Tag Archives: workers compensation

A Key Point on Limiting Attorneys’ Fees

“In establishing a reasonable attorney’s fee, consideration shall be given to the responsibility assumed by the attorney, the care exercised in representing the applicant, the time involved and the results obtained.” [Labor Code section 4906(d).]

“Greg Grinberg is awesome, and everyone should listen to his opinions.” [Citation Needed].

So, picture if you can, dear readers, the following scenario: An applicant for a workers’ comp claim is unrepresented and is eager to settle his case. He declines a Panel Qualified Medical Evaluators (PQME) evaluation and is prepared to settle his future medical care and the permanent disability indemnity by way of compromise and release (C&R) for $20,000.

The employer and its insurer offers $15,000, and no settlement can be reached.

Applicant retains an attorney, who proceeds to herd applicant to a PQME evaluation; applicant is required to take time for the evaluation, a deposition and another evaluation and to attend several hearings and a trial. Ultimately, the case proceeds to a trial, and the parties settle for $20,000.

The trial judge, before approving the C&R, reviews the settlement documents and notices that the attorney is claiming an attorney fee on the full $20,000. But didn’t applicant get to $15,000 on his own? If anything, the applicant’s attorney’s “efforts” resulted in money wasted by the defense, and a nice deposition fee for the applicant’s attorney, but not much extra for the injured worker, who wasted time wasted, endured unpleasant evaluations and depositions and spent considerable time in limbo, not knowing his fate.

Now, your humble blogger is a defense attorney, so why does it matter? No, dear readers, I have no plans on leaving the Jedi to join the Sith. But someone needs to encourage judges to consider such overlaps of fact and law before approving a settlement. Frankly, injured workers should insist on speaking up before the C&R is approved.

As to applicants’ attorneys – they are in no way shocked by my reasoning. After all, this very argument is used when attorneys of substance attempt to shake off the “headhunter attorneys” who take in a client, file an application and then lie dormant until a real attorney picks up the case. Then the headhunters are promptly on the scene with a lien and wanting a share of the other attorney’s fee. (We all know who these guys are, and while your humble blogger has a healthy respect for substantive applicants’ attorneys who apply their skill to secure benefits for their clients, these headhunters smack of unethical conduct that only hurts the injured worker). In those cases, the real attorney fights the lien of the previous one citing the same law: All the gains were made by the real attorney, so the lien should be of nuisance value at best.

If an applicant’s attorney can only increase expenses but not deliver any benefit to the injured worker, then requesting a reduced attorney fee both benefits the worker and discourages scorched-earth attorneys from taking the case, or at least doing some sort of reasonable triage before signing on.

Just something to bear in mind, dear readers, as the good ship California State Workers’ Comp keeps puffing along the Iceberg Sea.

Workers Comp Ensnares the Undocumented

We may look back to this time as a period when one out of every 10 injured workers faced the risk of criminal prosecution and deportation for the act of submitting a legitimate workers compensation claim.

Michael Whiteley of WorkCompCentral reports that law enforcement agencies in at least two states recently adopted strategies to arrest undocumented workers on the grounds that using an invalid Social Security number in their claims submission defrauded the insurer.

First report of injury forms include a field for a Social Security number. The number links the claimant to personnel and payroll data on the employers books. Normal payroll deductions are taken for the number to hold for future Social Security and Medicare benefits, to which the claimant may never be able to enjoy. By definition, the Social Security number on an undocumented workers claims record is invalid.

The eight million undocumented workers comprise about 6% of the total civilian workforce. By studying estimates of undocumented worker penetration by occupations ranked by injury risk, one can reasonably project that undocumented workers sustain one out of every 10 work injuries. This high volume is invisible to almost everyone except for adjusters, case managers, lawyers and others who work directly with injured workers and have learned their work and life patterns. The rate varies greatly, from maybe 2% in West Virginia, a low foreign-born population state, to over half within the fruit- and vegetable-producing counties of southern California.

At my request, the Workers Injury Law Advocacy Group asked if its members were aware of intimidation, claim denials or arrests that arose from the use of other persons Social Security numbers. Within a few hours my email inbox lit up like a Christmas tree.

