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AFL-CIO Disputes Labor Ready Claims
07/03/01
On June 29, the Building and Construction Trades Department, AFL-CIO formally requested the SEC to require Labor Ready, Inc. (NYSE: LRW), America's largest manual labor temporary employment agency, to correct false and misleading statements in its June 29 news release on the following controversies:
Workers
Compensation Investigations:
Labor Ready claims only two states
are investigating the company. In fact, it's more than a dozen. Labor Ready
understates assessed penalties by omitting its forfeiture of several hundred
thousand dollars in Ohio state rebates. Labor Ready claimed Washington's audit
is complete. In fact, Washington expanded its probe after auditors found
widespread misclassification and levied $734,000 in assessments.
Workers comp
reserves:
Labor Ready sidestepped concerns
about the adequacy of reserves to pay injury claims by admitting its Cayman
Islands subsidiary (established to hold reserves and pay claims) contains no
money and has been inactive since 1998. Labor Ready does not answer: where is
the money it told the SEC it has set aside to pay claims, and are those reserves
sufficient?
Safety:
Workers suffered 25.7 injuries per
100 workers. While telling investors its managers inspect job sites, Labor Ready
told Cal-OSHA in California (its largest market) it delegated safety
responsibilities to customers, and to do otherwise was impractical. Cal-OSHA
said "impracticality" is no excuse. Cal- OSHA ordered Labor Ready and
all other temp firms to inspect workplaces before dispatching workers.
Financing:
Building Trades asked Labor Ready
management to explain why they dramatically increased their credit line -- and
then used most of it up. Management never answered the most important part of
the question: "where did the money go?"
Labor Law
Violations:
Labor Ready falsely suggests it had
a few minor problems with the National Labor Relations Board that were resolved
long ago. In fact, the NLRB went to federal Circuit Court to get an enforcement
order because Labor Ready was not complying. In another case, Labor Ready signed
a settlement with the NLRB over similar offenses in California.
Cash Machines
Controversy:
Labor Ready minimizes multi-state
worker lawsuits over fees charged to workers to get paid in cash even though it
failed to get these cases dismissed. Furthermore, Massachusetts' Attorney
General has issued a directive against the practice.
Source: PR Newswire
Oregon Fund to be More Closely Scrutinized
06/28/01
Oregon Senate passed HB 3980 on June 26 making the bill law once signed by the govenor. The bill will increase oversight of the State Accident Insurance Fund (SAIF). The bill is intended to give the public and state officials an unbiased view of the financial condition and business practices of the State Fund and to enable concerned parties to determine whether the State Fund’s business practices are anti-competitive.
HB 3980 mandates an annual audit of State Fund by the Oregon Secretary of State. Athe law also requires the firm conducting the audit to be "qualified to perform an independent actuarial review," and "employ a staff that includes no fewer than three people who have attained fellowship in the Casualty Actuary Society."
The auditing firm will be charged with conducting an annual review of the sources and uses of SAIF's funds, a reconciliation of changes in actuarial assumptions and reserve values from the prior year, the development of reserve inadequacies or redundancies over time and the future financial viability of the fund.
The oversight bill was prompted by the findings of a recently released study, "An Economic and Actuarial Analysis of Financial Incentives in Oregon's Workers Compensation Insurance Market," conducted by Technical Associates and William M. Mercer for the Secretary of State, which concluded that the State Fund has consistently been over-reserved. There are allegations that such a practice results in an anti-competitive and unfair business climate because State Fund can pay dividends far in excess of that which most private carriers and most other state funds are able to pay which would case private carriers to either withdraw from the state or significantly curtail their writings.
Source: The Alliance of American Insurers
Hawaii Kills Confusing Privacy Act
06/27/01
According to the Alliance of American Insurers, Hawaii has taken the final step in repealing a privacy law that it says was poorly worded and caused mass confusion in the state's workers' compensation market.
Hawaii Gov. Benjamin Cayetano has signed a bill, HB 201, that repeals Act 87, the health information privacy bill enacted in 1999.
