Premium Fraud and AA Buffet

Fraud in the workers’ compensation system comes in many forms. It can come from employees, medical providers, and even employers. All types of fraud have a detrimental impact not only on those directly impacted by the case but also on the entire system at large. Fraud costs tax payers millions of dollars and can drive insurance premiums for workers’ compensation even higher. As a result, California takes steps to crack down on fraud, including from employers. Workers’ compensation fraud involving employers can mean that the employer is lying about the nature or number of its workers or about the nature of the work performed. In a March 2017 case, an employer pled guilty to charges arising out of workers’ compensation fraud.

The defendant, Chang Tai Lin, was the owner of AA Buffet. In May 2015, the fraud unit began an investigation into the defendant’s business after receiving a tip from the district attorney. The fraud unit began conducting surveillance, obtaining documents from the police department, health department, insurance companies, and other state agencies. In March 2016, a search warrant was executed not only on the AA Buffet but also at the defendant’s home. As a result of the investigation, it was discovered that from April 2010 through April 2016, the defendant had been underreporting the number of employees working at AA Buffet as well as falsely reporting payroll wages, as he actually paid many of his employees in cash. It was also discovered that the defendant had been committing tax evasion from October 2010 through April 2016 because he failed to accurately report employee wages or payroll taxes to the Employment Development Department. After the investigation, the defendant pled guilty to two counts of making a material misrepresentation in order to obtain a workers’ compensation insurance premium as well as one count of willfully failing to file payroll tax returns with intent to evade tax. Employers are required to accurately report the number of employees to their workers’ compensation insurance company. Failure to accurately disclose the workers or the type of work performed by the company can clearly result in harsh penalties, including both fines and jail time, for offending business owners. It is essential that employers understand and live up to their disclosure obligations to their insurance carriers.

Understanding your insurance obligations is essential to making sure you and your business are not running afoul of the law. Call me today at (714) 516-8188 if you wish to  discuss your business’s obligations.

Liens and Angelotti Chiropractic

When a worker sustains a work-related injury, he or she is entitled to seek medical treatment for the initial injury as well as an on-going basis. Workers’ compensation is meant to cover the costs of the treatment, including equipment, therapy, surgery, prescription medication, and a number of other costs. A provider who has supplied services, products, or medicines to an injured worker in a workers’ compensation case can file a lien against the workers’ compensation benefits of the worker. This allows the provider to make sure he or she gets paid. In 2012, a bill came into effect that required lien holders to pay an “activation fee.”  The purpose of this fee was an attempt to clear the large backlog of small liens that were bogging down the system, as well as discouraging providers from filing small claims by making the fee large enough as to render the lien worthless. A case called Angelotti Chiropractic v. Baker challenged the constitutionality of the activation fee. The case claimed that the activation fee was a violation of the Equal Protection clause of the United States Constitution because large institutional lien holders such as union trusts and health care plans were exempt from having to pay the activation fee. The plaintiffs alleged that this was unfair, and either all or no lien holders should have to pay the fee. The court ultimately agreed.

In November 2013, the court approved the request for a preliminary injunction, which prevented the DWC from collecting the activation fee for the liens from before 2013 as well as preventing enforcement of a provision of the new law that would have allowed for dismissal of liens by December 31, 2013 if the activation fee had not been paid.

The Ninth Circuit United States Court later determined that the activation fees were, in fact constitutional. The court dismissed the injunction put in place by the trial court. The court determined that any affected lien claimant who filed a declaration of readiness or attended a lien conference between November 9, 2015 and December 31, 2015 must pay the activation fee. It also determined that pursuant to labor code 4903.06(a)(5). After December 31, 2015, activation fees were no longer accepted by the DWC. Providers should note that the fee for filing liens was completely unaffected by this case.

If you have questions about how workers’ compensation claims are paid, you need an experienced attorney to discuss it with you. Contact us today at (714) 516-8188 for a consultation to discuss your business and how workers’ compensation will impact your business.

