Young: State's Top Comp Developments in 2023

Wednesday, December 20, 2023 | 0

As 2023 rolls to a close, it’s time to take stock of the California workers’ compensation system in 2023. Among things that did and didn’t happen, what stood out? What issues or trends rose to the forefront?

Julius Young

Here’s an assessment of noteworthy developments, in no particular order.

Few workers’ comp bills were signed into law, as many failed to advance or were vetoed by Gov. Gavin Newsom.

While the current Democratic legislative supermajority may be more sympathetic to altering the 2004 and 2012 California workers’ comp reforms than in recent years, it appears that Gov. Newsom is not inclined to make significant workers’ comp tweaks. 

I noted in a previous post that the 2023 workers’ comp bills that passed and were signed are largely niche bills, some favoring firefighters and public safety personnel.

My post, “California Workers’ Comp 2023 Winners and Losers,” contains a comprehensive list of bills that passed and were signed (including labor-sponsored bills regarding sick leave and wages of health care and fast food workers), as well as bills that failed.

The employer-insurer coalition that has been successful since 2004 now appears to be playing defense in the Capitol. However, the applicant bar has not moderated the effects of the 2004 and 2012 reforms.

In 2023, there were important workers’ comp cases in the California appellate courts.

Among the years’s appellate cases are the following:

• Abraham v. Wells Fargo — The 3rd District Court of Appeal holds that a worker on an out-of-state business trip who died in a car accident while socializing after hours was barred, as were her parents, from pursuing a wrongful death claim against her employer, Wells Fargo, since she was a commercial traveler at time of death and the workers’ compensation exclusive remedy applied.

• Jose Velasquez v. WCAB (Salvation Army) — The 2nd DCA holds that an individual injured while working at a warehouse while in a residential rehabilitation program as a condition of probation was not employed by the Salvation Army, which operated the program.

• Rose Jones v. The Regents of UC — The 4th DCA holds that a UC Irvine worker’s injury on a campus bike path was covered by workers’ comp under the premises line rule and that the exclusive remedy barred her civil tort claim against UC.

• Jimenez v. Mrs. Gooch’s Natural Food Markets Inc. — The 2nd DCA holds that where a worker died several hours after returning to the job site after being hit in a crosswalk while on work break, workers' comp is the exclusive remedy, and exceptions to the exclusive remedy rule did not apply.

• Vann v. City and County of San Francisco — The first 1st DCA holds that a San Francisco Fire Department firefighter injured when a city muni bus driver drove into an emergency scene was barred from a civil tort action by the workers’ compensation exclusive remedy despite fact that the accident was caused by a worker from a different city department.

• Zurich American Insurance v. WCAB (CIGA) — The 2nd DCA holds that under Labor Code 5909, the Workers' Compensation Appeals Board loses jurisdiction to consider a petition for reconsideration, and, after 60 days have passed, the board loses jurisdiction and a petitioner has 45 days to seek a writ of review with the appellate courts.

• In early July, the California Supreme Court released its decision in Kuciemba v. Victory Woodworks. Kuciemba’s wife had sued her husband’s employer after she claimed she contracted COVID from the husband’s alleged workplace exposure.

The court framed the issues as follows:

The questions are: (1) If an employee contracts COVID-19 at the workplace and brings the virus home to a spouse, does the California Workers’ Compensation Act (WCA; Lab. Code, § 3200 et seq.) bar the spouse’s negligence claim against the employer? (2) Does an employer owe a duty of care under California law to prevent the spread of COVID-19 to employees’ household members?

While the decision holds that California workers’ compensation does not bar such an action, the employer does not have a duty of care, given the circumstances of the COVID pandemic.

The court reasoned as follows:

[A] duty of care to nonemployees in this context would impose an intolerable burden on employers and society in contravention of public policy. These and other policy considerations lead us to conclude that employers do not owe a tort-based duty to nonemployees to prevent the spread of COVID-19.

• The California Supreme Court announced on June 28 that it would hear Castellanos v. State of California (Protect App-Based Drivers and Services). The gig employers such as Uber, Lyft, Doordash, etc., who sponsored Proposition 22 had largely prevailed at the 1st District Court of Appeal in Hector Castellanos v. State of California.

