers. Unfortunately, the applicant attorney bar and labor advocates do not provide independent studies of the system.  Most studies are done by the California Workers’ Compensation Institute (CWCI), affiliated with California insurers, or by the quasi-public WCIRB.

Notable 2023 studies to date include the following:

• WCIRB report on 2022 Quarterly Experience: https://www.wcirb.com/sites/default/files/documents/quarterlyexperiencereport-2022q4_-_final_0.pdf

• WCIRB June 27 report on 2022 California Workers’ Compensation Losses and Expenses:https://www.wcirb.com/sites/default/files/documents/2022_ca_wc_losses_and_expenses_report_0.pdf

• A draft CHSWC 2022 Annual report that will likely be approved at a July 2023 CHSWC meeting: https://www.dir.ca.gov/chswc/Reports/2022/CHSWC_AnnualReport2022.pdf

• May 2023 CWCI report on factors that drive IMR volume and outcomes: https://cwci.org/document.php?file=5565.pdf

• A June 2023 UC Berkeley Labor Center report on how the ABC test covers most of California’s alleged independent contractors: https://laborcenter.berkeley.edu/ab2257-employment-status/

• CWCI May 2023 study of low volume/high cost dermatological, opioids and antidepressants: https://cwci.org/press_release.html?id=955

• CWCI February 2023 study of low volume/high cost anti-inflammatory and anti-convulsant medications: https://cwci.org/press_release.html?id=945

• DWC report on 2021 Independent Medical Review: https://www.dir.ca.gov/dwc/IMR/reports/IMR-Annual-Report.pdf

• January 2023 CWCI study of inpatient care utilization: https://cwci.org/press_release.html?id=938

• March 2023 CWCI study of workers’ comp medical service treatment patterns: https://cwci.org/document.php?file=5459.pdf

• UC Berkeley Labor Center study on independent contracting in California: https://laborcenter.berkeley.edu/independent-contracting-in-california/

Stay tuned. The 2nd half of 2023 promises to be interesting.