UNDERSTANDING & IMPLEMENTING AB 749 - V

Saturday, March 15, 2003 | 0

This is the fifth in a six part series on the new California laws by attorney Richard Jacobsmeyer. The first part (Temporary Disability Benefits) of this 6 part article series was published in the Attorney segment. The second article discussed the changes in permanent disability and life pension benefits. The third article addressed dependency benefits and changes in penalties. Part Four discussed medical-legal changes and medical treatment changes. This part will discuss new claim procedures.

IV-PROCEDURAL CHANGES:

A. Insurance Carrier/TPA Required to Provide DWC-1 Form

Labor Code section 138.4 has been amended to provide for a specific requirement that a "claims administrator" [1] shall provide a claim form and notice of potential eligibility for benefits to an injured worker[2] under certain specified circumstances.

(1) If the claims administrator obtains knowledge that the employer has not provided a claim form or a notice of potential eligibility for benefits to the employee, it shall provide the form and notice to the employee within three working days of its knowledge that the form or notice was not provided.
II. If the claims administrator cannot determine if the employer has provided a claim form and notice of potential eligibility for benefits to the employee, the claims administrator shall provide the form and notice to the employee within 30 days of the administrator's date of knowledge of the claim.

Many claims administrators have, in the past provide such information to injured workers at various times however there has never been a specific requirement to do so. Labor Code section 5401 & 5402 only obligated the employer to provide such notices to the employee.

This author was initially concerned that by imposing on the claims administrator the obligation to provide the DWC-1 that employers would be lulled into a false sense of security that their claims administrator would provide the necessary forms. At the same time the claims administrator might believe that the DWC-1 returned by the employee that had been provided by the claims administrator would begin the 90 day countdown under Labor Code section 5402 to presumed compensability. The problem with both of these positions was the body of case law [3] which held that if the employer failed to promptly provide a claim form after notice of injury, the 90 day time for admitting or denying an injury began to run from the employer's knowledge based upon estoppel principles. Therefore if the employer relied on the claims administrator to provide the form, and the claims administrator relied on the date it received the form (perhaps weeks or months after the employer's knowledge) the time for an injury to be denied before becoming presumptively industrial would be much shorter than 90 days or even be gone before the claims administrator was aware of the potential injury, thereby resulting in a presumption of injury in an otherwise defendable case.

To some extent these fears have been allayed by the recent decision of the Court of Appeals in Honeywell v. WCAB, 67 Cal. Comp. Cas 1557. In that case the Court of Appeals rejected the concept of triggering the employer's 90 days to investigate and deny a claim from any event other than actual receipt of the DWC-1 form by the employer[4]. Given the result in Honeywell, it can be argued that the statutory scheme has now been set out even more firmly by requiring the claims administrator to provide a claim form in the absence of the employer doing so. The changes to Labor Code section 138.4 arguably support the rational of Honeywell, making the decision even more consistent with the statutory scheme discussed by the court.

B. Definition of Injury Triggering Obligation to Provide DWC-1 is Modified:

Labor Code section 5401has been altered to change the requirements for provision of a claim form by the employer to an injured worker. Subsection (a) has been changed slightly as to when a form is required to be provided to an employee ;

"...Within one working day of receiving notice or knowledge of injury under Section 5400 or 5402, which injury results in lost time beyond the employee's work shift at the time of injury or which results in medical treatment beyond first aid..." (Italics indicate changed language).

The prior section had required provision of the claim form for injury resulting in lost time beyond "the date of injury". This change does not appear to be significant under most circumstances but it is more specific that loss of time from the actual shift at the time of injury (which might extend over more than one day for late evening shifts) is the defining factor. This change will limit slightly some of the circumstances where a claim form might be required.

The definition of "first aid" has also been expanded to read:

"...As used in this subdivision, "first aid" means any one-time treatment, and any followup visit for the purpose of observation of minor scratches, cuts, burns, splinters, or other minor industrial injury, which do not ordinarily require medical care. This one-time treatment, and followup visit for the purpose of observation, is considered first aid even though provided by a physician or registered professional personnel..." (Italics indicate changed language)

The change allows a single follow up visit for observation only and also provides that even if such first aid is provided by a physician or registered professional personnel it may still be considered first aid. There had previously been some concern that if treatment had been provided by a physician that the definition of first aid was did not apply.

