December 11, 2012

Workers' Compensation In California: No Longer Just Permanent And Stationary


The workers' compensation landscape in California is changing, and employers need to be prepared for what lies ahead.

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Senate Bill 863 was passed on August 31, 2012 and signed into law by Governor Brown on September 1 for a January 1, 2013 effective date. This bill not only affects the workers’ compensation system in California but also has far reaching effects for employers under the California Fair Employment and Housing Act (FEHA) and the Americans with Disabilities Act of 1990 (ADA). With lengthy delays for treatment and outcomes, the old system wasn’t working.

In this author’s opinion, the most significant issues that employers face with the changes in SB 863 are with the supplemental job displacement vouchers, increases in permanent disability, and the independent review process.

The bill increases permanent disability and an independent medical review process (IMR), which may be problematic for an employer because claims that are not causally related or where there is no injury accepted can have a significant impact on the employer. In fact, an independent medical review can only be requested by an injured worker following a denial, modification, or delay of a treatment request through the utilization review (UR) process. The catch is that employers and insurance carriers cannot request review of treatment authorizations.

There is a right to appeal an independent medical review determination to the trial level Workers’ Compensation Appeals Board on the basis of fraud, conflict of interest, or mistake of fact. The reviewer’s underlying medical decision-making, however, cannot be overturned by a judge. The remedy, if an appeal is granted, is a referral to a different reviewer for another evaluation. In short order, the employer is stuck with the decision. Please note that this does not apply if the injury is in question!

What does this mean in terms of federal law for California?

To best answer this question one must understand the basis of these federal laws. Numerous states have anti-discrimination laws which can differ from federal law but are designed to encompass the spirit of the federal laws. These laws are provided in addition to the federal law in order to offer more desirable avenues for victims of harassment and discrimination. California is one state that has enacted such laws.

For the purpose of SB 863, we need to explore the California Fair Employment and Housing Act. This law prohibits discrimination based on race, color, religion, national origin, physical or mental disability, medical or related medical condition, marital status or sexual orientation. The act applies to all employers, labor organizations, employment agencies and any other entity or person who engages in or compels an act of discrimination. It also allows for the imposition of punitive damages when a corporate defendant’s officers, directors or managing agents engage in harassment or discrimination. In fact, the definition of disability under the California Fair Employment and Housing Act is more broad than Federal law as something that “limits” a major activity where the federal law states that it must “substantially limit” a major activity.

The enactment of SB 863 will pose an important question for employers; “where does workers’ compensation end and discrimination start?” As of January 1, 2013, California employers need to have the answer to that question because newly added Labor Code Sec. 4658.7 addresses that problem and ties into SB 863.

Under the current system, injured workers may be offered supplemental job displacement vouchers that can be used to pay for job retraining. Currently, the vouchers range from $4,000 to $10,000 and the permanent disability award is often determined a long time after the last date of temporary disability payable, so the use of the vouchers has been low. The amount is based on the permanent disability rating for the injured worker and does not have to be paid until a final determination of the permanent disability rating has been determined.

For injuries after January 1, 2013, under SB 863 the voucher amount will be fixed at $6,000 for all qualifying injured workers, and it is to be offered when the injured worker reaches permanent and stationary status and the treating doctor reports on work abilities and limitations resulting from the injury.

With Labor Code 4658.7, the trigger for a voucher will be when an employer does not offer regular, modified or alternative work within 60 days of receipt of a P&S report finding that the injury has caused permanent partial disability. Under state and federal law, employers must provide “reasonable accommodations” for disabled workers. This obligation includes a requirement to engage in a good faith “interactive process,” in which the parties discuss the employee’s limitations and explore possible accommodations.

A good case in point is the $1,571,500 lesson learned in Cuiellette v. City of Los Angeles (California Court of Appeal, Second Appellate District, 4/22/11). The significant point from this case is that if an employee seeks reassignment as a reasonable accommodation, the employer must consider if the employee can perform the essential duties of the position sought, rather than those of his current or prior position.

The only way for an employer to level the playing field and avoid potential landmines is with objective baseline testing such as the Electrodiagnostic Functional Assessment Soft Tissue Management baseline program, which provides employers the data necessary to only accept claims that arise out of the course and scope of employment.

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