What developments in California workers’ compensation stood out in the first half of 2024?
Imagine just returned after an extended holiday from California workers’ comp and wanted to separate the wheat from the chaff. What recent developments would stand out? Here are my picks for the top developments through mid-2024, in no particular order:
1. User funding has protected the California Division of Workers’ Comp from cuts and freezes that will affect many other state programs:
The final enacted state budget includes the following:
• 71 new positions at the Division of Workers Compensation over 3 years to address increased workload and reduce hearing waiting times
• 13 positions over 3 years at the WCAB to reduce backlog
• $22.1M for EAMS
• Department of Industrial Relations Hiring—”Statutory changes to authorize the Department of Industrial Relations to utilize emergency hiring authority to expedite hiring and fill vacancies to increase the effective and timely enforcement of state
labor laws and require the Department of Industrial Relations and Department of Human Resources to prioritize the analysis of classification changes”.
2. 2024 will not be a year for any grand legislative deals that might boost permanent disability benefits, but at mid-year a few significant workers’ compensation bills were in play:
• SB 1299 (Cortese), a bill sponsored by the United Farm Workers that would create an industrial presumption for agricultural workers who develop or manifest a heat illness injury working outdoors where the agricultural employer failed to comply with existing heat standards. The bill is likely to be further amended, but Assembly analysis of the bill can be found here: https://leginfo.legislature.ca.gov/faces/billAnalysisClient.xhtml?bill_id=202320240SB1299
The bill passed the Assembly Insurance Committee in late June and was referred to Assembly Appropriations. SB 1299 is opposed by employer and insurance interests, and the California Workers’ Compensation Institute produced a white paper questioning the bill: https://www.cwci.org/document.php?file=5767.pdf
• SB 1205 (Laird). This bill originally would have required employers to provide temporary disability to workers who missed time from work to attend medical appointments. There was opposition from employer and insurer interests and a critical analysis by the Assembly Insurance Committee analyst (https://leginfo.legislature.ca.gov/faces/billAnalysisClient.xhtml?bill_id=202320240SB1205
As a result, the bill was amended in late June, removing the TD entitlement. However, in its current version the bill remains helpful to workers in that while a worker is to make a reasonable effort to schedule treatment outside of work hours, if an employer denies an employee’s request to attend scheduled treatment during regular work hours, that would be a Labor Code 132a violation.
Less contentious bills that are likely to land on the Governor’s desk include the following:
• SB 1058 (Ashby), a bill to allow park rangers to draw Labor Code 4850 salary continuation benefits.
• AB 1870 (Ortega), a bill to require that state mandated workplace posters include language advising employees they have a right to consult an attorney about their workers’ comp rights
• AB 2337 (Dixon), a bill providing that signatures can be electronic
Bills that failed to advance included SB 1346 (Durazo) (where a UR denial was overturned by IMR, would have excluded that period of time from the 104 week TD cap) , AB 3106 (Schiavo) (would have required school employers to pay COVID-19 positive employees to stay home per certain RTW guidelines), and SB 1071 (Dodd) (eliminating contractor proof of coverage requirement for licensure).
3. The legal wars over employee misclassification continue, as AB 5 and Prop 22 remained the subject of appellate litigation in the first half of 2024, with probable implications for California workers’ compensation
The ABC employment test used by the California Supreme Court 2018 decision in Dynamex Operations West v. Superior Court was adopted by the legislature in 2019 as AB5, but legal challenges followed. In June 2024 the U.S. Court Of Appeals for the Ninth Circuit ruled in Lydia Olson V. State of California that AB5 was not unconstitutional as a violation of the Equal Protection Clause: https://cdn.ca9.uscourts.gov/datastore/opinions/2024/06/10/21-55757.pdf
Oral argument at the California Supreme Court was held in May in Castellanos v. State of California and a decision is likely coming soon. The principal issue before the Supreme Court is whether Prop 22 (the “Protect App-Based Drivers and Services Act”, i.e. Business & Professions Code 7451 et seq.) unconstitutionally infringes upon the plenary power of the legislature established by California’s Constitution Article XIV. The consensus among those who observed the oral argument was that the California Supreme Court is unlikely to declare Prop 22 unconstitutional and that they may uphold the ruling of the First District Court of Appeal in Hector Castellanos v. California.
It is likely that Castellanos will hand a victory to the platform gig companies, but other companies are losing in litigation to avoid application of AB5 and the ABC test to their businesses. For example, in March 2024 in a ruling by Judge Roger Benitez of the U.S. District Court Southern District, the California Trucking Association and an owner-operators association failed in their effort to be exempted from AB5: https://caselaw.findlaw.com/court/us-dis-crt-s-d-cal/115973792.html
4. Only one set of new regulations have been adopted by the DWC so far in 2024, but more regulatory changes are in development
After multiple comment periods, new QME process regulations were adopted effective February 26, 2024. Those regs deal with QME appointment rules, reappointment denial criteria, continuing education and report writing requirements etc. Perhaps the most important feature is Section 33 (a) which was amended to change from 60 to 90 days the time allowed for scheduling the initial appointment after a request is made for the appointment. Those regs can be found here: https://www.dir.ca.gov/dwc/DWCPropRegs/2023/QME/Index.htm
At mid-year, two other regulatory changes were being considered in formal rule making.