The Gregory Formula

Workers’ compensation benefits are designed to help an employee who has sustained a work-related injury by paying for related medical expenses.  The injured employee may receive a large variety of treatments including, but not limited to, physical therapy, prescription medication, chiropractic care, psychological services, or the use of durable medical equipment.  An employer may very well be on the hook for the costs of these services.  When providing medical care to an injured employee, medical providers and group health insurance providers may file liens against the workers’ compensation recovery in order to ensure reimbursement for care provided to the employee.  Ultimately an employer and an employee may agree to settle the workers’ compensation claim by a compromise and release agreement.  In a case styled Kaiser Foundation Hosp. v. Workers’ Comp. App. Bd., the WCAB addressed the issue of what happens when the medical providers who have filed liens do not agree with the amount settled on in the compromise and release agreement.

In that case, four separate cases were consolidated for consideration by the WCAB.  The issue revolved around how much a lien claimant should recover in a denied case.  It was proposed that the Lien Claimant should be eligible for the same ratio of recovery that the injured worker accepted as settlement of the case.  Where the lien claimant does not agree with the amount of the settlement compromise, the workers’ compensation referee shall “determine the potential recovery and reduce the amount of the lien in the ratio of the applicant’s recovery to the potential recovery in full satisfaction of its lien claim.”  The court stated that the phrase “potential recovery” means “the amount of recovery which is reasonably probable” in a contested trial, examining the entire record.  The proposed settlement should include the formula for determining the reduction of the lien, called “the Gregory Formula,” and the computation of the potential recovery needs to include a variety of figures, including the percentage of disability, medical expenses, and the duration of future medical expenses.  In the simplest terms the proposed recovery is a fraction, where the actual settlement amount is the top number (numerator), and the total reasonable case value if Worker won at Trial is the bottom number (denominator).  Basically, if the Injured Worker accepted 25% of the potential case value as settlement, that number could be attributed to the lien claimants.  These need to be set forth in specific detail for the judge.  These figures have to be disclosed to the lien holder to allow it to examine the basis on which the settlement would reduce the award against it.  If the Lien Claimant objects to the formula after notice, the WCAB may withhold that lien from resolution, and give the Lien Claimant an opportunity to independently prove up an injury.  The lien claimant then runs the risk of zero recovery if they fail to independently prove an injury.

If you have a question about how the Gregory Formula could help reduce the financial liability of your business during a workers’ compensation case, contact me today at (714) 516-8188.  We can discuss your business and your options.

The Privette Doctrine and Alvarez v. Seaside Transportation Services LLC

Workers’ compensation rules apply to almost every single employer across the state of California.  There are some industries that are more inherently dangerous than others, and so tend to have more workers’ compensation issues.  The construction industry tends to be one of these, as the very nature of the business requires working with heavy machinery, open trenches, electrical wires, and an enormous variety of dangerous conditions not present in, for example, an office setting.  In Privette v. Superior Court, the court developed a particular doctrine discussing the liability of owners and sub-contractors in the construction field.  The Privette Doctrine holds that in general, contractors and project owners are not liable for tort damages in work-related injuries sustained by the independent contractors hired by the lower-tiered contractors.  The reasoning for this is that those employees should already be covered by the insurance of their direct employers.  A recent case discusses the Privette Doctrine and its application.

In Alvarez v. Seaside Transportation, the plaintiff was injured on the job.  He drove his work van into a shipping container while on the job site.  When he was injured, he was employed by Pacific Crane Maintenance Company, who was in turn hired by Evergreen Container Terminal for the purpose of performing maintenance on its marine container terminal.  The plaintiff sued Evergreen and two if its contractors, alleging they were negligent in the placement of their containers.  The defendants asked the court for summary judgment in their favor, citing the Privette Doctrine.  The trial court granted the motion, and the plaintiff appealed.  On appeal, he argued that he should have been permitted to proceed to trial, as he raised issues of material fact over whether the Privette Doctrine applied in his case at all, as the defendants retained control over the safety conditions at the work site, which is a theory by which some plaintiffs may proceed with a tort case despite the Privette Doctrine.  The appellate court agreed with the defendants.  In these types of cases, a plaintiff may still be able to proceed with a tort case if he or she can prove that the contractor did not fully delegate the task of safety to the lower-tiered subcontractor who hired the independent contractor.  In this case, the plaintiff’s mere allegations that such was the situation here did not meet his burden of proof, and the trial court was correct to grant the defendants’ motion for summary judgment.

