News & Knowledge

Executive Order Mandates Unprecedented Expansion of Compensability for COVID-19 Claims

May 6, 2020

Although strongly contested by the California Chamber of Commerce, on May 6, 2020, Governor Gavin Newsom issued Executive Order N-62-20 creating a rebuttable presumption of occupational exposure for workers diagnosed with COVID-19. The Executive Order mandates provision of workers compensation benefits under a certain set of criteria and applies to claims retroactive to March 19, 2020. It is effective for the next 60 days (through July 5, 2020).

To qualify, the injured worker must meet a four part test. They must show:

              1. The COVID-19 diagnosis was made within 14 days of the last day the employee worked at the employer’s place of employment at the employer’s direction;
              2. The work at the employer’s location occurred on or after March 19, 2020; The order is silent as to what happens in situations involving multiple employers straddling the 14-day time period, or multiple concurrent employers – but we trust the situation will arise…
              3. The place of employment was NOT the employee’s home or residence; AND
              4. The COVID-19 diagnosis was made by a physician holding a physician and surgeon license from the California Medical Board AND the diagnosis was confirmed by further testing within 30 days of the date of diagnosis.

Although the presumption is rebuttable, similar to other rebuttable presumptions in the Labor Code, an employer will likely need to prove the disease was entirely caused by contemporaneous non-occupational exposure(s). This may be an extremely difficult burden of proof as it is still unclear exactly how the virus is transmitted (and there have been documented cases of persons with the disease who exhibit very limited symptoms). Apportionment under Labor Code 4663/4664 does apply. The Order modifies Labor Code 4706.5 so that death benefits are not owed to the DIR for persons without any surviving dependents who pass from COVID-19.

30 Day Investigation Period to Accept or Deny

The Executive Order modifies the requirements of Labor Code Section 5402(b) and imposes a 30 day time period (reduced from 90) to accept or deny the COVID-19 claim. Absent timely denial, the claim will be presumed compensable (subject to rebuttal by information which could not have been obtained in the initial 30 day period).

Sick Leave vs. Labor Code 4850/TD Benefits

If sick leave benefits are available to the employee under state or federal law specifically for COVID-19, the Order mandates this sick leave time shall be used and exhausted before any TD and/or 4850 benefits are due and payable.

To qualify for TD/4850, the employee must show:

              1. if they were diagnosed with COVID-19 on or after 05/06/20 pursuant to the four part test, that they were certified for TD within 15 days of the initial diagnosis (and must continue to be certified every 15 days for the first 45 days) OR
              2. if they were diagnosed with COVID-19 prior to 05/06/20 pursuant to the four part test, they must obtain a certification no later than 05/21/20 documenting the period they were unable to work and thereafter must continue to be certified every 15 days for the first 45 days following the diagnosis.

Additional Contemplated Legislation for COVID-19

Two pieces of legislation are being considered in the California State Senate and Assembly to more permanently address the coronavirus.

Assembly Bill 664, which would be codified as Labor Code Section 3212.18, would create a conclusive presumption for certain state and local firefighting personnel, peace officers, certain hospital employees (who provide direct patient care in an acute hospital), and certain fire and rescue services coordinators who were exposed to or contracted COVID-19 (retroactive to January 1, 2020). The scope of benefits under this bill would include, beyond medical and indemnity, the cost of self-procured personal protective equipment (PPE), reasonable living expenses that exceed the usual living expenses that were incurred as a direct result of the injury, and temporary housing costs if the employee was ordered by the employer or advised by a physician to enter into quarantine due to the disease. Labor Code Section 4663 would be amended to exclude this Section from apportionment. The presumption would be extended for a period of 90 days following termination of service.

