Workers’ compensation is an important part of our legal system. It provides support and financial assistance for injured employees. It also provides immunity from additional tort law suits to the employer, except in limited circumstances. California has the largest workers’ compensation system in the United States. Under California law, employers are required to carry workers’ compensation insurance. There are severe civil and criminal consequences for employers who fail to fulfill this responsibility. There are a few narrow exceptions to this rule, including self-insurance.
Self-insurance means that the employer has assumed the financial risk associated with providing workers’ compensation benefits to their employees who sustain work-related injuries. Workers’ compensation benefits can include not only the cost of medical treatment for the worker, but also other monthly benefits. Clearly, this can represent a significant financial burden, especially for smaller businesses.
California law provides that there are strict requirements before a business can qualify to self-insure instead of purchasing a workers’ compensation insurance policy. A business wanting to qualify for self-insurance must apply to the California Office of Self-Insurance Plans. The business will have to provide particular information and evidence to support the application. First, the business must have been a legally authorized business form for at least three years. Next, the business will have to provide three years of certified, independently audited financial statements with the application. The business will also have to demonstrate it has an acceptable credit rating for three years preceding applying for self-insurance. If the company has subsidiaries, each subsidiary must file its own application. The application may be filed separately or together with the parent company’s application. If a current existing company that already has been approved for self-insurance creates a new subsidiary or affiliate, a new application can be filed. If the parent company can demonstrate solvency, the subsidiary is automatically self-insured for 180 days. The parent company must file an application for a permanent certificate during that time.
Once an employer is approved by the state to be self-insured, the employer is still subject to state audits. The audits check for the accuracy of claims reserving practices as well as the correctness of the reported workers’ compensation liabilities.
If you have questions about workers’ compensation and your rights and responsibilities as a business owner, contact us today. We can talk to you about your business and the workers’ compensation process.
There are a variety of expenses associated with running your own business. From inventory to lease payments to taxes, there are many expenditures included in your total overhead. In California, workers’ compensation needs to figure into this computation. Especially in the case of small businesses, many business owners wonder if it is necessary to purchase workers’ compensation insurance, as the cost can be extensive. It is very important for business owners to understand the different permissible options under California law, as well as the consequences of not acting pursuant to the relevant regulations.
The option that is most common is purchasing a workers’ compensation insurance policy. Pursuant to California Labor Code § 3700, a business must provide workers’ compensation benefits to its employees if it employs one or more employees. Recent changes to the law provide that executive officers and directors of corporations are no longer exempt from the requirement that all employees must be covered, with some limited exceptions. California Labor Code § 3351 defines “employee,” and it should be noted that “every person in the service of an employer under any appointment or contract of hire or apprenticeship, oral or written, whether lawfully or unlawfully employed” is included under the definition. Moreover, other people such as minors, handymen, aliens, nannies, and several others are also included.
Self-Insurance can also be an option for some businesses. Businesses or employers who want to be self-insured must fulfill very particular financial requirements. In addition, the business must apply to the Office of Self-Insurance Plans for Approval. The business or employer must provide 1) three calendar years in business in a legally authorized business form; 2) three years of a certified, independently audited financial statements; and 3) acceptable credit rating for three full calendar years leading up to the application. Employers should note that subsidiaries must apply separately.
If you choose not to provide workers’ compensation insurance, the consequences could be severe. Not only could you and your business face stiff fines, there is a possibility you could even face criminal prosecution. The first offense could result in a fine of $10,000 and a year and jail, and subsequent offenses carry even stiffer penalties.
If you have questions about whether you are required to carry workers’ compensation insurance for your business, contact us today. We can discuss your business and what we can do to protect its future.
In an overwhelming majority of court cases, the parties settle before ever having to see the inside of a court room. The field of workers’ compensation is no exception. Attorneys for both sides are typically experienced and are skilled in obtaining reasonable settlement agreements. There is a lot of paperwork and material exchanged by the attorneys in an effort to get to a settlement or prepare for trial. In some cases, the parties may agree to use an “Agreed Medical Evaluator” in order to help get to a proper settlement. The AME will examine and evaluate the injured worker and determine the level of disability or impairment. In preparation for this evaluation, the attorneys may also send certain letters to the AME. California Labor Code 4062.3 contains rules about what can and cannot be sent to the AME before the evaluation, including medical records from current and previous treating physicians. The attorney may also provide a letter “outlining the medical determination of the primary treating physician,” and a copy of that letter must also be served on the opposing party at least twenty days before the evaluation. Subsection (d) states that if the opposing party objects within ten days to any non-medical records or “information” that is proposed to be sent to the AME, the information shall not be sent unless a judge approves it. An attorney may communicate with the AME without the approval of the other attorney for purposes such as furnishing records and reports or other “nonsubstantive matters.” The difference between “communication” and “information” is therefore crucial, as communication without the “go ahead” from the opposing side is permissible, whereas passing information is not.