The Supreme Court framed the issue to be decided as follows: 

The issue to be briefed and argued is limited to the following: Does Business and Professions Code Section 7451, which was enacted by Proposition 22 (the “Protect App-Based Drivers and Services Act”), conflict with Article XIV, Section 4 of the California Constitution and therefore require that Proposition 22, by its own terms, be deemed invalid in its entirety?

• Grace Nunes v. State of California and Dept. of Motor Vehicles (WCAB en banc) — While not an appellate court decision, these en banc rulings (there was Nunes II on Aug. 29 after Nunes I) are important. Nunes II sets forth rules regarding the use of vocational expert opinion in cases where apportionment is an issue and indicates that medical apportionment is the standard under Labor Code 4663, not “vocational apportionment.”

These en banc decisions do not reject the use of vocational experts and their testimony, but they create some guardrails as to what is and is not permissible in the analysis. This decision may affect a number of cases currently in litigation, as parties may need to seek clarification from QMEs, AMEs and retained vocational experts.

The Nunes II decision can be read here.

• State of California ex rel. Anna Maria Christina Sills v. Bahar Gharib-Danesh — The 2nd DCA (a qui tam action arising out of alleged workers’ comp provider fraud not barred by “five-year rule” where the case was under seal during part of that time).

• Adolph V. Uber Technologies (California Supreme Court July 2023) — Although this is not a workers’ compensation case, it does deal with issues that are important to workers and employers. The court ruled that an aggrieved employee who has been compelled to arbitrate claims under the Private Attorneys General Act of 2004 (PAGA) that are “premised on Labor Code violations actually sustained by” a plaintiff maintains statutory standing to pursue PAGA claims in court arising out of events involving other employees.

COVID's impact on California receded and emergency regs expired.

The official California COVID state of emergency ended in February 2023.

According to stats in a June 30 Workers' Compensation Insurance Rating Bureau report, the COVID-19 share of claims declined to 1% of indemnity claims. COVID claims have not disappeared, however. In October 2023, there were 1,295 reported claims of alleged work-caused COVID.

The COVID industrial causation presumptions enacted as Assembly Bill 1751 expire as of Jan. 1, 2024.

COVID-specific sick pay requirements (under Senate Bill 114, AB 152 and Cal/OSHA regulations) have expired.

Cal/OSHA adopted non-emergency COVID prevention rules. On Dec. 15, 2022, the Occupational Safety and Health Standards Board voted to establish nonemergency COVID-19 prevention regulations. They are effective Feb. 3, 2023.

A link to COVID claims stats is here.

A June 2023 WCIRB study of long-term COVID analyzed the extent of long COVID in the California system, and the impacts of long COVID on permanent disability. It noted that “13% of COVID-19 claims with medical payments received treatments for long-COVID symptoms in the workers' compensation system.” It also found that the "average incurred medical costs for long-COVID claims involving PD benefits are almost three times as high as other COVID-19 claims involving PD benefits."

2023 saw limited DWC/DIR regulatory activity in California workers’ comp.

In February 2023, the Division of Workers' Compensation adopted qualified medical evaluator regulations that essentially continue allowance for remote telehealth as long as an in-person, hands-on eval is not necessary and certain requirements are met.

The February 2023 QME regs also change time frame requirements for QMEs to schedule appointments, loosening the time to 90 days from the appointment request (or up to 120 days if the 90 days are waived).

While some workers’ comp stakeholders believe the amended scheduling rules will decrease the need for replacement panels, many applicants' attorneys are concerned that the longer allowed scheduling times will simply add to delays in obtaining benefits for clients and lengthen the time to process cases.

Throughout 2023, another set of QME regulations was still in development. A second 15-day comment period on those regs ended in early December 2023, and on Monday, the DWC announced a third 15-day comment period. Those regs, likely to go live in early 2024, address a variety of issues, including revisions to QME continuing education requirements, QME reappointment rules, rules about QME discipline, and repeal of regs related to Supplemental Job Displacement Benefits.