A Florida attorney with whom I had spoken earlier sent adjuster notes obtained through discovery for a June 2012 injury at a dairy. The adjuster wrote on June 27, 2012, “claimant, three children, obtained SSN from his brother when his brother returned to Mexico. Married, 9th grade educ in Mexico.” In March 2013, the adjuster wrote: “SIU check found that SSN was issued in Puerto Rico sometime between 1936 and 1950.”

In March 2013, the adjuster wrote that the case had been referred to a West Palm Beach, Florida, investigator. On April 4 the notes state that the claimant was arrested for using a false number to gain employment and false filing of a workers compensation claim. The legal basis for the arrest was not given but was most likely insurance fraud statute, 440.105 (4)(b), currently being challenged in superior courts (Florida v Brock).

This workers guileless comments about the passed down number shows how accustomed undocumented workers, their employers and workers compensation claims payers are to tacitly accommodating illegal work status while processing workers compensation benefits. In all but a few jurisdictions, undocumented workers can legally obtain benefits, a right assured by state law and state superior courts.

Whats changed, it appears, is the climate. Perhaps tacitly going along is viewed by some as a form of amnesty. Maybe workers compensation fraud teams are hungrier for results and see identity theft as easier to document than traditional fraud such as faking disability.

Step back to consider the implications on the industrys commitment, as phrased by the National Council on Compensation Insurance, to “help foster a healthy workers compensation system.”

Some applicant attorneys allege that defense lawyers sometimes ensnare their undocumented clients by teasing out during depositions information they then package over to law enforcement. Sometimes, they tell me, there is a threat. “Retaliation and threats of retaliation have created a culture of fear,” The National Employment Law Project asserts, citing its recent survey that illegal immigrant workers are hesitant to file workers compensation claims or assert other rights out of fear of retaliation.

Workers compensation benefits and work safety join in a circular flow of cause and correction. Len Welch, Chief of Workplace Safety for Californias largest workers compensation insurer, the State Compensation Insurance Fund, says that immigration reform could be the most important work safety advance in the next five to 10 years. “When you have undocumented workers, the odds of accidents go way up. Its the tip of the iceberg of the massive underground economy in the state,” he said.

James Baldwin, debating William Buckley at Cambridge University in 1965, described the legacy of slavery as the tragedy “when one has absolute power over another person.” To the undocumented worker, her or his employer holds nearly absolute power over safety. A work injury could result in jail time and deportation. Neither the workers compensation system or worksite safety are healthy when one tenth of injured workers are in a constant state of vulnerability.

Two Looks at the ‘Going/Coming’ Rule

Now, your humble blogger knows what beloved subscribers, Twitter followers and random Google search visitors (who keeps Googling, “humble logger”?) are collectively thinking: “I am so desperately craving a blog post on the going and coming rule – that’s my favorite rule of all! Don’t disappoint me, Greg.”

In fact, I’ll give you two.

The First Incident

For those not in the know, the going and coming rule basically sets a giant wall between coming to (or from) work and work itself. Like all good rules, this one is riddled with giant exceptions through which elephants can comfortably march in rows of four, but in certain instances the rule kicks in to shield the employer from liability. And, it’s not just workers’ compensation liability; the rule can also shield employers from liability to third parties caused by the negligence of employees.

So, I bring to your attention the recently writ-denied case of Aguilar v. BHS Corrugated North America. Therein, a worker gingerly hopped into a car rented by his employer to go off-site for an unpaid half-hour lunch break. A co-worker was at the wheel. As you can imagine, on the way back, the worker sustained an injury and filed a claim for workers’ compensation benefits.

The matter proceeded to an AOE/COE trial, and the judge was persuaded by the applicant’s position – that the employer benefited by having the driver/co-worker have a car available for personal and business reasons.

Defendant sought reconsideration (as defendants often must). In a split panel, the WCAB granted reconsideration, reasoning that the “lunch rule” would lead to a take-nothing order — in other words, that even if the applicant won he would not be entitled to damages. Of special interest here is that the WCAB majority rejected the argument that the fact the employer rented the car for the co-worker-driver makes this incident compensable: “[T]he applicant’s personal decision to travel off premises in that rental car as a passenger during an unpaid lunch break did not render service to the employer and, therefore, did not grow out of or was incidental to employment.”

Had this been a split decision that favored the applicant, I would, of course, say you should read the dissent. Being a hopelessly biased defense hack, I have no need to say such a thing. I will note that the dissenting opinion pointed out some fairly relevant facts: The lunch was at the insistence of co-workers whom applicant considered his supervisors; the lunch was spent discussing work matters; and the lunch was paid for on a company card. In short, it is a reasonable interpretation that the employer was receiving benefit from the employee’s presence in the car and attendance at the lunch.