In Maxham v. California Department of Corrections and Rehabilitation, the WCAB was faced with the task of clarifying the difference between communication and information. In that case, the applicant’s attorney provided the employer’s attorney with a copy of the proposed “communication” to the AME, which included factual assertions, citation to case law, and summaries of legal principles. The defendant’s attorney timely objected to the letter and asked for portions to be redacted. The attorney for the employee sent the unredacted letter. The WCAB determined that “information” in these cases constitutes records prepared or maintained by a physician and/or medical and nonmedical relevant records. A communication can become information if it contains, references, or encloses medical or non-medical records that are otherwise “information.”
If you have questions about workers’ compensation, call us today at (714) 516-8188. We will discuss your business and what you can do to make sure you are facing workers’ compensation issues head on.
Employers in California are required by statute to carry workers’ compensation insurance for all of their employees, with only a few, limited exceptions. Failure to carry insurance can result in severe penalties for an employer, and can easily climb into tens of thousands of dollars. Premiums for this insurance are also costly, however, and some employers attempt to keep that cost down by not being completely honest with the insurance company. Employers have been found to lie about the number of employees, the nature of the business, or the location of the work performed, all in an effort to cut the cost of the insurance premium. If the insurance company then discovers the fraud, it can cancel the insurance policy. In Southern Insurance Co. vs. Workers’ Compensation Appeals Board, EJ Distribution Corp. et al., the issue of rescinding an insurance policy for a trucking company was at issue.
In that case, the workers’ compensation insurance company issued a policy to EJ Distribution Corp. The application for insurance incorrectly indicated that the employees would not travel outside the state of California or farther than 200 miles from the business. Later that same year, a worker injured his back while in Tennessee and performing work for the employer. The next month, the worker filed for workers’ compensation and the employer filed a claim with the insurance company. In June, the insurance company notified the employer that they would be rescinding the insurance policy based on the material misrepresentation made by the employer in that it failed to state that its employees were actually long-haul truckers. The insurer applied this rescission retroactively, returned the policy premiums paid to that date, and cancelled the policy going forward. The employer and insurer submitted to mandatory arbitration. The arbitrator determined the insurer could not retroactively rescind the policy, based on some ambiguities in the state statutes. The WCAB disagreed. It determined that California’s insurance code does provide for rescission of policies and the law makes no exception for workers’ compensation policies. The court determined that there was evidence that the employer made knowing misrepresentations to the insurer, but there was not a decision about whether the misrepresentations were material, which is required for rescission to be the appropriate remedy. The WCAB sent the matter back to arbitration to make the determination
The workers’ compensation system has many important requirements for employers. Call us today at (714) 516-8188 and let us talk with you about your business and what you need to do to make sure you are in compliance.
After a worker sustains a work-related injury, he or she will receive a treatment from a large range of providers, depending on the type of the injury. The type of treatment can range from psychological treatment to surgery to chiropractic treatment. Often, the treatment often includes prescription medication to treat and address any number of conditions that may have arisen from the work-related injury and subsequent treatment. In recognition of the widespread use of prescription medication in treatment of work-related injuries in the workers’ compensation system, the California legislature has created new laws with requirements to adopt a new drug formulary.
Drug formularies are used in both health insurance and workers’ compensation insurance fields. A drug formulary is, quite simply, a list of medications. The list will provide what types of mediations are approved and covered under the insurance and what type are not. Just because a worker is prescribed a medication that is not on the approved list of a drug formulary does not mean that the medication will not be covered under workers’ compensation, merely that the worker may have to take additional steps to have the cost of the medication covered. The purpose of a drug formulary is to attempt to cut costs to the workers’ compensation system and in some other states has seen other benefits such as a reduction in the number of opioid prescriptions.
Assembly Bill 1124 mandated the adoption of an evidence-based formulary by the DWC. After an initial comment period, the DWC has modified the proposed regulations in order to make them more clear and to add more detail. The comment period ended on August 2, 2017. There are many changes the DWC is considering making. These changes include:
- Making the effective date for the new formulary January 1, 2018;
- Changing drug designations from “preferred and non-preferred” to “exempt and non-exempt;”
- Phased implementation for the formulary;
- Clarification of particular dispute resolution processes; and
- Updated the drug listings.
When treating an injured worker, a medical provider may reference the drug formulary, or he or she may not. It is up to the insurance company to determine whether or not the drug is on the exempt or non-exempt list and whether the company may require additional steps from the injured worker before covering the cost of the medication.
If you have questions about your business whether it is required to cover the cost of certain medication for injured employees, contact me today at (714) 516-8188. We can discuss your business and your responsibilities.
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.
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.