These two changes will eliminate the requirement to provide claims forms in a small number of cases that might have required the form in the past.

C. Employers' Notification Requirement Changed: Labor Code section 3550 & 3551

Employers posting notices under Labor Code section 3550have been changed to require additional information and also to require that the notices be posted in English and Spanish (if there are Spanish-speaking employees). The notice, which is to be created by the Administrative Director after consultation with the CHSWC shall contain the following information:

(1) How to get emergency medical treatment, if needed.
(2) The kinds of events, injuries, and illnesses covered by workers' compensation.
(3) The injured employee's right to receive medical care.
(4) The rights of the employee to select and change the treating physician pursuant to the provisions of Section 4600.
(5) The rights of the employee to receive temporary disability indemnity, permanent disability indemnity, vocational rehabilitation services, and death benefits, as appropriate.
(6) To whom injuries should be reported.
(7) The existence of time limits for the employer to be notified of an occupational injury.
(8) The protections against discrimination provided pursuant to Section 132a.
(9) The location and telephone number of the nearest information and assistance officer.

Items number 1,2,7 and 8 above are new items to be included. The remainder are holdovers from the prior statute.

The Administrative Director has already reported that these materials will not be out for several months. The California Workers' Compensation Institute (CWCI) has prepared and has available for sale notices which the AD has reported as complying with the statutory requirements.

In addition to the posted notices for places of employment, Labor Code section 3551 has also been amended to provide that between the time of hire and the first paycheck, every newly hired employee is to receive written notice of the information in Labor Code section 3551. Additionally, Labor Code section 3552, which required an employer to provide a form for predesignation of a PTP by an employee upon request, has been deleted and instead Labor Code section 3551 provides employers shall provide to new employees a form for predesignation of PTP. The AD, who is to create the form, has reported that the form will not be ready for several months but that the form created by CWCI will satisfy the obligation.

-----------

Implementation Issue: Predesignation issues
An employer can potentially waive the requirement to actually predesignate a physician by failing to provide PTP predesignation form to each new employee or failing to document that form was provided. Applicant attorneys are undoubtably going to argue that the employer's failure to provide such predesignation forms will result in a waiver of the right to dispute the employee's Personal Physician is entitled to the presumption of injury. Attorneys and representatives at the W.C.A.B. are going to have to be prepared to defend cases where the assertion is made, by providing proof that the employee got the predesignation form.
There will essentially be two ways to prove the employers compliance with the rule (where there has been no predesignation form completed). First the Human Resources manager can come to the W.C.A.B. to testify as to the business practices of the employer and how each employee is given a complete package including the necessary PTP forms. The second means of proving this information is to have the employee sign an acknowledgment of receipt of the information in the employment package including the PTP form. Such acknowledgment will become part of the employer's business record and can be admitted into evidence at the W.C.A.B. after being obtained by means of a subpoena. target="new"> The second problem that is going to arise is where employees have predesignated a physician who is not eligible to serve in the capacity ( See Section F. 2 of this article) Employees may predesignate their group health care physician for workers' compensation without considering if the physician qualifies (has previously treated the employee and has his/her records in his possession etc.). Carriers will have to be prepared to verify if predesignation was appropriate.

------------

D. Statute of Limitations on Lien Claims:

The legislature has finally codified, in Labor Code section 4903.5, some time limits for pursuit of lien claims before the W.C.A.B. Do not count on very many lien claims being barred by this statute as the time limits are quite liberal. Additionally it appears that this provision applies only to liens for medical treatment or medical legal expenses as it references only Labor Code section 4903 (b). In some respects the lien claim time limits are similar but even slightly more liberal than the same time frames for employees to file an application for adjudication of claim for a disputed injury. The statute starts out with three potential limits

No lien may be filed after:
a. 6 months from the date of a final decision in the case issues (included order approving C & R, Findings and Award etc.), or
b. 5 years from the date of injury for which the services were provided, or
c. 1 year after the date the services were provided.

The stature provides that the medical provider shall have whichever of the above time limits is latest. This is slightly more liberal than the statute for injured workers who must file within 1 year of a denial of injury pursuant to Labor Code section 5401. Medical lien claimants would have up to 5 years from the date of injury to make a similar finding. One of the questions that is sure to arise is whether the injured worker can piggyback an otherwise barred claim on the back of a medical lien filed over 1 year from the date of denial of an injury but withing 5 years from the date of injury.