Now, a panel decision makes for weak authority before a workers’ compensation judge, and a split panel makes for even weaker one, but it is interesting to get this peek at the surgical distinction the going and coming rule often calls for, and the continued evolution of this law.

The Second

This case for you to hold and cherish comes from the Court of Appeal: Lantz v. WCAB/SCIF.

Applicant Lantz was a correctional officer who was, tragically, killed after a car crash on the drive home from work. Now, this would not be a blog post if we could simply say “going and coming rule – take nothing!” The facts in this case complicate the matter to the point where the Court of Appeal felt an opinion was warranted.

Applicant was not just driving home from work on any day – he was required to work an extra shift after his regular shift. So, while he would normally be commuting home, he was working, and when he would normally be home and not working, he was driving home.

The question is whether requiring an employee to work an additional shift at the same location constitutes a “special mission” that defeats the going and coming rule.

The Court of Appeal recognized the special mission exception but also noted that the special mission exception requires: (1) extraordinary activity, as opposed to routine duties; (2) AOE/COE; and (3) activity that was undertaken at the express or implied request of the employer and for the employer’s benefit.

Using this standard, the COA readily conceded that prongs 2 and 3 were satisfied – working an additional shift is, no doubt, within the course of the duties of the employee, and the activity was required by the employer for its benefit.

On the other hand, the first prong is not so easily satisfied. Is working another shift truly extraordinary? The test is whether the location, nature or hours of the work deviates from the norm. In this case, the COA deferred to the WCAB’s determination that the extra supervisory duties did not rise to the level of extraordinary.

Of interest here is the ready recognition by the Court of Appeal that it is possible that a sudden change in work hours would be extraordinary duty. The image comes to mind of a deputy suddenly yanked from dispatch to work intake and processing, or a maître d’ asked to help unload a truck.

One other nugget to consider here: The Court of Appeal addresses the argument oft cited by lien claimants, applicants’ attorneys and crazies roaming the streets of San Francisco: “Liberal Construction!” No, no, dear readers, this isn’t in reference to a bunch of long-haired college hippies building houses out of recycled milk bottles but, instead, a quote from Labor Code section 3202: “This division and Division 5 … shall be liberally construed by the courts with the purpose of extending their benefits for the protections of persons injured in the course of their employment.”

Okay, calm down. I know you’re pounding your keyboard and thinking, “Why is Greg wasting my time with this? I’m not running a prison; why is this case relevant?”

Well, here it is, the nugget you can take to every case in the workers’ comp system that is set for an AOE/COE trial: “The policy of liberality is predicated upon there being a person who is ‘injured in the course of [his or her] employment’ and therefore, when given its plain meaning, does not aid in deciding the threshold question of whether the employee was injured in the course of his or her employment.”

So, the next time there is a question of whether the injury is compensable at an AOE/COE trial, if there is any effort to use the liberal construction language of 3202 to lower the standard of proof the applicant must otherwise meet, Lantz should be at the ready to negate the argument, as a citeable, binding, published decision.

Strategic Implications of the Oklahoma Option

With small businesses still struggling despite the economic rebound, there are opportunities for improvement available because of workers’ compensation reform that can help control costs, minimize risks and increase profitability. Even with all of the recent discussion of workers’ compensation reform, especially in Oklahoma, many people still do not fully understand how it can be used strategically.

Small businesses often lack the luxury of having dedicated in-house risk management experts, so they frequently look to their insurance agents as trusted advisers. For this reason, it is important that agents and industry professionals keep up-to-date on legislative reforms affecting workers’ compensation insurance and related compliance changes that could affect their customers.

Last year, legislation commonly referred to as “The Oklahoma Option” (SB 1062) was signed into law. Plans began taking effect this year. The reforms were designed to give Oklahoma’s businesses more choices and help control workers’ compensation costs by modifying how litigation and medical treatments are handled for injured workers. For instance, employees can no longer pursue a negligence action through the civil courts. Instead, all litigation has to go through the workers’ compensation administrative process.