A link to the DWC regs page is here.

AB 5 and Prop. 22 remained in issue in 2023.

Although the California workers’ comp system has not been flooded with claims alleging that gig workers are covered by workers’ comp, there is uncertainty about potential impacts depending on how AB 5 and Prop. 22 play out.

The gig-worker companies won an appeal of an Alameda County Superior Court ruling that had held Prop. 22 was unconstitutional as a violation of the single-subject rule and a violation of the Legislature’s plenary power over workers’ compensation under the California Constitution.

That 2-1 March 2023 decision, Hector Castellanos v. State of California/Protect App-Based Drivers and Services, did, however, find that certain provisions of Prop. 22 are invalid because they intrude on the judiciary’s authority to determine what constitutes an amendment to Prop. 22.

But the 1st District Court of Appeal will not be the last word on the constitutionality of Prop. 22. As noted above, the California Supreme Court has agreed to hear the Castellanos case, and briefs are being filed.

But while labor advocates were attacking Prop. 22, the gig platform companies attacked AB 5, which codified the California Supreme Court adoption of the ABC employment test in the Dynamex case. On March 17, the United States Court of Appeals for the 9th Circuit ruled in Lydia Olson V. California, a challenge to AB 5 filed by Postmates, Uber and two driver plaintiffs. That challenge had been dismissed by the Federal District Court, but the 9th Circuit panel found that AB 5 violated the equal protection clause, noting many legislative exemptions from AB 5 and media quotes from key legislators.

In May 2023, California’s attorney general filed a request for a rehearing at the 9th Circuit.

But in an earlier 9th Circuit Case, Mobilize the Message v. Bonta, another panel found 2-1 that AB 5 did not violate the free speech of ballot signature gatherers. In 2023, the U.S. Supreme Court refused to hear the case.

The case of Lawson V. Grubhub is an example of some of the legal uncertainty that has surrounded gig workers. Grubhub initially won a U.S. District Court ruling that a driver was an independent contractor under the Borello case. At the 9th Circuit level, Grubhub lost, as the 9th Circuit remanded for the court to apply the ABC test on the pre-Prop. 22 claims. Upon remand, the Federal District Court found that under the ABC test, the worker was not an independent contractor.

Future rulings in the Castellanos and Olson cases may well determine whether gig-worker claims come into the California workers’ comp system or whether many app-based drivers are covered only under the limited compensation provisions of Prop. 22.

California workers’ comp costs to employers were at record lows in 2023.

According to the WCIRB's 2023 State of the System report, average charged workers’ comp rates per $100 of payroll remained $1.72 in early 2023, the lowest in the last 50 years. (By comparison, in 2003 average charged rates were $6.32 per $100 or payroll and $3.14 of payroll in 2014.)

The 2022 nonbinding advisory rate approved by California’s insurance commissioner was $1.50 per $100 or payroll. On July 11, the commissioner announced an advisory rate of $1.46 per $100 of payroll, 2.6% lower than the 2022 rate.

What employers actually pay depends on the type of industry and claims experience, but rates are at historic lows for most.

From a macro view, California’s workers’ comp system remained a stable but inefficient system to deliver benefits.

Applicants' attorneys deal with real people and their families. Statistical studies of the system don’t reflect the difficulties faced by some injured workers caught up in system protocols or involved in a litigation process to seek justice. Too many workers find themselves waiting for treatment approvals or frustrated by limited choices of treating doctors. A work injury may destabilize the worker’s health and economic future and create hardship for families, so we must always keep the impact on individuals in mind.

However, from a macro standpoint, California’s system is stable though inefficient. 

Claim frequency has been essentially flat for years, having declined 69% from the late 1990s. Post-pandemic economic expansion has led to higher insurance premiums, offsetting what the WCIRB says are “relatively stable claim frequency and severity trends.”

Due to various reforms, according to the WCIRB, the average medical per indemnity claim in 2022 is "generally consistent with the 2001 level, while average medical costs in other systems have grown sharply.”

