What developments in California workers’ compensation stand out in the first half of 2024?

Julius Young

I just returned after an extended holiday from comp and wanted to separate the wheat from the chaff. What recent developments would stand out?

This is Part 1 of my picks for the top developments through mid-2024, in no particular order:

1. User funding has protected the California Division of Workers’ Compensation from cuts and freezes that will affect many other state programs.

The final enacted state budget includes the following:

• 71 new positions at the DWC over three years to address increased workload and reduce waiting time for hearings.
• 13 positions over three years at the Workers' Compensation Appeals Board to reduce backlog.
• $22.1 million for the Electronic Adjudication Management System.
• Statutory changes to authorize the Department of Industrial Relations to utilize emergency hiring authority to expedite hiring and fill vacancies to increase the effective and timely enforcement of state labor laws and require the Department of Industrial Relations and Department of Human Resources to prioritize the analysis of classification changes.

2. 2024 will not be a year for any grand legislative deals that might boost permanent disability benefits, but at midyear, a few significant workers’ compensation bills were in play.

• Senate Bill 1299, sponsored by the United Farm Workers, would create an industrial presumption for agricultural workers who develop or manifest a heat illness injury while working outdoors where the agricultural employer failed to comply with heat standards. The bill is likely to be further amended. The bill passed the Assembly Insurance Committee in late June and was referred to Assembly Appropriations. SB 1299 is opposed by employer and insurance interests, and the California Workers’ Compensation Institute produced a white paper questioning the bill.
•  SB 1205 originally would have required employers to provide temporary disability to those who missed time from work to attend medical appointments. There was opposition from employer and insurer interests and a critical analysis by the Assembly Insurance Committee. As a result, the bill was amended in late June, removing the TD entitlement. However, in its current version, the bill remains helpful to workers in that while one is to make a reasonable effort to schedule treatment outside of work hours, an employer that denies a request to attend scheduled treatment would violate Labor Code 132a. 

Less contentious bills that are likely to land on the governor’s desk include the following:

• SB 1058, a bill to allow park rangers to draw Labor Code 4850 salary continuation benefits.
• Assembly Bill 1870, requiring that state-mandated workplace posters include language advising employees that they have a right to consult an attorney about workers’ comp.
• AB 2337, a bill providing that signatures can be electronic.

Bills that failed to advance included:

• SB 1346. For cases in which utilization review denial was overturned by independent medical review, the 104-week TD cap would have excluded that period.
• AB 3106 would have required school employers to pay employees with COVID-19 to stay home, per certain return-to-work guidelines.
• SB 1071 would have eliminated contractors' proof of coverage requirement for licensure.

3. The legal wars over employee misclassification continue, as AB 5 and Proposition 22 remained the subject of appellate litigation in the first half of 2024, with probable implications.

The ABC employment test used by the California Supreme Court in the 2018 decision in Dynamex Operations West v. Superior Court was adopted by the Legislature in 2019 as AB 5, but legal challenges followed. In June 2024, the U.S. Court Of Appeals for the 9th Circuit ruled in Lydia Olson V. State of California that AB 5 was not unconstitutional as a violation of the equal protection clause.

Oral argument at the California Supreme Court was held in May in Castellanos v. State of California, and a decision is likely coming soon. The principal issue before the Supreme Court is whether Prop. 22 (the Protect App-Based Drivers and Services Act, i.e., Business & Professions Code 7451, et seq.) unconstitutionally infringes upon the plenary power of the Legislature established by Article XIV of the California Constitution. The consensus among those who observed the oral argument was that the California Supreme Court is unlikely to declare Prop. 22 unconstitutional and that it may uphold the ruling of the 1st District Court of Appeal in Hector Castellanos v. California.

Castellanos will likely hand a victory to the platform gig companies, but other companies are losing in litigation to avoid the application of AB 5 and the ABC test to their businesses. For example, in a March 2024 ruling by Judge Roger Benitez of the U.S. District Court Southern District, the California Trucking Association and an owner-operator association failed in their effort to be exempted from AB 5.

4. Only one set of new regulations has been adopted by the DWC so far in 2024, but more regulatory changes are in development.

After multiple comment periods, new qualified medical evaluator process regulations were effective Feb. 26, 2024. Those regs deal with QME appointment rules, reappointment denial criteria, continuing education and report writing requirements, etc. Perhaps the most important feature is Section 33(a), which was amended to change from 60 to 90 days the time allowed for scheduling the initial appointment after a request is made for the appointment.

At midyear, two other regulatory changes were under consideration for formal rulemaking.

A 15-day comment period ended June 24, 2024, on a physician and pharmaceutical fee schedule.

There has been considerable controversy over these rules, as the April proposed version would have eliminated dispensing fees to doctors who provide medications to patients. Doctor groups opposed this, citing it as a barrier to treatment access for some patients.

On the other hand, some payers believe that in-office physician dispensing is a source of abuse and a cost driver. The April version also proposed an increase in pharmacy dispensing fees but with a two-tier fee structure depending on the pharmacy volume. A public hearing on the issue was held on April 11.

But lo and behold, the DWC reversed course, and under the June 2024 proposed rules, physician dispensing fees would not be eliminated after all, and the two-tier pharmacy dispensing fee would be dropped as well. 

Also pending are proposed changes to medical provider network and utilization review regulations, with a scheduled public hearing set for July 25.

Among the proposed changes is a revised form (called Form PR-1) that would include both PR-2 progress report documentation with an authorization request documentation. A new Section 9767.6 would mandate that the employer’s administrator serve the treating doctor with all relevant medical records within 20 days and provide the doctor with contact information for the MPN and the entity that processes authorizations and bills. The portal would also clarify procedures for treatments within the first 30 days that are exempt from prospective review.

And the DWC has been holding meetings with stakeholders about other possible changes to MPN regulations, though those have not entered the rulemaking phase yet.

5. There were few groundbreaking workers’ comp case law developments in the first half of 2024. But among the few noteworthy Court of Appeal and WCAB en banc decisions rendered in the first half of 2024 are the following:

• 3 Stonedeggs Inc. V. WCAB, in which the 3rd DCA found that a worker involved in an accident while driving from a remote firefighting camp without employer permission was not barred as a deviation from employment and was covered under the commercial traveler rule; at midyear, the defendant was seeking California Supreme Court review.
• Vigil v. County of Kern (June 2024 WCAB en banc) clarifies what is required for rebuttals under Athens Administrators v. WCAB (Kite) to the Combined Values Chart.
• Hidalgo v. Roman Catholic Bishop, Gonzalez v. The Bicycle Casino, and Ledezma v. Kareem (WCAB en banc). These three cases award costs and sanctions against an applicants' attorney for pleadings filed with willful intent to disrupt or delay.
• Chavez V. Alco Harvesting (2nd DCA, June 2024). In a widow’s civil action against an employer for her husband’s COVID death, the court allowed suit to proceed under the fraudulent concealment exception to workers’ comp exclusive remedy doctrine.

Tune in Friday for Part 2.

Julius Young is an applicants' attorney and a partner for the Boxer & Gerson law firm in Oakland. This column was reprinted with his permission from his Workers Comp Zone blog on the firm's website.