Subsection (b) of the same statute provides a separate time limit for medical providers who extend medical benefits on a nonindustrial basis and later find out the case might be industrial.

"(b) Notwithstanding subdivision (a), any health care provider, health care service plan, group disability insurer, employee benefit plan, or other entity providing medical benefits on a nonindustrial basis, may file a lien claim for expenses as provided in subdivision (b) of Section 4903 within six months after the person or entity first has knowledge that an industrial injury is being claimed."

It is certainly possible under this section for lien claims to be filed long after the other time frames have long passed.

The statute specifically provides that if a lien claim is not timely filed the injured worker will not have responsibility for the actual medical bills. Additionally unless the lien claimant has filed the actual application, they may not file a Declaration of Readiness until the case in chief has been resolved.

E. DWC-1 Form is Required to be in English and Spanish:

Labor Code section 5401 has been amended to require that the claim form contain additional information as to claims for benefits including Labor Code 132a protection, rights to medical care etc. As it is now the back of the DWC-1 form has this information printed in barely discernable type. We can therefore look forward to even more difficult to read forms as the amount of information is to increase and the same information will have to be added in Spanish to all forms.

F. Arbitration Changes: Labor Code section 5275 (a) (3),(4),(5) & (6) and (b) and (c) have been eliminated with the former subsection (d) now being renamed as subsection (b). The effect of these changes is to eliminate the requirement to arbitrate certain permanent disability and vocational rehabilitation issues if the delay to hearing was beyond the statutorily determined time frames.

The code section now only provides for mandatory arbitration over issues of insurance coverage and contribution under Labor Code section 5500.5. Subsection (b) allows for arbitration of any issue by agreement of the parties.

G. Expedited Procedure for Injury AOE-COE: (New)

One of the sources of controversy over the Expedited Hearing procedure in effect since 1989, has been the lack of applicability of the expedited procedure to threshold issues. The passage of Labor Code section 5502(c) is intended to address this perceived deficit by creating an expedited procedure for handling cases where Employment or Injury AOE-COE is at issue. The statute specifically requires the newly created "Court Administrator"5 to establish this calendar.

The procedure requires the setting of a "priority conference calendar," for represented cases only, with the conference to be conducted by a workers' compensation administrative law judge within 30 days after the declaration of readiness to proceed if filed. If the dispute cannot be resolved at the conference, a trial shall be set as expeditiously as possible, unless good cause is shown why discovery is not complete, in which case status conferences shall be held at regular intervals. The case shall be set for trial when discovery is complete, or when the workers' compensation administrative law judge determines that the parties have had sufficient time in which to complete reasonable discovery. A determination as to the rights of the parties shall be made and filed within 30 days after the conference.

It is clear that the purpose of this calendar is to require the parties to be moving promptly toward resolution of these threshold issues. The procedure looks similar to what civil attorneys are familiar with in Federal Court, where judges will set cases for status conferences and push the parties to complete discovery and make the cases move toward trial. The language for a mandatory cutoff of discovery is not in this section. It therefore seems that a WCJ could have discretion to give the parties a limited period of time to complete discovery and set a case directly for trial at the end of that time.

Because the statute provides that the Court Administrator is to create this new calendar the W.C.A.B. rules of Practice and Procedure that have recently been adopted (effective 1/1/03) provide only a very limited outline for implementation of this procedure. It is clear however that the W.C.A.B. is not going to wait for the governor to appoint the Court Administrator before the Priority Conference Calendar is put to use. The new DOR forms have specific provision for such hearings as to the revise Request for Expedited Hearing forms.

----------------

Implementation Issue: This procedure is in response to complaints from applicant's bar that AOE-COE issue prevented use of Expedited Hearing procedure and delayed benefits. Expect fewer AOE-COE cases to be delayed while applicant used nonindustrial benefits. This provision will encourage prompt investigation and decisions on threshold issues.
It is certainly conceivable that, if an applicant attorney requests a priority setting in an injury denied case within the first 45 days after an injury and a defendant appears at court without being able to document a diligent effort to investigate the case, that the matter could be set for trial before 90 days from the date of injury. This author does not believe that there is an automatic requirement for defendants to have 90 days to investigate a claim. The key to avoiding going to trial before discovery is complete will hinge on the party's diligence in moving forward.
Forewarned is forarmed.

