Yesterday we issued a summary of workers' compensation bills recently signed into law. The most significant is SB 1127, which is outlined in depth here. A webinar will be scheduled shortly to delve into these changes and their implications.
On Sept. 29, 2022, Gov. Gavin Newsom signed into law SB 1127. The bill makes several changes to coverage by a statutory presumption of compensability. As explained in the Assembly Floor Analysis, "presumptions of compensability have been adopted, some many decades ago, to reflect unique circumstances where injuries or illnesses appear to logically be work related, but it is difficult for the injured worker to prove it is work related."
There are many presumptions in the system, such as the presumption of compensability when a claim is denied more than 90 days from service of the claim form. (See Sullivan on Comp Section 5.16 Presumption of Injury –– 90-Day Rule.) Generally, that presumption is not affected by SB 1127. What is affected are the statutory presumptions covering firefighters and peace officers employed by state and local governments. (They are discussed in Sullivan on Comp Section 5.17 Presumption of Injury –– Public Employee in General and Section 5.18 Presumption of Injury –– Public Employee's Covered Condition.) Also affected are the COVID-19 presumptions (discussed in Sullivan on Comp Section 5.19 Presumption of Injury –– COVID-19). In 2020, Gov. Newsom signed a law creating a rebuttable presumption that illness or death resulting from COVID-19 is compensable for front-line workers and employees who contract COVID-19 due to a workplace outbreak, and that law recently was extended through Jan. 1, 2024.
SB 1127 made these changes to the workers' compensation system:
- It increases the maximum time from 104 weeks to 240 weeks that specified firefighters and peace officers can access wage replacement disability benefits for cancer work-related injuries. This change affects claims filed by specified peace officers and firefighters with dates of injury on or after Jan. 1, 2023.
- It reduces the time period from 90 to 75 days for an employer to deny liability for a workers' compensation claim for specified presumptive injuries. This change affects claims filed by specified peace officers and firefighters and is effective Jan. 1, 2023.
- It increases the penalty when liability has been unreasonably rejected for claims of injury or illness, as defined in LC 3212 - LC 3213.2, to five times the amount of the benefits unreasonably delayed due to the rejection of liability, up to $50,000. This change affects claims filed by specified peace officers and firefighters, as well as claims falling under the COVID-19 presumptions, and applies retroactively effective Jan. 1, 2023.
Increase in Wage Replacement to 240 Weeks
According to the bill's author, Senate President Toni Atkins, "SB 1127 ensures that temporary disability awarded for a cancer claim is adequate to protect the injured firefighter over time as they battle their illness by removing the statute of limitations for cancer claims and by allowing up to 240 compensable weeks for those suffering from occupational cancer where that cancer has caused a temporary disability." SB 1127 adds subsection (d) to LC 4656, which states that "for an employee who suffers from an injury or condition defined in Section 3212.1, aggregate disability payments for a single injury occurring on or after January 1, 2023, causing temporary disability shall not extend for more than 240 compensable weeks."
The increased disability applies only to firefighters and peace officers who qualify for the cancer presumption under LC 3212.1. But unlike the other exceptions to the 104-week limit for temporary disability in LC 4656(c) (for example, acute and chronic hepatitis B, acute and chronic hepatitis C, amputations, severe burns, etc.), the 240 compensable weeks available to firefighters and peace officers covered by LC 3212.1 are not limited to five years from the date of injury. So those employees potentially could receive temporary disability benefits for a cancer-related injury more than five years after the date of injury.
See Sullivan on Comp Section 9.14 Time Limit on Payment on or After April 19, 2004 and Section 9.43 One Year's Salary –– Public Safety Employee.
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Time To Deny Reduced to 75 Days
The next two changes were adopted because, according to Sen. Atkins, "Regrettably, today injured workers continue to experience delays and denials that prevent their claims and access to medical care from moving forward in a timely manner. SB 1127 reduces the timeline for acceptance or denial of injury claims, presumptive or otherwise ..."
For the second change, SB 1127 adds subsection (b)(2) to LC 5402. LC 5401(b)(1) establishes the 90-day investigation period for most claims. LC 5401(b)(2) states, "Notwithstanding paragraph (1), for injuries or illnesses defined in Sections 3212 to 3212.85, inclusive, and Sections 3212.9 to 3213.2, inclusive, if the liability is not rejected within 75 days after the date the claim form is filed pursuant to Section 5401, the injury shall be presumed compensable under this division. The presumption of this subdivision is rebuttable only by evidence discovered subsequent to the 75-day period." LC 5401(b)(2) covers the statutory presumptions for publicly employed firefighters, peace officers and first responders. It does not cover the presumptions for illnesses or deaths related to COVID-19, which have shorter investigation periods.