A 15 day comment period ended June 24,2024 on a Physician Fee Schedule and Pharmaceutical Fee Schedule: https://www.dir.ca.gov/dwc/DWCPropRegs/2024/Pharmaceutical-Fee-Schedule/Index.htm
There has been considerable controversy over these rules, as the April proposed version would have eliminated dispensing fees to doctors who provide medications to patients. Doctor groups opposed this, citing it as a barrier to treatment access for some patients. On the other hand, some payors believe that in-office physician dispensing is a source of abuse and a cost driver. The April version also proposed an increase in pharmacy dispensing fees, but with a two-tier fee structure depending on the pharmacy volume. A public hearing on the issue was held on April 11.
But lo and behold the DWC reversed course, and under the June 2024 proposed rules physician dispensing fees would not be eliminated after all, and the two-tier pharmacy dispensing fee would be dropped as well.
Also pending at mid year are proposed changes to MPN and utilization review regulations, with a scheduled public hearing set for July 25, 2024: https://www.dir.ca.gov/dwc/DWCPropRegs/2024/Utilization-Review/Index.htm
Among the proposed changes are a revised form (called Form PR-1) that would include both PR-2 progress report documentation with an authorization request documentation. A new Section 9767.6 would mandate that the employer’s administrator serve the treating doctor with all relevant medical records within 20 days and provide the doctor with contact information for the MPN and the entity which processes authorizations and bills. The portal would also clarify procedures for treatments within the first 30 days that are exempt from prospective review.
And the DWC has been holding meetings with stakeholders about other possible changes to MPN regulations, though those have not entered the rule making phase yet.
5. There were little groundbreaking workers’ comp case law developments in the first half of 2024:
But among the few noteworthy Court of Appeal and WCAB en banc decisions rendered in the first half of 2024 are the following:
• 3 Stonedeggs Inc. V. WCAB (3rd DCA found that worker involved in accident driving from remote forest firefighting camp without employer permission was not barred as a deviation from employment and was covered under the commercial traveler rule; at mid-year defendant was seeking California Supreme Court review)
• Vigil v. County of Kern (June 2024 WCAB en banc) (clarifies what is required for rebuttals under Athens Administrators v. WCAB (Kite) to the Combined Values Chart)
• Hidalgo v. Roman Catholic Bishop, Gonzalez v. The Bicycle Casino, and Ledezma v. Kareem (WCAB en banc) (3 cases awarding costs and sanctions against an applicant attorney for pleadings they filed with willful intent to disrupt or delay)
• Chavez V. Alco Harvesting (2nd DCA June 2024) (in widow’s civil action against employer for husband’s COVID death, court allows suit to proceed under fraudulent concealment exception to workers’ comp exclusive remedy doctrine)
6. At mid-year California workers’ comp costs appeared stable while the Department of Insurance considered a WCIRB request for a small advisory rate increase
In April 2024 the WCIRB requested a 0.9% increase in the non-binding benchmark advisory pure premium, which if adopted would take the advisory rate from $1.41 per $100 of payroll to $1.42. Public members of the WCIRB voted to recommend a 3.3% decrease, but were outvoted. Subsequently, a hearing on the rate request was held by the CDI on June 6,2024. At mid-year the CDI had not made its rate finding. Here is the WCIRB request: https://www.wcirb.com/sites/default/files/2024-05/sept_1_2024_pp_rate_filing-complete.pdf
Advisory pure premium rates have been declining for 9 years, so if CDI were to approve the WCIRB request, it would be a minor reversal in trend. Average charged workers’ comp rates have declined to $1.65 per $100 of payroll in 2023 from $6.32 per $100 of payroll in 2003 and $3.13 per $100 of payroll in 2015.
7. Concern about the impact of fires and indoor and outdoor heat on workers continued to mount
In June 2024 Calmatters.org published a series of articles documenting the substantial hurdles and red tape California firefighters face in getting treatment for post-traumatic stress: https://calmatters.org/series/california-firefighters-trauma-wildfires/
The article presents very specific examples of CalFire workers in distress. Delays and the lack of psychologists and psychiatrists willing to take industrial cases due to payment issues and authorization problems render many CalFire workers unable to access treatment. The article claims that despite the 2020 enactment of a PTSD presumption, these problems persist.
In June 2024 a blog post from CAAA “CalFire Battles More Than Flames” noted that mental health issues are contributing to a staffing crisis and high turnover at CalFire: https://www.caaa.org/?pg=latestnews&blAction=showEntry&blogEntry=109049
There has been great controversy about indoor heat standards in 2024. Although the Occupational Safety and Health Standards Board voted to adopt long-developed indoor heat standards, Governor Newsom’s administration balked before they were to be approved by the Office of Administrative Law. This was detailed in an earlier blog post: https://www.boxerlaw.com/workerscompzone/indoor-heat-regulations-in-turmoil/
Apparently irritated that the Standards Board had voted to proceed, Newsom removed Laura Stock of UC Berkeley, one of the Standards Board members ,and demoted another. The indoor heat standards were thereafter approved, with prisons excepted.