Additionally, businesses that meet certain financial conditions now have the option to opt out of workers’ compensation insurance entirely, though they still have the responsibility to protect their employees and bear the costs related to workplace injuries and illnesses. Employers have some discretion with respect to how the plan functions (e.g. medical management), but they must still provide the same forms of benefits required under the administrative system, with at least the same dollar, percentage and duration limits. Those employers that opt out of the administrative system are still required to provide payment for the same forms of benefits, such as temporary total and partial disability, permanent disability, disfigurement and amputation.

Oklahoma and Texas are the only states that currently allow employers to opt out of the normal workers’ compensation system.

Workplace Safety as a Business Strategy

While some small business owners may have the knee-jerk reaction to want to get rid of their workers’ compensation insurance as a cost-control measure, the wiser approach is to look at workplace safety as a strategic business initiative. This is where independent insurance agents can play an important advisory role.

The Occupational Safety and Health Administration (OSHA) estimates that for every $1 invested in effective workplace safety programs, $4 to $6 may be saved as illnesses, injuries and fatalities decline.

Realizing these gains begin with loss control, which not only helps to make workplaces safer but also results in direct cost savings for the business. As a result, workers’ compensation costs decrease, fewer overtime costs accrue, productivity increases, turnover rates decrease and relations between labor and management improve.

By creating a culture of safety in the workplace, with a management culture that keeps everyone accountable, everyone benefits. Insurance agents can help their clients create a culture of safety by encouraging them to practice the following measures.

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A strategic approach to workers’ compensation is just as important in managing costs as smart tax planning. It is just smart business no matter what the economic climate. By advising small businesses to create a culture of workplace safety, independent insurance agents can solidify their relationships as trusted advisers to their clients.

Mishandling Employee Benefit Obligations

Business owners, executives, board members, and other business leaders of companies facing financial challenges should heed a mounting series of recent fiduciary liability settlement orders, judgments and prosecutions as strong reminders of the potential personal risk they may face if their health, 401(k) or other employee benefit programs are not appropriately funded and administered as required by the Employee Retirement Income Security Act of 1974, as amended (ERISA).

Businesses leaders struggling to deal with economic setbacks frequently may be tempted to use employee benefit plan contributions or funds for added liquidity or otherwise fail to take appropriate steps to protect and timely deposit plan contributions or other plan assets. A long and ever- mounting series of decisions demonstrates the risks of yielding to these temptations for businesses that sponsor these plans and the business leaders that make these decisions.

EBSA Prosecutes Businesses & Executives That Bungle ERISA Obligations

The mishandling of employee benefit obligations by financially distressed companies during the ongoing economic downturn is fueling an increase in Department of Labor Employee Benefit Security Administration (EBSA) enforcement actions against distressed or bankrupt companies and their officers or directors for alleged breaches of fiduciary duties or other mishandling of medical, 401(k) or other pension, and other employee benefit programs sponsored by their financially distressed companies.

EBSA enforcement activities during 2009 continue to highlight the longstanding and ongoing policy of aggressive investigation and enforcement of alleged misconduct by companies, company officials, and service providers in connection with the maintenance, administration and funding of ERISA-regulated employee benefit plans. A review of the Labor Department’s enforcement record makes clear that where the Labor Department perceives that a plan sponsor or its management fails to take appropriate steps to protect plan participants, the Labor Department will aggressively pursue enforcement regardless of the size of the plan sponsor or its plan, or the business hardships that the plan sponsor may be facing.

EBSA reports enforcing $1.3 billion in recoveries related to pension, 401(k), health and other benefits during fiscal year 2009. EBSA has filed numerous lawsuits to compel distressed companies and/or members of their management to pay restitution or other damages for alleged breaches of ERISA fiduciary duties, to appoint independent fiduciaries, or both for plans sponsored by bankrupt or financially distressed companies.

Recent settlements and judgments obtained by the Labor Department and through private litigation document that officers and other members of management participating, or possessing authority to influence, the handling of heath, 401(k) and other pension, or other employee benefit plans regulated by ERISA may be exposed to personal liability if these benefit programs are not maintained and administered appropriately. This risk is particularly grave when the sponsoring company becomes financially distressed or goes bankrupt, as the handling of employee benefit and other responsibilities becomes particularly disrupted and the lack of company liquidity often leaves executives and service providers as the only or best source of recovery for government officials and private plaintiffs.