"This well-intentioned act aimed to protect individuals from the unauthorized and inappropriate use of protected health information," said Judy Grimes, workers' comp policy manager for the Alliance of American Insurers, in a statement. "However, it resulted in unintended consequences last summer due to its vague wording."
Since Act 87 didn't expressly exclude the property/casualty and workers' comp industries from its application, it was assumed to apply to all lines of insurance, the Alliance said. As a result, the law "brought the Hawaii workers' compensation system and many other industries to a screeching halt last July," said the Alliance, a national trade association representing 326 property/casualty insurance companies.
It is expected that the federal government will implement new medical privacy rules on the heals of the federal Gramm-Leach-Bliley Act, and the Department of Health Services has regulations pending, which should resolve much of the debate and standardize such privacy requirements.
States that don't have their own privacy laws in place by July 1 will be governed under the Gramm-Leach-Bliley rules, which require companies to allow customers to "opt out" if they don't want companies to share their personal information with third parties for marketing purposes. While the Gramm-Leach-Bliley Act applies to financial-services companies, the National Association of Insurance Commissioners has proposed a model act that also includes rules to govern the sharing of medical information.
Source: Alliance of American Insurers
Reliance Won't Hurt CIGA; AB 1183 Expected to Pass
06/27/01
A.M. Best reports that California's Insurance Guarantee Association’s (CIGA) executive director, Larry Mulryan, says that the financially pressured organization shouldn't be burdened by Reliance Group Inc. bankruptcy and related financial distress. CIGA is anticipated to run out of money to pay claims towards the end of the year and legislation is pending to increase the surcharge against existing carriers to pay for this shortfall.
Reliance had filed a $250 million premium to sell workers' comp insurance, in accordance with state requirements to do business in the state. Mulryan said that money should go a long way to cover the company's future claims. The premium is based on a company's written premiums and is to be a safety net to cover policyholders' future claims if the company fails, and all work comp carriers must file this special deposit.
Pennsylvania regulators took control of Reliance Insurance Group on May 29. According to A.M. Best about 15.3% of Reliance's business was in California as of 1999.
CIGA has been paying out $40 million a month in workers' comp claims, says Best, mostly to cover the claims of insolvent Superior National Insurance Co.
AB 1183, which will raise the surcharge on workers' comp direct premiums written to 2% from 1% was passed by the Assembly May 24 by a 65-5 vote and the bill has also passed the state Senate insurance committee, with an amendment to make it become law as soon as it is signed by the governor. It is anticipated that this would raise approximately $124 million.
While additional claims may arise from California’s recent seizure of HIH America Compensation & Liability Insurance Co. and Great States Insurance Co. (both members of HIH America Group), it is not anticipated that unpaid claims will reach a level as high as Superior National, which was among the largest workers' comp carriers in the state at one time.
According to A.M. Best Co. state/line statement products, State Compensation Insurance Fund of California is the largest workers' comp writer, with 21.5% of the direct premiums in 1999, Fremont General Group was the second largest, with 8.9% of the market, followed by Liberty Mutual Insurance Cos. with 7.9%; California Compensation Insurance Co. with 4.6%, and Allianz of America Inc. with 4%.
Source: A.M. Best
'01 CAAA Summer: MOST IMPORTANT CASES OF 2001
06/25/01
Panelists Mark Kahn, Joe Capurro, William Herreras, Ron Feenberg and Melissa Brown presented “The Most Important Cases of 2001” at this summer’s CAAA convention, 6/21 – 6/24. The following is a summary of the main cases that were discussed.
Jefferson v. CA Dept. of Youth Authority ruled that an attachment to a workers’ compensation Compromise and Release that contains a general release under Civil Code Section 1542 bars a claim for damages under the California Fair Employment and Housing Act (FEHA). The panel criticized this case for its harsh result at the same time that it advised pre-planning for such problems in the drafting of C&R forms.
In Currie v. WCAB, the court ruled that an injured worker who recovers lost wages under Labor Code Section 132(a) is entitled to prejudgment interest under Civil Code Section 3287 from the date the employer withheld the wages rather than interest from the date of the judgment as provided in Labor Code Section 5800.
