Labor Code Section 4558 Clarified

Wednesday, April 6, 2011 | 0

By Richard M. "Jake" Jacobsmeyer
Shaw, Jacobsmeyer, Crain & Claffey 

The California 2nd District Court of Appeal has issued a decision clarifying an important exception to the exclusive remedy provisions of Labor Code Section 3600. In Lefiell Manufacturing v. Super. Ct. (Watrous) the Court has ruled on two issues it deemed both important and unclear.

Plaintiff Watrous filed a four-count complaint based on an allegation of his employer’s violation of Labor Code Section 4558, the so-called “power point” exception, which allows and employee to sue his employer where it can be shown the employer knowingly and intentionally removed, or knowingly and intentionally failed to install a point of operation guard on a power press (a machine that shapes metal using a die). In addition to alleging the cause of action for violation of Section 4558, the employee also alleged general negligence, and product liability counts based on improper design, manufacture and installation of the equipment which injured him. Watrous’ wife also filed a loss of consortium claim on each of the same four counts.

The employer demurred (filed a pleading asserting the complaint’s allegations were defective) to the complaint’s causes of action except for the specific count alleging the power point exception and also to the loss of consortium alleged by the spouse on all causes of action including the power point exception. The trial court ruled the employee was entitled to assert the negligence and product liability causes of action based on the allegation of violation of Section 4558. The court determined if the employee prevailed on the Section 4558 allegation, the employer’s conduct was outside the exclusive remedy provisions of the Labor Code and the additional counts were also outside the Labor Code.  His holding on the wife’s claim for loss of consortium was based on a similar analysis.

The Court of Appeal however disagreed with this approach. Noting Section 4558 is a narrow exception with a heightened standard of proof and requires a different standard of proof on the part of plaintiff than does actions for negligence and product liability.  The Court quoted from a prior decision in a different case:

“[i]f such action cannot be brought on its own where the facts fail to establish all the elements of the power press exception under section 4558, it follows that individual causes of action against an employer which do not meet the requirements of section 4558 cannot be bootstrapped onto a civil action for damages which is properly brought under Section 4558.”

The court further noted there was not much reason to an employee to attempt to assert negligence or product liability actions based on the power press exception as there would be no additional or enhanced recovery on those counts. In essence, the court held if one can prevail on the power press, with its enhanced level of showing on the part of the employee, there is no need for additional counts based on the same liability theory. The court therefore ordered the lower court to grant the defendant’s demurer to the non-Labor Code Section 4558 counts.

The court also linked the spouse’s recovery to the same rational. It held the wife’s claim, to the extent it was derivative of the Labor Code § 4558 allegations, was also outside the exclusive remedy provisions of the Labor Code.

“…Watrous’s power press injury is excluded from the exclusive remedy rule in section 3600.  Since Watrous’ injury is outside the workers’ compensation bargain, his spouse’s dependent claim also falls outside the compensation bargain of section 3600.  The loss of consortium claim, however, is only viable if Watrous establishes his power press injury.  Thus, Watrous’s spouse must plead the power press injury as the “tortious conduct” element of her loss of consortium claim. 

The court remanded with instructions to dismiss all the causes of action except the specific allegations based on a violation of Section 4558. It should be kept in mind this result does not guarantee a favorable result for plaintiffs. As the court has pointed out, Section 4558 requires the plaintiffs’ to meet a heighted burden requiring them to show actual knowledge on the part of the employer regarding the removal or failure to install a point of operation guard on a power press. This will require the employee to prove first of all. The equipment he was operating qualifies as a power press, that there was no guard on the machine at the time, that a guard was either designed to be part of the machine or that the employer removed the guard and that the failure to install or the removal was knowingly done by a managing employee for his employer. Failure to meet any of these elements will serve as a bar to both his and his wife’s claims for damages.

To read the Waltrous decision, go here: http://www.workcompcentral.com/pdf/2011/misc/Watrous03302011.pdf

WC Nuggets:

Occasionally I come across a piece of information that really needs to be shared. I obtained one such “nugget” a couple of weeks ago while attending and participating as a panelist at the “Current Issues in Workers’ Compensation,” put on annually but the Montarbo Law firm. Those who have had the opportunity to attend Rich Montarbo’s programs (which he has been putting on for many years now) know he puts on one of the premier educational programs in Northern California. If you ever get a chance to attend his program, always in Sacramento and usually sometime in the latter part of March, it is well worth the effort. Rich’s comprehensive case law presentation alone is worth the price of admission with his balanced, pragmatic approach to reviewing and interpreting case law. His other speakers usually hit on the most relevant topics that are the current discussion at the Workers' Compensation Appeals Board and are also worthwhile.

One of the more troublesome issues that has periodically come up over the past few years has been the provision in Labor Code Section 4064 requiring an employer to pay an applicant’s attorney fees where the employer files the application for adjudication of claim. While this provision is problematic for issues such as discovery or compelling medical legal exams, one of the applications of this section that was the difficult for defendants to accept was an interpretation Stipulations with Request for Award or a Compromise and Release were treated as an application for purposes of that section. If the WCAB did not approve the settlement, and the employee later obtained representation, attorney fees could be awarded. There have been in the past several low level decisions of the WCAB and even one writ denied case so holding.