----------------

H. Settlement of Vocational Rehabilitation Benefits:

Labor Code section 4646 has been amended to provide for settlement of prospective vocational rehabilitation under certain limited circumstances:

"4646. (a) Settlement or commutation of prospective vocational rehabilitation services shall not be permitted under Chapter 2 (commencing with Section 5000) or Chapter 3 (commencing with Section 5100) of Part 3 except as set forth in subdivision (b), or upon a finding by a workers' compensation judge that there are good faith issues that, if resolved against the employee, would defeat the employee's right to all compensation under this division.
(b) The employer and a represented employee may agree to settle the employee's right to prospective vocational rehabilitation services with a one-time payment to the employee not to exceed ten thousand dollars ($10,000) for the employee's use in self-directed vocational rehabilitation. The settlement agreement shall be submitted to, and approved by, the administrative director's vocational rehabilitation unit upon a finding that the employee has knowingly and voluntarily agreed to relinquish his or her rehabilitation rights. The rehabilitation unit may only disapprove the settlement agreement upon a finding that receipt of rehabilitation services is necessary to return the employee to suitable gainful employment. (c) Prior to entering into any settlement agreement pursuant to this section, the attorney for a represented employee shall fully disclose and explain to the employee the nature and quality of the rights and privileges being waived." (Italics indicate changed language).

The provision appears to apply only to applicants represented by attorneys and is not available to those injured workers who do not have an attorney. While subsection (b) only references "represented applicants," which may include those represented by parties who are not attorneys, subsection (c) specifically requires that the "attorney" for the represented employee shall disclose and explain the released rights and benefits. This provision would eliminate settlement of VR by those with legal assistants or other non-attorney representation.

The settlements are approved by the Rehabilitation Unit, not the W.C.A.B. and only after the Rehab Unit has determined that the employee has knowingly and voluntarily agreed to release his/her vocational rehabilitation rights. The provision requiring that the injured worker's attorney fully disclose these rights and benefits should satisfy the Rehabilitation Unit of this required element.

Subsection (b) also has a peculiar provision that the Rehabilitation Unit can only disapprove of the settlement if there is a specific finding that the injured worker can only return to work through use of VR benefits. This is peculiar, not only because of the questionable relationship between providing vocational rehabilitation and returning to work, but also because there is no requirement that the Rehabilitation Unit have access to any information that would allow it to make such a determination. The proposed regulations for this provision do not require assignment or evaluation by a Vocational Rehabilitation Consultant (VRC) or provision of any information as to the educational, occupational or intellectual experience or abilities of the injured worker.

Retroactivity?
One of the questions that will arise as a result of this section is the potential application of the section to injuries before the effective date of the modified Labor Code section 4646. The legislator who was the principal sponsor of AB 749 has apparently issued a letter indicating that there was an intent to make this section retroactive. The Rehabilitation Unit, in their proposed rule (10131.2), has clearly taken the position that the settlement provision is not retroactive and apply only to post 1/1/03 injuries.

One of the arguments that can be used in favor of retroactivity is that this is essentially a "procedural statute," and that it simply creates a different way to obtain termination of VR through the self-directed plan (which for the most part will undoubtedly be an illusory plan). As such, the provisions could be given retroactive effect. It will be difficult to obtain clarification on this issue as the Rehabilitation Unit has responsibility to approve or disapprove the settlements and the WCAB can only review the agreements on appeal from the Rehabilitation Unit.

--------------

Implementation Issues:
The process for settlement of VR will be heavily dependent on the rules adopted by Administrative Director to implement this settlement procedure. (See proposed Rule 10131.2 and Form 122: Settlement of Prospective Vocational Rehabilitation Services ). Interestingly while it requires a 2 page form to settle all of a worker's compensation case before the W.C.A.B. including all disability, medical and dependency benefits etc., to resolve VR before the Rehabilitation Unit will require a 3 page form, which includes the Order approving the settlement.