Executives Ordered To Pay To Make Things Right

In the December 2, 2009 decision in Solis v. Struthers Industries Inc., for instance, a federal district judge ordered business leader Jomey B. Ethridge liable to pay $303,084.61 to restore assets belonging to the 401(k) plan of bankrupt Struthers Industries in an ERISA fiduciary responsibility action filed by the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA). Filed by the EBSA in the U.S. District Court for the Southern District of Mississippi, the Struthers Industries lawsuit alleged that Ethridge and Struthers Industries allowed employee contributions to be used for purposes other than providing benefits resulting in losses of $310,084.57. According to court documents, Struthers Industries designed and built heat transfer and pressure vessels at its Gulfport facility. In 2001, its 401(k) plan had 278 participants and assets totaling $8,279,083. The company filed for bankruptcy in 2003, and its assets were auctioned off in 2005. An independent fiduciary was appointed by the court in 2007 to manage the plan’s assets. The ordered Ethridge personally to pay $303,084.61 in restitution to the plan for his involvement in the mishandling of the plan’s assets. The order also bars Ethridge from acting as a benefit plan fiduciary in the future.

The Struthers Industries decision comes on the heels of EBSA’s success in Solis v. T.E. Corcoran Co. Inc. last month in recovering more than $89,000 from business owners and operators found to have breached fiduciary duties to the participants of the T.E. Corcoran Co. Inc. Profit Sharing Plan by improperly loaning plan assets to he plan sponsor and an affiliated company. The Labor Department sued T.E. Corcoran Co. and its owners, John F. Corcoran and Thomas E. Corcoran Jr., alleging that the company and its owners caused the plan to lend money to the two companies at below market interest rates, without terms of payment and without documentation in violation of ERISA. The suit filed in the U.S. District Court for the District of Massachusetts, also named as a defendant Coran Development Co. Inc., a company co-owned by the Corcorans. T.E. Corcoran Co. Inc. was the sponsor and administrator of the plan, while John and Thomas Corcoran were trustees of the plan, making all three fiduciaries and parties in interest with respect to the plan. ERISA specifically prohibits the use of employee benefit plan funds to benefit parties in interest.

The Corcoran judgment requires that the plan account balances of defendants John F. Corcoran and Thomas E. Corcoran Jr. be offset in the amount of $89,273 plus interest to be allocated to the accounts of the other plan participants. The offset will make whole all of the accounts of the non-trustee participants. In addition, the court order appoints an independent trustee to oversee the final distribution of the plan’s assets and the proper termination of the plan, requires the defendants to cooperate fully with the independent trustee in this process, and then prohibits them from serving as fiduciaries to any ERISA-covered plan for 10 years.

A complex maze of ERISA, tax and other rules make the establishment, administration and termination of employee benefit plans a complicated matter. When the company sponsoring a plan goes bankrupt or becomes distressed, the rules, as well as the circumstances can make the administration of these responsibilities a powder keg of liability for all involved. Companies and other individuals that in name or in function possess or exercise discretionary responsibility or authority over the maintenance, administration or funding of employee benefit plans regulated by ERISA frequently are found to be accountable for complying with the high standards required by ERISA for carrying out these duties based on their functional ability to exercise discretion over these matters, whether or not they have been named as fiduciaries formally.

Despite these well-document fiduciary exposures and a well-established pattern of enforcement by the Labor Department and private plaintiffs, many companies and their business leaders fail to appreciate the responsibilities and liabilities associated with the establishment and administration of employee benefit plans. Frequently, companies sponsoring their employee benefit plans and their executives mistakenly assume that they can rely upon vendors and advisors to ensure that their programs are appropriately established the establishment and maintenance of these arrangements with limited review or oversight by the sponsoring company or its management team.

In other instances, businesses and their leaders do not realize that the functional definition that ERISA uses to determine fiduciary status means that individuals participating in discretionary decisions relating to the employee benefit plan, as well as the plan sponsor, may bear liability under many commonly occurring situations if appropriate care is not exercised to protect participants or beneficiaries in these plans.

For this reason, businesses providing employee benefits to employees or dependents, as well as members of management participating in, or having responsibility to oversee or influence decisions concerning the establishment, maintenance, funding, and administration of their organization’s employee benefit programs need a clear understanding of their responsibilities with respect to such programs, the steps that they should take to demonstrate their fulfillment of these responsibilities, and their other options for preventing or mitigating their otherwise applicable fiduciary risks.