Meanwhile, a proposed federal workplace heat standard rule was unveiled at mid-year by the U.S. Department of Labor and is in the comment process before adoption: https://www.dol.gov/newsroom/releases/osha/osha20240702
8. As usual, there were plenty of studies of aspects of the California workers’ comp system during the first half of 2024
One study that is apparently underway is a Department of Industrial Relations commissioned study of the Subsequent Injuries Trust Fund (the SIBTF), but little has been revealed about the scope and methodology of the study or who is being consulted by the RAND researcher tasked with this, Liisa Hiatt: https://www.rand.org/about/people/h/hiatt_liisa.html
In recent years there have been rumors that the SIBTF might be a bargaining chip in future comp reform discussions, so when published this study may be of great interest. This is not a CHSWC requested study. However, it should be noted that CHSWC commissioners have raised questions about the quality of recent RAND studies, so the SIBTF study will likely be carefully scrutinized.
Another important upcoming study will be the WCIRB’s 2024 State of the System report.
Studies that were published in the 1st half of 2024 include the following:
• An in-depth June 27, 2024 WCIRB report on California workers’ compensation losses and expenses: https://www.wcirb.com/sites/default/files/2024-06/2023_ca_wc_losses_and_expenses_report_1.pdf
Interestingly, in 2023 defense attorney costs ($938 million) continue to far outpace applicant attorney fees paid ($402 million). Defense attorney costs jumped from $850 million in 2022 to $938 million in 2023.
• From CHSWC (Commission on Health and Safety and Workers’ Compensation), its annual report: https://www.dir.ca.gov/chswc/Reports/2023/CHSWC_AnnualReport2023.pdf
• A WCIRB research study analyzing whether employee tenure, (i.e. how long workers have been working at an employer) affects claim frequency. The study shows that “About 40% of workers’ compensation claims come from workers with <1 year of tenure.
Service-providing industries have a higher share of claims from these short-tenured workers than other industries. From 2020 to 2022, all industry groups experienced a rise in the share of claims from workers with <1 year of tenure, largely driven by a strong labor market with increased job openings. This might have resulted in a higher number of new hires with less experience or
training, who were more susceptible to work-related injuries” : https://www.wcirb.com/sites/default/files/documents/report-employeetenurestudy-032724.pdf
• From the California Workers’ Compensation Institute (CWCI), an analysis of workers’ comp inpatient hospital care showing a drop in inpatient hospitalization of over 50% during the last 10 years : https://www.cwci.org/document.php?file=5667.pdf
• From the California Division of Workers’ Compensation, a June 2024 study on the volume of IMR requests in 2023: https://www.dir.ca.gov/dwc/IMR/reports/IMR-Annual-Report.pdf
• A mid-year WCIRB report on how trends in the California economy in various industries (healthcare, hospitality, manufacturing, construction, retail etc) are affecting the frequency and severity of workers’ compensation in those industries: https://www.wcirb.com/sites/default/files/2024-06/economic_report_2024_a.pdf
• From CWCI, a study of cumulative claims and litigated claims:https://www.cwci.org/press_release.html?id=999
• Also from CWCI, an study of Medical-Legal costs under the revised fee schedule that went into effect in 2021: https://www.cwci.org/press_release.html?id=1015
• A slide deck from National Council on Compensation Insurance (NCCI) chief actuary Donna Glenn that compares the profitability of workers’ comp insurance with other insurance lines: https://www.ncci.com/Articles/Documents/AIS2024-SOTL-Presentation.pdf
• A Workers’ Compensation Research Institute report on the impact of excessive heat on frequency of workers’ comp injuries: https://www.wcrinet.org/reports/impact-of-excessive-heat-on-the-frequency-of-work-related-injuries
• A national study on workers’ comp from the National Academy of Social Sciences: https://www.nasi.org/wp-content/uploads/2024/02/2024-WC-Report-2021-Data-Final.pdf
9. Problems with California’s labor law enforcement continue to pose risks for California workers
Severe staffing problems at Cal/OSHA and the State Labor Commissioner. Problems at EDD’s SDI and UI programs. As noted in my recent blog entry “California Trouble”, these are collateral issues that can impact California workers’ comp: https://www.boxerlaw.com/workerscompzone/california-trouble/
In early 2024 the Assembly Labor and Employment Committee held a hearing on labor enforcement issues and staffing problems at the California Labor Commissioner and Cal/OSHA.
Even with money for additional positions and some relaxed hiring rules, achieving and maintaining adequate staffing is a tall order.
10. With the exception of concern over worker heat exposure, California workers’ comp remained a back-burner issue, attracting little attention from the press, politicians or the Governor
Stay tuned. Workerscompzone will cover any important developments in the latter half of 2024.
Julius Young
https://www.boxerlaw.com/attorney/julius-o-young/
510.835.8870