The proposed rules appear to be ready to issue as the period for public comment has expired and no revised rules have been issued. The rules provide that only employees who sustained injuries after 1/1/03 may submit a REHABILITATION UNIT-122 form for approval. The rules also provide that if the plan is not disapproved by the Rehabilitation Unit within 10 days of filing, it will be deemed approved.
Keep in mind that $10,000 is the upper limit of what can be used to settle VR[6]. Certainly if the injured worker has already spent $9000 toward the VR cap, there is no rational reason to pay $10K to settle VR. In that circumstance settlement of VR for an additional $3000-$4000 would be more than reasonable. There is no requirement that settlement of VR is allowed only for identified QIWs. Where there is a weak case for QIW, settlement of VR for a significantly smaller sum such a $2500 might be attractive as a means of completely closing a case by C & R. Additional Benefits to Settlement of VR:

- Encourage hiring of attorneys in difficult cases. In the post 1/1/94 world, it is much easier to deal with injured workers who are represented by attorneys. Particularly once the PTP presumption becomes less prevalent, resolving cases with attorneys will hopefully involve less game playing and more resolution based upon the actual record. Having experienced and capable counsel for injured workers results in more carefully considered resolutions by parties who understand the issues.

S Encourage early settlement of all issues rather than waiting. If applicant wants to settle VR he or she will have to do so early or else decline VR in the early stages.

Problems with Settlement of VR:

- Carriers may delay provision of services anticipating settlement of VR.

This provision can potentially be a trap for the claims administrator if they fail to follow the existing rules in identifying and offering VR services. There is no change in the employers' obligation to offer and provide vocational rehabilitation services as has existed since 1994. Failure to do so will simply result in large retroactive obligations for VRTD, not applied to the VR cap and not part of any settlement under Labor Code section 4646.

- Settlement of VR does not include issues under FEHA or ADA (employee may take money and demand their job back).

- VR attorneys' fees will have to be awarded by W.C.A.B. Rehabilitation Unit does not have jurisdiction to award attorneys' fees. The proposed forms make provision for attorneys' fees to be held in trust pending order of the WCAB directing disbursement.

Settlement Recommendations:

Make settlement of VR part of overall settlement of case and coordinate with C & R at W.C.A.B. to resolve all issues. We will undoubtedly all have our VR settlement addendums where we set out that the VR settlement is only to be paid a part of a C & R and give 25 days after approval by the W.C.A.B. of the C & R to make payment etc.

-----------------

FOOTNOTES

1 For purpose of this section, claims administrator has been specifically defined to include any of the potential entities that might adjust a workers' compensation claim for an insured, self-insured or legally uninsured entity.
2 Injury is defined as "...resulting in lost time beyond the employee's work shift at the time of injury or medical treatment beyond first aid." Labor Code section 138.4(b)
3 As represented in the Shoai-Ahari v. Zenith Ins. Co. (1992) 21 CWCR 14 and Janke v. State of California (1991) 19 CWCR 310.
4 The court did provide for an exception where estoppel might apply in holding "..the denial of an employer's right to conduct a reasonable investigation before being compelled to make its decision as to whether to accept or reject the employee's claim can only be justified by evidence of egregious employer misconduct beyond a mere failure to provide a claim form to the employee in a timely manner as contemplated by section 5401. Such employer misconduct must, in order to justify application of the doctrine of estoppel, rise to the level of either (1) a deliberate or intentional refusal to provide the required claim form to the employee or (2) false statements made to the employee, all for the purpose of preventing or delaying the completion and filing of a claim form by the employee. A mere negligent failure to provide a timely claim form is not sufficient." (Honeywell v. W.C.A.B., 67 CCC at 1567).
5 Created in Labor Code 110(p) and discussed in Part 6 of this series
6 The $10,000 figure to settle VR benefits is certainly and interesting number. It probably represents that amount that a typical plan would have being paid directly to the injured worker plus an allowance for an attorneys fee of 12 -15%. Most plans appear to provide for about ￯﾿ﾂ￯ﾾﾽ of the plan expenses to be paid to the injured worker and the rest are paid to various vendors for VR services including tuition, expenses counseling fees etc. The $10,000 figure, even after payment of an attorney's fee will result in a slightly larger payment to applicant than most plans would provide, thus making it a fairly attractive alternative to participation in vocational rehabilitation.



This is the fifth of a six part series authored by attorney Jake Jacobsmeyer, of the firm Adelson, Testan & Brundo. He can be reached by e-mail at RichardJacobsmeyer@atblaw.net, or by phone at (925) 609-1990.