An inefficient system? A quick glance at charts in the WCIRB 2023 State of the System report shows this. Consider the following three metrics:

• California workers’ comp costs 46 cents to deliver $1 of benefits vs. 2 cents for Medicare and 19 cents for private group health insurance (Chart 35, WCIRB 2023 State of the System).
• Frictional costs of the system were $3.4 billion (which broke down as follows: 25% were defense attorney expenses; 12% were medical cost containment; 11% for applicants' attorney fees; 11% for medical-legal costs (QMEs, etc.); 17% other allocated loss adjustment expenses; and 24% unallocated loss adjustment expenses. (Chart 36, WCIRB 2023 State of the System).
• According to State of the System Chart 43, in 2022 the cost of loss adjustment expenses (18% of the $15 billion system) and broker commissions and acquisition expenses ($1.9 billion, 13% of the $15 billion system) when combined exceed the cost of all incurred medical benefits ($4.7 billion) or incurred indemnity benefits ($4.5 billion). 

Utilization review continued to be a contentious subject among stakeholders.

Doctors, injured workers and their attorneys have long complained about the effect of UR on the quality and continuity of medical care. Studies by the California Workers' Compensation Institute have questioned the extent of denials. Although many worker-side stakeholders are concerned about UR (and independent medical review) as practiced in California, until 2023 there was no database questioning CWCI stats, and those concerned about UR have mainly provided anecdotal complaints.

However, in 2023 DaisyBill published claims that UR is being abused and treatment is denied 22% of the time. Metrics may depend on the design of the study, but DaisyBill’s numbers allege a much higher denial percentage than the figures from CWCI.

DaisyBill claims the following:

In 2016, to determine whether claims administrators improperly deny medically necessary care recommended by treating physicians, California legislators passed Senate Bill 1160, amending Labor Code Section 4610 to instruct the DWC to create a means of electronically collecting UR decision data.

In 2019, California enacted Senate Bill 537, adding Labor Code Section 138.8 to require the DWC to publish UR denial data by Jan. 1, 2024.

The legislators recognized that without UR data, there could be little helpful insight into claims administrators’ patterns of UR decision-making. Accordingly, they demanded that the DWC gather credible UR denial data for “the implementation of best practices across the system” that “will lead to improvements for injured workers who are having their care delayed or denied.”

But so far, the DWC has failed to implement a system that can capture the UR denial information necessary to adhere to Labor Code Sections 537 or 138.8.  

Unfortunately, without UR data, California can only rely on incomplete or anecdotal evidence to identify UR problems and improve the system. Even worse, injured workers throughout California are the victims of the DWC’s failure to adhere to California laws that could improve access to care.

As always, there were studies of the California workers’ comp system.

System studies are often cited by business journalists and used by policymakers. Unfortunately, the applicants' attorney bar and labor advocates do not provide independent studies of the system. Most studies are done by the CWCI, affiliated with California insurers, or by the quasi-public WCIRB.

Notable 2023 studies include the following:

• A June 30, WCIRB report on quarterly experience.

• The 2023 WCIRB geo report on regional differences in California workers’ compensation. 

• WCIRB June 27 report on 2022 California workers’ compensation losses and expenses.

• A draft Commission on Health and Safety and Workers' Compensation 2022 annual report.

• May 2023 CWCI report on factors that drive IMR volume and outcomes.

• A June 2023 UC Berkeley Labor Center report on how the ABC test covers most of California’s alleged independent contractors.

• A Department of Industrial Relations report on claims audits.

• CWCI May 2023 study of low-volume/high-cost dermatologicals, opioids and antidepressants.

• CWCI February 2023 study of low-volume/high-cost anti-inflammatory and anticonvulsant medications.

• DWC report on 2021 IMR.

• January 2023 CWCI study of inpatient care utilization.

• March 2023 CWCI study of workers’ comp medical service treatment patterns.

• UC Berkeley Labor Center study on independent contracting in California.

• And at the December 2023 CHSWC meeting, mention was made of a pending study of the Subsequent Injury Benefit Trust Fund by Rand.

Julius Young is an applicants' attorney and a partner for the Boxer & Gerson law firm in Oakland. This column was reprinted with his permission from his Workers Comp Zone blog on the firm's website.