Senate Bill 1159, which would be codified as Labor Code Section 3212.86, would create a rebuttable presumption defining injury as illness or death from exposure to COVID-19 for “critical workers” who contracted the virus while in service of an essential critical infrastructure employer. The term critical worker would be defined as public or private sector employees who are employed to combat the spread of COVID-19. This bill appears to be targeted towards employees of the “essential businesses” (i.e. grocery stores, pharmacies, laundromats, mail delivery, etc.) that remained open following the initial shelter in place mandate. The current draft iteration of this bill does not contain an anti-attribution clause or a corollary proposed amendment of Labor Code 4663 to exclude it from apportionment, though this could very well change.

Analysis and Implications

Foremost, it should be stressed that the Executive Order “makes sense” in the abstract. It is a limited duration response to address the concerns of workers who have been placing themselves in the public at the requirement of their employer, and causing them to be exposed to greater risk of exposure to an unpreventable disease during a global health crisis. The Executive Order makes clear it only applies to workers who are working at their employer’s location at the direction of the employer (i.e. not stay at home work or persons who voluntarily go to the employer’s location). But make no mistake – this Order applies to all employees, in every sector of our economy, who were required to work at their employer’s location – not just first responders, medical care employees, or “essential” workers.

Additionally, the Order specifically states Labor Code Sections 4663 and 4664 apportionment apply, which allows the employer to cite to pre-existing conditions for the purposes of permanent disability (Note: it is likely Labor Code 4663 apportionment will not apply to claims brought under Labor Code 3212.18/3212.86, if passed). The virus has been shown to cause more severe symptoms in persons with co-morbidities (particularly hypertension and diabetes, along with hyperlipidemia and COPD). This is important for claims brought pursuant to the Executive Order because it is highly likely applicants will not only be filing claims for lung impairment, but also other internal body parts such as the heart, and even for strokes/seizures (medical reports have linked coronavirus to strokes in largely asymptomatic younger adults).

However, the cost implications of COVID-19 in the workers compensation system are disconcerting. A study conducted by the WCIRB in April 2020 attempted to assess the cost projections of COVID-19 claims for workers deemed “Essential Critical Infrastructure Workers” by Governor Newsom. The estimated annual cost ranged from $2.2 – $33.6 billion, with a mid-range annual estimate of $11.2 billion. This represents 61% of the annual estimated cost of workers compensation claims prior to the pandemic (estimated at $18.3 billion prior to COVID-19).

This $11.2 billion estimate assumes claims brought by 20% of public safety personnel, and by 4% of all other essential workers, and that the claims would fall into mild (80% of cases, no hospitalization, average cost of medical and indemnity $1,400), severe (15% of cases, hospitalization without ICU, average cost of medical and indemnity $53,400), critical (4.3% of cases, hospitalization ICU, average cost of medical and indemnity $137,800), and death (0.7% of cases, average cost of medical and indemnity $333,300), with an overall average cost of $17,400.

A full copy of the WCIRB study can be obtained at: https://wcirb.com/news/wcirb-releases-cost-evaluation-conclusive-covid-19-presumption

The most critical aspect of the Executive Order is the shortened 30 day timeline for investigation and determination of whether to accept or deny the claim. The injured worker must show they reported to the employer’s place of business at the direction of the employer, and that the diagnosis was made by both a physician and verified by subsequent testing. It is imperative that the employer and claims analysts quickly process the claim information to make determinations whether the injured worker meets all of the four part criteria. The pending bills in the Senate and Assembly could have an even more dramatic effect, as eliminating Labor Code 4663 apportionment could cause a tremendous increase in exposure for persons with severe pre-existing lung (and other body part) conditions.

Regardless of whether or not apportionment for permanent disability applies, we all know the cost driver in many cases is the medical. When considering the implications of the South Coast Framing case, where a mere “crumb” of the pie is enough to warrant causation, employers may be assuming a lifetime of medical liability for pre-existing co-morbidities, now armed with a presumption.

Written By: Matthew B. Lee, Esq., of our LFLM San-Francisco Office

 

Laughlin, Falbo, Levy & Moresi, LLP.

www.lflm.com