Construction cases are highly nuanced and require a skilled attorney.  I have experience in assisting my employees with their businesses in these types of cases.  Feel free to contact us  at (714) 516-8188 if you have  questions in this field.

Is My Worker an Independent Contractor?

Employers many times will take different paths to make sure that the services and products demanded by customers and clients are supplied an executed in a timely manner.  This includes hiring employees directly as well as using the services of other businesses, such as internet service providers, couriers, or food services.  In between these two falls the independent contractor.  While an employer is required to provide workers’ compensation insurance for all employees with few exceptions, an employer is not required to provide workers’ compensation insurance for independent contractors.  Penalties for failing to adhere to this provision are severe, so it is crucial that an employer have a firm understanding of the differences between an employee and an independent contractor.

 

California Labor Code section 3353 defines “independent contractor” as any person “who renders service for a specified recompense for a specified result, under the control of his principal as to the result of his work only and not as to the means by which such result is accomplished.”  This statute essentially means that to be an independent contractor, the person has to have control over the way in which a job is accomplished.  Accordingly, if an employer is telling an independent contractor not only what the job is to be done but also how and when to do the job, it is very possible that the person is actually an employee.  The California Supreme Court also laid out a multi-factor test in S.G. Borgello & Sons, Inc. v. Dept. of Industrial Relations, which discusses a long list of other potential contributing inquiries.  These include such issues as whether the person performing the services is also engaged in another business that is separate from that of the employer, whether the service performed is part of the regular business of the employer, who supplies the work materials for the job, and whether the service rendered requires special skills.

 

There is an automatic presumption under Labor Code that a person is an employee.  If the employer disputes this, then it is up to the employer to prove that the person is an independent contractor.  The most straight-forward way to demonstrate that a person is an independent contractor is to have a written agreement between the business and the contractor that specifies this.  However, the employer must be aware that simply calling a person an independent contractor does not make it true, as a court will look beyond the agreement to what the parties actually did in order to make the final determination.

 

If you have questions about your business and making sure it is in compliance with rules regarding independent contractors, call us today at (714) 516-8188.  I have experience in helping my clients understand the rules and regulations for any business.

Controlling Costs in Workers’ Compensation

Every business owner knows that keeping costs down in any area possible is essential to the growth of his or her business.  Wasting money and resources is never a good business practice, and it is crucial that any business owner stay on the alert for ways to reduce waste and costs.  The area of workers’ compensation is no exception to this rule.  Clearly the employer should not be looking for ways to get out of paying appropriate workers’ compensation claims, but there are legitimate and important other methods to help keep the cost of workers’ compensation down.

First, a well-thought out safety plan and program will help keep the employees from sustaining work-related injuries at all.  Employers should make sure that the employees have a good understanding of all safety procedures and protocols in the work place.  Creating a safety committee and changing the safety procedures on a regular basis to reflect changes in the industry or in the work place will also help reduce these costs.

Second, in the event an employee does sustain work-related injuries, the employer should take any available action to help that employee return to work as soon as possible.  Even though it is possible to have others fill in for the injured employee or even hire a temporary worker to fill the injured employee’s position while he or she recovers, this ultimately will probably cost the employer more money.  The employee has the expertise and contacts necessary to complete his or her job in a more efficient and straight-forward manner than a temporary worker who will have to be trained.  An employer should stay in close contact with the medical professionals and its workers’ compensation insurance company during the flow of the workers’ compensation case to make sure that the employer is taking any available steps to help get the employee back to work.

Finally, an employer should be open and honest with the workers’ compensation insurance company.  Being less than honest about the number of employees or nature of the work performed may cut costs on the front end, but when the insurance company discovers the deception, it can cost the employer much more than the original cost of insurance would have been.  Moreover, if the employer has an open discussion with the insurer about safety measures that are being taken, there is sometimes a possibility that such programs could help lower workers’ compensation insurance costs.

Ensuring compliance with workers’ compensation standards is essential for any business, but it does not have to bankrupt the company. Contact me today at (714) 516-8188 to talk about your business and what needs to be done.