In Melton v. Industrial Indemnity, the court found: 1) the employer’s workers’ compensation insurance carrier was liable for defending and indemnifying against a 132(a) action brought by an injured worker against his employer; and 2) the carrier breached an implied covenant of good faith and fair dealing because the insurer mishandled a “courtesy defense” and refused to indemnify the employer. The court ruled that the carrier had a duty to defend a 132(a) action and indemnify the employer where the policy of insurance limited coverage to an “accident,” and that the carrier was estopped from denying coverage where the employer provided a “courtesy defense.” The panel warned that attorneys should not think they represent only the insurance company and that the attorney does, in fact, owe a duty to the employer. (This case has been decertified from publication).
Niedle v. WCAB held that, under Section 4644, cost effective restrictions on out-of-state vocational rehabilitation plans do not violate an individual’s fundamental constitutional right to travel.
In Ordorica v. WCAB, the court ruled that the applicant could not utilize the presumption of correctness under LC 4062.9 by extorting medical control from the employer who, under 4600, has the right to control medical for 30 days. Thus, the employee cannot seek treatment during those thirty days from another doctor without infringing this right of the employer. In this case, the employee’s refusal to attend an appointment with the employer’s prescribed doctor during the 30 day period was in bad faith and unlawful.
In SCIF v. Superior Court of Orange County, the court ruled that an insurer is not immune from liability under Insurance Code S. 11758 for the alleged misallocation of an employer’s expenses and reporting that misinformation to a rate making organization, a Ratings Bureau, resulting in higher premiums for the insured.
Garcia v. The Vons Company held that Labor Code S. 5813 authorizes sanctions for “bad faith actions or tactics that are frivolous or solely intended to cause unnecessary delay” in Petition for Reconsideration hearings and that filing such a petition 6 months late, as in this case, without any good faith for doing so, is sanctionable. Also, the panel noted that asking for sanctions when doing so is frivolous and without merit is also sanctionable.
Discussing apportionment, the court in Fresno Unified School District v. WCAB held that Labor Code 4705.5 requires that the full extent of the disability solely related to the subsequent event not be considered in the determination of the level of disability and that the subsequent event be more than a condition. It must be an actual injury or disabling event which, if industrial, would be compensable.
City of Martinez v. WCAB held that a police officer cannot be forced into retirement while they are still undergoing rehab. and they are still eligible for 4850 pay despite being declared permanent and stationary.
In Lucena v. Diablo Auto Body and Liberty Mutual Insurance Co., the court ruled that a failure to remedy the lack of a Verification for Petition for Reconsideration after the petitioning party has notice of its lack of Verification validates dismissal of such Petition despite the fact that the lack of Verification is not jurisdictional.
Finally, the panel discussed the Rolda v. Pitney Bowes case, an En Banc decision which establishes the proper analysis to make where defense is good faith personnel action.
Was 3208.3 Wrong?
06/21/01
The Wall Street Journal recently ran a series of articles reporting that depression in the workplace costs U.S. businesses about $70 billion a year in medical expenditures and lost productivity.[n1] It is estimated that more than 51 million Americans have a mental disorder in a single year, and around 9.1 million live with major forms of depression.[n2] American antidepressant sales alone have risen more than 800% since 1990. Popular drugs like Prozac, and protective laws like the ADA, allow more mentally ill people to keep working. At the same time, employers are increasingly worried about rising psychiatric claims and the toll depression takes on their business as a whole.[n3] In this short article, we will look at how California has dealt with this increasing problem.
In California, a worker’s ability to pursue reimbursement for psychiatric medication and counseling was severely limited in 1993. Labor Code Sec. 3208.3 essentially made it much more difficult for employees to get reimbursed by their employers for depression-related costs. An injured worker needs to prove in a cumulative psychiatric stress claim that the work was more than 50% the cause of the psychiatric injury. Additionally, there is a six-month minimum in which an employee needs to have worked in order to file a stress claim under 3208.3.[n4] The CA legislature back in 1993 was reacting to widespread criticism of the CA system as being too permissive to the point that healthy people with normal everyday stresses were filing stress claims at an enormous cost to employers.