The abbreviated investigation period under LC 5401(b)(2) goes into effect Jan. 1, 2023. LC 5401(b)(2) doesn't have retroactive application, so it doesn't affect claims that were timely denied within the 90-day investigation period before Jan. 1, 2023. LC 5401(b)(2), however, also doesn't limit its application to dates of injury occurring after that time, and it probably applies to injuries before the effective date. So, for injuries covered by LC 5401(b)(2) filed on or after Oct. 3, 2022, which is 90 days before Jan. 1, 2023, the employer should have decision dates by the end of the year. For injuries covered by LC 5401(b)(2) filed on or after Oct. 18, 2022, which is 75 days before Jan. 1, 2023, employers should begin using the 75-day investigation period.
Penalty Increase to $50,000
Finally, SB 1127 increases the penalties for unreasonably rejecting claims covered by a statutory presumption. LC 5414.3 is added to the Labor Code, and LC 5414.3(a) states, "Notwithstanding Section 5814, when liability has been unreasonably rejected for claims of injury or illness as defined in Sections 3212 to 3213.2, inclusive, the amount of the penalty shall be five times the amount of the benefits unreasonably delayed due to the rejection of liability, but in no case shall the penalty exceed fifty thousand dollars ($50,000). The question of rejection and the reasonableness of the cause shall be determined by the appeals board in accordance with the facts." Unlike the other changes, this one will affect most private employers because LC 5414.3 also applies to the presumptions for illnesses or deaths related to COVID-19 in LC 3212.86 - LC 3212.88.
Although the statute requires the WCAB to determine whether the rejection of liability is reasonable, if the appeals board determines that an employer unreasonably denied a claim, the statute does not give it discretion regarding the amount of the penalty. Unlike LC 5814(a), which gives the board discretion to issue a penalty "up to 25 percent" of the amount unreasonably delayed, up to $10,000, LC 5414.3 states that if liability has been unreasonably rejected for a claim covered by a statutory presumption as defined in LC 3212 - LC 3213.2, the penalty "shall" be five times the amount of the benefits unreasonably delayed, up to $50,000.
Generally, the employer always has a duty to proactively investigate each claim, and denial of a claim without genuine doubt as to liability can result in a penalty (see Sullivan on Comp Section 13.14 LC 5814 –– Genuine Doubt and Section 13.20 Unreasonable Delay –– Duty to Investigate). The penalty amount of $50,000, however, is much steeper here. In addition, per LC 5414.3(b), employers found to have violated LC 5414.3 "shall be reported to the audit unit within the Division of Workers’ Compensation." So, they could be subject to additional penalties imposed by the Audit Unit. (See Sullivan on Comp Section 13.50 Audit Penalty et seq.)
LC 5414.3(c) states, "This section shall apply to all injuries, without regard to whether the injury occurs before, on, or after the operative date of this section." So, although the statute does not go into effect until Jan. 1, 2023, the penalty provisions will apply to all dates of injury. Although employers might challenge the constitutionality of retroactive application of these penalty provisions, previous challenges to retroactive changes that adversely have affected injured workers have been upheld as an exercise of the Legislature's plenary power of the workers' compensation system under the California Constitution. (See Sullivan on Comp Section 1.9 California Constitution.) So it's unlikely that constitutional challenges to the penalty provisions will be successful.
The Senate Floor Analysis addressed SB 1127's penalty provision and noted, "Combined with the shortened window for investigation under this bill, employers could face more incentive to accept claims without investigation." So the Legislature recognized that the changes could result in more claims being accepted without a proper investigation. In passing SB 1127, the Legislature clearly wanted employers to accept more claims covered by a statutory presumption.
Accordingly, SB 1127 forces employers to rethink how they approach injuries or illnesses covered by the statutory presumptions under LC 3212 - LC 3213.2. They must be confident that they have a genuine factual, legal or medical basis for denying a claim before doing so. Otherwise, the cost of the denial potentially could exceed the cost of accepting the claim.
Because the changes apply retroactively, parties might want to revisit any previously denied claims. Employers, however, don't have much of an incentive to accept claims covered by the statutory presumptions under LC 3212 - LC 3213.2 that already have been denied. LC 5414.3 does not have a provision like LC 5814(b), which would allow employers to self-impose a 10 percent penalty prior to an employee claiming a penalty under that section in order to avoid larger penalties. So it's likely we will see litigation at the board to establish the parameters of what constitutes an unreasonable denial under LC 5414.3.
For a detailed discussion on legal issues related to the effect of COVID-19, see Navigating COVID-19: A Legal Guide For California Employers.
- Assembly Floor Analysis, 8/23/22, at p. 1. The legislative history of SB 1127 is available at:https://leginfo.legislature.ca.gov/faces/billAnalysisClient.xhtml?bill_id=202120220SB1127
- Assembly Floor Analysis, 8/23/22, at p. 2.
- Assembly Floor Analysis, 8/23/22, at p. 2.
- Senate Floor Analysis, 8/30/22, at p. 6.