Torts versus Workers’ Compensation – Can My Employees Sue My Business?

The workers’ compensation system is designed to provide a method by which an employee who sustains a work-related injury may obtain reimbursement for medical care and disability payments.  California is a “no fault” workers’ compensation system, so even if the employer or employee is not “at fault” for the work-related injury, an employee may still recover expenses and disability payments.  This is different than if the employee were to file a civil claim for negligence or an intentional tort.  In that sort of case, an employee would be required to go before a judge and prove the elements of his or her claim, which would always include a degree of fault on the employer’s part.  In the vast majority of cases, if an employee is injured at work, he or she is required to go through the workers’ compensation system in order to recover for the cost of injuries or obtain payment for temporary or permanent disability.  However, there are some limited situations in which an employee may choose to go outside the typical workers’ compensation system.

 

The type of suit that an employer should be most cautious of in this sort of situation is where an employee alleges that his or her injuries were caused by Serious and Willful misconduct on the part of the employer.    For example, if an employer is fully aware that using a certain chemical will cause injury to the employees working with the chemical but fails or even refuses to provide safety equipment for the employees, a Serious and Willful cause of action could be appropriate.  Clearly to combat this sort of claim, an employer should take all reasonable steps to make sure employees are safe and have the safety gear needed.  Employers should also speak with an experienced workers’ compensation attorney about “serious and willful” claims under the California Labor Code and how these claims can be avoided and defended.

 

An employee could also choose to sue a third party, meaning someone other than the employer.  An employee could choose to sue a contractor, a vendor, or the manufacturer of a faulty product.  If this is the case, the employer may want to get involved in that suit under the theory of subrogation in order to reduce any costs to the employer pursuant to any serious and willful claim made by the employee.

 

Workers’ compensation can be complicated, and it can seem even more so when an employee chooses to file an additional suit outside the system.  If you have questions about your business and how a civil suit interacts with workers’ compensation, call me today at (714) 516-8188.  I am experienced in helping my clients navigate these situations and look forward to talking with you about your business and possible solutions.

What is the Central Index Bureau and Can It Help My Business?

There are many ways that an employer can properly reduce the cost associated with workers’ compensation, such as properly reporting injuries and the number of employees to the employer’s workers’ compensation insurance company.  Another very important step to reducing costs is taking steps to recognize and curtail workers’ compensation fraud.  The Central Index Bureau is a tool used by workers’ compensation insurance companies to assist in spotting fraudulent workers’ compensation claims.

The Central Index Bureau is a division of the Insurance Services Office, which was formed as an organization for the purposes of advising and rating insurance industries in order to provide statistical services and help combat fraud.  The reports from the Central Index Bureau can also be called “an ISO” or a “claim index.”  The terminology will vary between insurance companies, and almost all insurance companies are members of the ISO Central Index Bureau.  These reports contain a record of every insurance claim filed by any individual, including workers’ compensation claims.  When an employee makes a workers’ compensation claim, a CIB report will be generated by the workers’ compensation insurance company.  This report contains the employee’s name, social security number, aliases, addresses, occupation, and other vital statistical information.  The report will also identify all past claims made by the employee, including the type of injury, the source of the injury (such as automobile accident, medical malpractice, etc.).  The report will also identify the employee’s medical providers for the past injuries and the names of any attorneys who may have represented the employee.

An insurance adjuster can use all of this information to help spot and stop workers’ compensation fraud.  The adjuster will examine this report for repeat injuries.  For example, if the employee has made many workers’ compensation claims, all stating that the employee has a soft-tissue injury, this could be a red flag for fraud, or at the very least indicates a potential pre-existing injury.  The adjuster will also be on the look-out for multiple doctor changes.  Employees who commit workers’ compensation fraud will often switch doctors with a high frequency.  This is so the new doctor will not be familiar with the employee’s history of injuries.

If you have questions about how to best protect your business from fraudulent claims, contact us today at (714) 516-8188.  We will discuss your business and how to stop fraud in the work place.