Now, statistics show that employers are paying an even higher price in the form of loss of productivity, absenteeism, and various other implications of depression in the workplace. Evidence suggests that employers are now in an even worse position financially than they were before Labor Code Sec. 3208.3 became law in 1993.
Although no official studies have calculated whether Sec. 3208.3 has adversely impacted employers, various statistics reflect that employers may have “shot themselves in the foot” by getting this bill passed. Early intervention and treatment of depressed workers clearly reduces the chances of hospitalization and long-term work disability. A Yale Univ. study found that depressed workers who report poor quality of health care are most likely to have persistent depressive symptoms and decreased work productivity.[n5]
Another comprehensive study in Health Affairs compared the cost of short-term, depression-related work disability with the cost of successful depression treatment. It found that depressed workers have between 1.5 and 3.2 more short-term work disability days in a given month than other workers. The average salary-equivalent disability costs of these days range between $182 and $395 per depressed worker.[n6] These workplace costs are as large as the direct costs of successful depression treatment, which suggests that encouraging depressed workers to get treatment might be cost-effective for some employers.
Loss of productivity and absenteeism are not the only depression-related costs for employers. Other depression-related costs include: hiring and training replacement workers, paying long-term work disability benefits, increased number of employee accidents, lost profits as a result of poor worker performance, and reduced productivity of coworkers who are adversely affected by interacting with depressed coworkers.[n7]
The ADA poses another significant threat to employers because they are forced to hire and retain mentally ill or depressed workers who may be unsuited for their jobs. Employers face the threat of a lawsuit by the ADA if they fire an employee due to emotional or psychiatric illness. The ADA has triggered a stream of lawsuits over mental disabilities in the workplace, and between 1992 – 97 federal officials received more than 10,000 complaints about discrimination in the workplace – more than any other kind of disability except for back problems.[n8]
As employers face escalating health insurance costs and increasing costs of doing business in other forms, a review of potentially repealing or modifying 3208.3’s restrictions may be in order. While not perfect, workers’ compensation is still one of the best tools employers have for controlling employee medical costs and disability. Perhaps it is time for a detailed study to be performed to determine the social, business, legal, and medical costs of limiting access to the work comp system for mental injuries and illnesses.
Source: workcompcentral.com exclusive – by WCC Staff Member Tyler Wilkinson
NEWS: Workers' Comp Headlines
Vol. 11 Number 10, Wednesday, May 31, 2001
IMC Launches Groundbreaking Study, Pledges Objectivity
Amid pledges of objectivity, the IMC recently awarded a consultant's
contract that will determine if injured workers generate a disproportionate
amount of work for doctors.
E&M Codes Eyed for Consultant's Study
The current edition of the California Workers' Comp Advisor lists the most
frequently billed Evaluation and Management Codes. They are the likely
focus of the study on the relative work involved in treating injured workers.
Take a One-Hour Survey, Get a QME Fee Rebate
Qualified Medical Evaluators will get a $110 rebate on this year's renewal
fee. But there's one catch: To get the money, QMEs must complete a
questionnaire that takes more than and an hour to complete.
Former QME Sentenced in 5-year-old IMC Case
A former San Francisco Bay Area physician recently received a $1,000 fine
and probation. He also pledged to not protest the revocation of his medical
license in a criminal case based on a 5-year-old Industrial Medical Council
investigation.
Set Pocketbooks Aside During RVRVS Study, Sommer Says
Richard Sommer, the IMC member spearheading a study of switching to a
Resource-Based Relative Value Scale fee schedule, kicked off the study by
proclaiming: "We are not talking about compensation, OK
BULLETIN: FLASH REPORT
WORKERS' COMP ADVISOR
Monday, May 14, 2001
No More Exclusivity, Oregon Workers Win Right to Sue
Oregon workers can sue employers in civil court after having their injury
claims rejected by the workers' compensation system, according to a recent
state Supreme Court Decision.
But the court's ruling in Smothers vs. Gresham Transfer doesn't mean all
Oregon injured workers can sue their employers. It only applies when a
claim is denied because the workers' comp system determines that a
preexisting medical condition is the major cause of an injury.
