What were the top 10 developments in California workers' comp in 2011? It was not a blockbuster year in California workers' comp, although a few things do stand out. Here's my list, in no particular order:

1. TRANSITION FROM SCHWARZENEGGER ADMINISTRATION TO THE JERRY BROWN APPOINTED DIR/DWC

In 2011 Brown appointees Christine Baker and Rosa Moran took the reins at the Department of Industrial Relations and the Division of Workers' Compensation respectively. Inheriting a slew of immediate problems including difficulties with EAMS, lack of staffing at some WCAB district offices, and the Medical Unit, Baker and Moran have launched some initiatives to tackle these problems, but with money in short supply, solutions may be incremental. 2011 did not see much activity on the rulemaking front, and a number of the Schwarzenegger administration's 12-point cost saving measures remain in limbo.

At year's end it was unclear whether in 2012 the DIR/DWC will move aggressively on various systemic cost-savings issues or whether the DIR/DWC will hold back to see if stakeholders can hammer out a deal.

Several bills that Brown signed will require DWC implementation (see below).

Meanwhile, over at the Workers' Compensation Appeals Board, Brown appointed Commissioner Ronnie Caplane to be the chairwoman of the WCAB, succeeding outgoing chairman Joe Miller. As Caplane became chairwoman the WCAB had a number of empty commissioner slots, and at year's end it was not clear how quickly Brown would act to fill those slots.

2. MEAGER CHANGES FOLLOW 2011 LEGISLATIVE SESSION

Injured workers and labor advocates who hoped the Governor would sign significant legislation in 2011 remedying injustices from SB 899 were disappointed.

Brown vetoed bills that would have simplified the job retraining voucher process (AB 211) , prohibited discrimination in apportionment determinations (AB 1155) , allowed workers under specified circumstances to draw more than 104 weeks of total temporary disability if they were recuperating from surgery (AB 947), and have required that utilization reviews be done by California doctors (AB 584).

Brown did sign bills requiring the DWC to develop a voc rehab expert fee schedule (AB 1168), requiring the DWC to develop streamlined notices (AB 335), requiring the DWC to regulate the allowable costs of compounded medications (AB 378), and requiring proof of workers' comp coverage when renewing a contractors license (AB 397).

In casting his vetoes, Brown specifically noted that some of these changes would be approved only as part of a broader overall reform.

3. PREMIUM RATES APPEAR TO BE RELATIVELY STABLE AFTER INSURANCE COMMISSIONER AND WCIRB ADOPT NEW ADVISORY RATE METHODOLOGY

2011 was the first year in which the California Department of Insurance and the WCIRB used a new methodology to determine the advisory "pure premium rate." California Insurance Commissioner Dave Jones adopted $2.33 as an advisory pure premium rate and noted that the "average filed pure premium rate" in early 2011 was $2.37 per $100 of payroll and the "average charge rate" was $2.38 per $100 of payroll, down from 2003 average charged rates of $6.29 per $100 of payroll.

While rate-setting changes may result in increases for some employee classifications, it appears that rates paid by employers overall have remained very stable at a time that the California economy was weak.

Also noteworthy was news by the WCIRB that the calendar loss ration for the first 9 months of 2011 had decreased from the 2010 calendar loss ratio.

For a link to a post on the topic of rate trends , see "Proof in the Pudding."

Also adding cheer for California employers was a 28% reduction in assessments authorized by Labor Code 62.5 and 62.6. These assessments fund the Workers' Compensation Administration Fund, the Uninsured Employers Benefit Trust Fund, the Subsequent Injury Fund, the California Occupational Safety and Health Division, the Division of Labor Standards Enforcement and the Workers' Comp Fraud Account. According to the DIR, reduction in assessments were "acieved through fiscal controls put in place by Governor Brown."

4. TRANSITION AND TURMOIL AT STATE COMPENSATION INSURANCE FUND CONTINUES

At SCIF, transition and turmoil continued. Early in 2011, SCIF announced plans to lay off up to 1,800 workers, a move contested by SEIU Local 1000. Later in the year a severance agreement was reached between SCIF and the union that represents many SCIF employees.

Overall, staff morale at SCIF plunged to new lows as SCIF leadership made moves to trim costs and staff and close various offices.

At year's end SCIF announced a $50 million dividend for policyholders, its first since 2001.

5. WCAB VALDEZ DECISION REINFORCES TREND TOWARD INCREASING USE OF MEDICAL PROVIDER NETWORKS

A 2011 study by the California Workers Compensation Institute showed that usage of medical provider networks (MPNs) had continued to rise since 2004.