 The obligation to pay attorney fees when a settlement document was filed as the original pleading simply does not make any sense. Arguably it is not just the employer but also the employee who is filing the document to seek approval and the potential obligation to pay attorney fees if the WCAB found the agreement defective (even if only on some technical ground) likely had a chilling effect on some defendant’s willingness to reach informal agreements with injured workers. I have even had some judges use the issue as a hammer to compel my clients to increase the value of settlements beyond what they would ordinarily be willing to pay to avoid the potential attorney fee issue. This has been a particularly troubling issue in the current environment where it seems like every judge is insisting defendants have to obtain rebuttal to their own medical reports to address Almaraz/Guzman in every single case or even Ogilvie rebuttal in unrepresented cases!  How a workers' compensation judge can order a defendant to provide an Ogilvie analysis to rebut the Permanent Disability Rating Schedule is beyond my comprehension but I have seen it done (our office has one such case at the WCAB on a Petition for Removal).

Thanks to Rich, at least the attorney fee issue is one we have a handle on in the future.

He pointed out ADR 10400(b) which was recently amended to read as follows:

“(b) A case opening Compromise and Release Agreement, a case opening Stipulations with Request for Award, and a Request for Findings of Fact under section 10405 are each an "application" for purposes of invoking the jurisdiction of the Workers' Compensation Appeals Board, but none of these documents shall be deemed an application for purposes of Labor Code section 4064(c). (Emphasis added)

This provision was adopted as part of revisions to the regulations which became effective 11/17/2008.  Prior to that date, the last phrase in red had not been a part of the regulation.  While there are no cases that specifically have ruled on the applicability of the section as amended, it has been cited with approval in a panel decision in a case involving attorney fee issues which arose prior to but was decided after the effective date of the regulation. (See Mendieta v Copenhagen House of Danish, attached to this message).  Since the definition of an “application” for purposes of Labor Code § 4064 was originally contained in this section, there is no reason to anticipate there is any legal impediment to the regulation defining an application for purposes of Labor Code § 4064 as excluding settlement documents.  Further it makes sense to exclude such filings which are not intended initiate litigation, requiring an employee to obtain counsel, but are intended to resolve workers’ compensation claims in the manner intended, without the need for litigation.

Thanks to Rich for sharing this nugget and I look forward to his program again next year. If he has another wine and food pairing to compare to this year’s end of program feast he will have to close his registration much earlier than usual.

Another troublesome issue, especially in Southern California, has been applicant attorney evading employer’s medical provider network and obtaining treatment using Labor Code Section 4605, which allows an employee to treat at their own expense, with a physician of their choosing. Some applicant firms have been making a practice of sending their clients to their “house docs” and using the reports as their medical legal evaluations thereby avoiding both the employer’s MPN physicians and the limitations in Labor Codes 4060/4061/4062. A frequently touted WCAB panel decision had declared reports from such physicians, while not the financial obligation of defendant, as still being admissible in proceedings before the W.C.A.B.  In this fashion applicant attorneys had been able to completely circumvent the medical legal restrictions on obtaining reports. Defendants had no such ability and were therefore handicapped in obtaining evidence as they were restricted to the medical-legal process to obtain reports.

A recent WCAB panel decision has called into question whether such reports might be admissible. While not specifically on point to Labor Code Section 4605, the holding in the case would seem to be equally applicable to admission of reports obtained under that section. In Scudder v Verizon, the WCAB panel ruled reports obtained by the applicant from physicians who were neither in the employer’s MPN nor referred by the employee’s predesignated personal physician were not admissible before the WCAB.  In Scudder, the applicant had predesignated his personal physician.  However that physician did not refer applicant to the specialists whose reports were obtained by his attorney.  Instead the attorney referred the applicant directly to his hand selected specialists. The workers' compensation judge adopted opinions of the attorney selected opinions in awarding benefits.

While not commenting on Labor Code Section 4605, the WCAB held the employee was limited to physicians to whom he was referred by his predesignated physician or to the employers MPN physicians for purposes of obtaining treating physician reports or Labor Code Section 4060 et seq for medical legal reports. Since the reports relied upon by the WCJ did not qualify under any of these criterion, the WCAB ordered the WCJ to exclude the defective reports and consider the case based on admissible evidence.

It seems to me the WCAB has realized it had created a huge hole in the medical legal system by allowing applicant attorneys to hand select physicians outside the medical legal process and, effectively, buy their own medical legal opinions. If employees could obtain such opinions, the WCAB might ultimately have been obligated to allow employers to obtain reports under Labor Code Section 4050 or 4064 to even the playing field which would have effectively rendered the carefully arranged medical legal provisions, intended to provide something of a level playing field for obtaining reports by either side, obsolete.

Richard M. "Jake" Jacobsmeyer is a founding partner with the Shaw, Jacobsmeyer, Crain & Claffey law firm in Oakland. This column was reprinted with his permission from the firm's client newsletter.