Oregon has a so-called 51 percent rule, which says the job must be a "major
contributing cause" of an injury before workers' comp benefits can be
awarded. California has such a rule only for mental stress claims.
Get the full story on this decision in the May 16 edition of the California
Workers' Comp Advisor.
BULLETIN: FLASH REPORT
WORKERS' COMP ADVISOR
Tuesday, May 8, 2001
FLASH REPORT:
Key Committee Expected to Approve Skeleton Benefit Increase Bill
The Senate Labor and Industrial Relation Committee is expected on Wednesday
to approve a skeleton version of SB 71, the workers' compensation benefit
increase bill.
As currently written, the bill expresses the intent to increase benefits,
but is a mere template document, with blank lines inserted where the
increase numbers should be. The blanks will be filled in later, when the
bill reaches the Assembly or a conference committee.
Sources told the California Workers' Comp Advisor that the bill, sponsored
by Senate President Pro Tem John Burton, D-San Francisco, will be voted out
of the Labor and Industrial Relations Committee on Wednesday without
amendments. Since no dollar amounts are yet included, it will bypass the
Appropriations Committee and go to the full Senate for a vote.
Injured Workers for Change - http://www.injuredworkers4change.org
Michigan Employers Seek Reform 05/01/01
Michigan employers are looking to "reform" that state's workers'
compensation system in light of industry changes being felt throughout the
nation. The Michigan Chamber of Commerce Board of Directors announced
unanimous support for legislation to amend Michigan's Workers' Disability
Compensation Act.
"Recent court decisions have created unworkable standards for favored work
positions, and the lack of a clear standard for mental disability, or
stress, claims make it difficult for employers, employees, and the
judicial system to make consistent and fair benefit determinations," said
Rex E. Schlaybaugh, Jr., Chairman of the Michigan Chamber Board in the
Chamber's press release.
The Michigan Chamber Board unanimously voted April 24 to support
legislation which would amend Michigan's workers' compensation laws to:
* Provide that mental disability claims arising from lawful,
nondiscriminatory, good faith personnel actions will not be compensable;
* Establish a specific period of time during which an offer of favored
work must remain available when the employee has unreasonably refused the
offer; and
* Specify that an employee may be terminated for non-compliance with the
employer's rules, regulations and procedures during the first 100 weeks of
reasonable employment, without triggering a presumption that workers'
compensation benefits should resume.
State Representative Wayne Kuipers (R-Holland) recently introduced House
Bill 4512 to amend the Workers' Disability Compensation Act. The bill has
been referred to the House Committee on Employment Relations, Training &
Safety. Michigan Chamber President & CEO Jim Barrett said the Chamber will
work with Rep. Kuipers to incorporate the Board's recommendations and pass
the legislation.
Source: Michigan Chamber of Commerce press release; PR Newswire
Workers' Comp Headlines
Vol. 11 Number 8, Wednesday, April 25, 2001
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NEWS:
Doctors and Judges View Key Treatment Terms Differently
A court decision is creating confusion regarding the terms doctors commonly
use when discharging injured workers, and a regulation change is needed to
fix matters, the Industrial Medical Council says. At issue is an appeal
court's ruling in the Tenant case. See the latest California Workers' Comp
Advisor for all the details.
IMC Ponders How to Document QME Job Changes
The Industrial Medical Council is trying to figure out how to get Qualified
Medical Evaluators to devote up to two hours to complete a questionnaire
that will be used to validate wither the exam for new QMEs measures what
today's evaluator's actually do.
QME Hit With Suspension
A Duarte physician will be suspended as a QME for three months and face 10
years probation in a settlement that center's on the doctor's not reporting
to the Industrial Medical Council sanctions he received from the State
Medical board for an instance involving alleged incompetence.
IMC Seeking E&M Study Related to Fee Schedule
The Industrial Medical Council is in the process of hiring a consultant to
study whether it takes longer and is more expensive to provide Evaluation
and Management (E&M) services to injured workers.
Legislation Seeks More Ammo to Fight Underground Economy
A bill has been floated that would beef up the state's hunt for employers
that are avoiding paying employment-related bills, including holding
workers' compensation coverage.
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