Meanwhile, an en banc ruling from the WCAB, Elayne Valdez v. Warehouse Demo Services, found that where unauthorized treatment is obtained outside a validly established and properly noticed MPN, reports from the non-MPN doctors are inadmissible, and may not be relied on.
Here is a link to my initial Valdez post. http://workerscompzone.com/index.php?entry=entry110420-223325

But despite Valdez, in Southern California many applicant attorneys continue to circumvent medical provider networks based on carrier non-compliance with MPN regulations. A mid-year seminar at the California Applicants' Attorneys Association convention discussed dozens of scenarios where MPNs might be found out of regulatory compliance, enabling applicant to "take control" and choose a non-network provider. Still, at year''s end it appears that Valdez will likely trip up those applicant attorney practice models that routinely attempt to circumvent MPNs.

6. MANDATED REVISION OF PERMANENT DISABILITY SCHEDULE STILL NOT ACCOMPLISHED

By statute, California's permanent disability rating schedule is supposed to be revised every five years. In 2010 the Schwarzenegger Administration declined to adopt a revise of the 2005 PDRS, citing the fragile California economy.

Although the DWC may now be allocating some staff resources to the issue, 2011 saw no public leadership by the DIR/DWC on the issue. Various stakeholder groups have met with the DIR/DWC to discuss possible cost savings.

At year's end it was still unclear whether the DIR/DWC would take the lead in outlining its vision of a plan for cost-savings that would fund a PD increase or whether nothing will be done until a stakeholder consensus emerges.

7. LIEN BACKLOG CONTINUES TO PLAGUE CALIFORNIA SYSTEM

Lien backlogs continued to choke the California WCAB district offices at several California boards, principally in Southern California. The issue has been studied by CHSWC staff, which presented a comprehensive report on the scope of the problem that was adopted by CHSWC in January 2011. The CHSWC report included 28 recommendations for dealing with the problem of liens.

SB 863 (Lieu), a bill to tighten limitations periods on liens, did not make it through the legislative gauntlet.

As 2011 ends it is not clear what the DIR/DWC intends to do on many of the CHWSC recommendations. Proposed rulemaking by the WCAB has not been finalized.


8. EMPLOYERS WIN IN COURT ON COLA ISSUE

In 2011 the California Supreme Court issued an opinion in Baker vs. WCAB (formerly known as Duncan v. WCAB and before that as the XYZZ case), handing injured workers a defeat. At issue was the proper interpretation of California's COLA statute, Labor Code 4659(c) which applies a COLA to injuries after 1/1/03 where the worker is 70% disabled or above (i.e. permanent total or eligible for a "life pension" as disabled between 70% and 99%). Here is a link to my post on the case:

9. WORKERS PREVAIL IN COURT IN OGILVIE CASE

Advocates for disabled workers scored a win at the 1st District California Court of Appeal in the case of Ogilvie v. City and County of San Francisco. The issue was over whether the "adjustment factor" in the 2005 PDRS could be rebutted by vocational testimony and whether the court would uphold the formula for doing so adopted by the WCAB in its en banc Ogilvie II decision.

Under the decision by the 1st DCA, the schedule can be rebutted by showing a factual error in calculation the rating formula, by showing the omission of medical complications in the preparation of the schedule, or by demonstrating a greater loss of future earning capacity than reflected in the scheduled rating. In so holding, the Court equated the pre SB 899 standard of lack of ability to compete in the open labor market with the SB 899 standard of diminished future earning capacity.

The California Supreme Court declined to hear the case. But since the 1st DCA had remanded the case back to the WCAB for further factual determination, we may yet hear more about Ogilvie in 2012.

At year's end the meaning of the decision and methodologies permissible under Ogilvie are still subject to debate in the comp legal world.

Moreover, it is thought that advocates of reform will try to take away "the cases" (Ogilvie and Guzman) as part of a deal for a revised benefit schedule.

10. DIR CONTINUES TO FOCUS ON THE UNDERGROUND CALIFORNIA ECONOMY

As 2011 came to a close, a hearing at California's Capitol reminded observers of the huge problem known as the "underground economy."

Testimony by DIR director Christine Baker noted that out of a sample of 1,498 employers identified by EDD , over 25% were found by the Workers Compensation Insurance Rating Bureau to be lacking insurance coverage.

Baker's testimony noted that it appears that many employers are misclassifying or buying just enough coverage to stay under the radar.

Here is a link to my post on the topic.

Notable on this topic is SB 459, which will allow fines of up to $15,000 per violation for willful misclassification of an employee. Penalties of up to $25,000 can be assessed if there is a "pattern and practice" of willful misclassification of employees.

That's my list for 2011.

In a post coming soon I'll be featuring a quiz about predictions for California workers' comp in 2012. Meanwhile, here is a link to my quiz for 2011.

To put all this in perspective, here is a link to the Top 10 Developments in California Workers Comp in 2010.

The Top 10 Developments in California Workers Comp in 2009 is here.

<i>Julius Young is an attorney for Boxer & Gerson, an applicants' law firm in Oakland. This column was reprinted with his permission from his blog, http://www.workerscompzone.com</i>