Reducing Your Business’ Workers’ Compensation Costs and Liability

Every employer should maintain the important goal of reducing work-related injuries to their employees as much as possible.  Not only is this the ethically and morally right step, but it can prove to help an employer with their bottom line.  By taking steps to reduce work-related injury, an employer may be able to reduce the workers’ compensation premiums paid, the risk of serious and willful claims, or the risk of a 132a issue arising.  There are some good steps that any employer can take to reduce his or her business’ workers’ compensation costs and liability for future costs.

First, almost all employers are required to maintain workers’ compensation insurance in the state of California.  There are some exceptions, but by and large, failure to adhere to this requirement can result in hefty penalties, both civil and criminal, for an employer.  Like shopping for health insurance or life insurance, a business owner should get more than one quote for workers’ compensation insurance.  Getting competitive quotes can help to reduce the ultimate cost of insurance premiums.

Second, an employer must pay special attention when submitting insurance information.  This is two-fold.  An employer must first be accurate when submitting information to the insurance company to purchase the policy, as well as keep the information updated.  Moreover, when submitting information about any work-related injury to the insurer, the employer must also be certain to submit accurate and detailed accounting of what happened, together with the necessary paperwork and witness statements.  Although an employer may be initially convinced that not reporting all his or her employees for the premiums or maybe omitting certain details of an injury will help reduce the up-front cost, this is fraud and can ultimately cost the employer much more in penalties.  It   can also end up resulting in no insurance at all to help with the costs.

Third, an employer can implement a good, solid safety program.  Some employers choose to set up safety committees made up of employees, to help create safety policies as well as help implement safety programs.  Rotating the members on the committee as well as making changes to a safety program on a regular basis can help keep the program fresh and keep employees from becoming complacent.

Finally, an employer can create an incentive program to adhere to safety standards.  Financial bonuses, trips, or extra time off for meeting certain safety goals can help create a work-place atmosphere that encourages adhering to safety standards.

If you have questions about how you can reduce your business’ workers’ compensation costs and liabilities, contact me today at (714) 516-8188.  We can discuss your business and what we can do for its financial future.

Do I Have Alternatives to Carrying Workers’ Compensation Insurance?

Workers’ Compensation is a vast and often complex system. The goal of the entire set of laws is to protect both the employees and the employer. When an employee sustains a work-related injury, the workers’ compensation system provides a method by which the employee may receive payments for medical treatment and for disability payments and also by which the employer may be insulated from a costly law suit. To make sure the employees receive the compensation that they need following such an injury, California law requires that employers carry workers’ compensation insurance. Some employers find this requirement burdensome, and frequently ask whether there are any alternatives to carrying workers’ compensation insurance. It is first essential to understand that the California requirement to carry insurance is strict, and failure to abide by its provisions can result in both civil and criminal penalties. That being said, there are some limited situations in which an employer may have some alternatives to carrying workers’ compensation insurance.
One alternative to using a traditional insurance company is for an employer to purchase insurance through the State Compensation Fund. This may be an appropriate and essential alternative for those employers engaged in a high-risk business. Such high-risk businesses may be turned away from traditional insurance agencies, or the premiums may simply be too high. For an employer with this problem, seeking options from the State Compensation Fund may be the answer. State Fund is required to offer coverage to any business, although the cost may be higher than an Employer would find with another Insurance Company.
Some employers may also choose the option of being self-insured. To become self-insured, an employer must first apply to the Office of Self-Insurance Plans for approval. The OSIP will evaluate the application and the business for financial strength and stability, the proposed benefit delivery system, and whether the business is suitable to participate in self-insurance. The financial requirements are that there must be $5 million in shareholder equity, an average net profit of $500,000 per year for each of the last five years, and certified, independently audited financial statements must be provided to verify these claims. If the company has affiliates or subsidiaries, each of those must file its own application to become self-insured.
There are some limited circumstances in which an employer may not have to cover certain workers under workers’ compensation insurance at all. These exceptions would apply to independent contractors or certain types of board members in closely held corporations. Before assuming that these exceptions apply to your business, however, you need to consult an attorney.
California requirements to carry workers’ compensation insurance are strict and the penalties are harsh. Before making these decisions for your business, you need to consult an experienced attorney. Contact me today at (714) 516-8188 to more thoroughly review the requirements for your business.

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