The arrest of California law enforcement workers on charges of workers’ comp fraud makes a splashy news item in the media. 

Julius Young

In recent days there has been the report that a former Santa Clara police officer, Kenneth Henderson, was arrested for fraudulently misrepresenting his claimed disability. His wife, Mandy Henderson, formerly of the Santa Clara County Sheriff’s Office, was arrested in 2018 and later convicted of workers’ comp fraud. Videos of them in the gym apparently yielded a striking contrast to their disability contentions.

Stories like these lead to cynicism about the comp system, even though direct worker fraud may actually be less consequential than employer premium fraud and medical provider fraud and abuse. But these worker fraud stories get a lot of play.

What especially caught my eye was a Feb. 10 column in CalMatters by Dan Walters, long one of the deans of California political journalism. Titled “Fraud infects disability system,” the article cites the arrests of the Henderson couple and claims that:

“Having both halves of a married law enforcement couple prosecuted for the same crime of cheating on workers’ compensation is obviously unusual. But there’s another odd aspect — it happened in Northern California.”

Frankly, there will always be some instances of worker fraud across the state, and from time to time the occasional worker prosecution in the Bay Area as well as the L.A. Basin. Hard figures on the cost of worker exaggeration or outright fraud may be determined in individual cases, but stats on the frequency and cost of worker fraud are essentially impossible to come by.

A 2017 report by the California State Auditor detailed four types for workers’ comp fraud: worker fraud, employer fraud, insurer fraud and provider fraud. That report was critical of fraud-fighting efforts by the state.

Several reports to the Commission on Health and Safety and Workers' Compensation have identified employer fraud/misclassification as a major system problem. In 2007 there was “Fraud in Workers’ Compensation Payroll Reporting: How Much Employer Fraud Exists? What Is the Impact on Honest Employers?"

And in 2009 there was a follow-up report to CHSWC on employer payroll fraud.

But what about the “rampant fraud” Walters mentions?

Walters seems to conflate the type of fraud alleged in the Santa Clara County peace officer cases with allegedly fraudulent cumulative trauma claims, particularly those filed in Southern California.

Here in is his analysis:

“Fraud in California’s $20 billion a year system of supporting disabled workers is rampant, but the vast majority of it occurs in Southern California. Shady lawyers use what are called 'cappers' to scour the streets for potential clients, asking them whether they are feeling any pain that might be connected to past employment.

"The resulting claims often describe 'cumulative trauma' that cannot be tied to any one event. Equally shady doctors sign off on the claims.

"Two recent reports by the Workers’ Compensation Insurance Rating Bureau frame the prevalence of fraud in Southern California.

"One, on doctors who have been charged with fraud, reveals that 'Indicted providers in the Los Angeles Basin accounted for about half of … indicted providers but received more than 90% of the medical payments made to indicted providers.'

"The second report reveals that 'the share of cumulative trauma claims as a percent of all claims is much higher in the Los Angeles Basin than in other parts of the state, and that gap has generally widened over time.'

"The Legislature periodically strengthens anti-fraud laws. Three years ago, the Department of Industrial Relations, using a new law, suspended seven Southern California doctors from participating in workers’ comp.

"One, Philip Sobol, an orthopedic surgeon in Los Angeles, had been convicted of federal insurance fraud charges for getting kickbacks from lawyers. He had filed nearly 6,000 active compensation claims for an estimated value of more than $42.7 million.

"Obviously, there’s big money in defrauding the system and it’s a factor in California’s employers paying the nation’s second-highest costs for workers’ compensation insurance, according to a biennial survey by Oregon’s Department of Consumer and Business Services, the widely accepted authority.

"It also indirectly cheats those with legitimate work-related disabilities.”

Walters’ analysis merits a good parsing.

Any worker fraud is concerning and threatens the integrity of the system, as does provider fraud and employer premium fraud. But alleging that the system has “rampant” worker fraud is an oversimplification.

Yes, the much higher volume of cumulative trauma claims in Southern California is well documented in the Workers' Compensation Insurance Rating Bureau Geo Studies and is concerning. There is some evidence that many cumulative trauma claims in Southern California are in industries such as the garment industry, certain types of manufacturing, hotel workers, warehousing and the like. Those industries exist in other parts of the state, but may be more concentrated in the Southland, and many of those physically demanding jobs are done by Hispanics.

Employer-side critics will cite the 2019 WCIRB Geo Study that argues that claim frequency is higher in the L.A. area even after “controlling for regional differences in wages and industrial mix.” It may well be that portions of this are due to the more prevalent Southland lawyer advertising, as well as cappers, unscrupulous lawyers and physicians.

Data mining analytics will be yielding more information on this in the coming years, and what Walters rightly terms “shady practices” of some of the abusers in the L.A. Basin will continue to be under great scrutiny. I’m OK with that.

Several waves of comp reforms, including SB 1160 and AB 1244, have drastically cut down on liens and created procedures that may be helping reduce the amount of bad actors in the system. Scores of Southland physicians were prosecuted and barred from the system. Their fraud and abuse were tarnishing the system.

But it is somewhat complex. Take Dr. Sobol, cited by Walters. I never knew Sobol, who apparently had a stupendously large volume treatment and evaluation practice. But while some of his actions appear to have been fraudulent, undoubtedly there were many legitimately injured workers who came through his clinic, including workers with cumulative trauma.

Let’s not throw the baby out with the bathwater. Many CT claims are legitimate. And let’s not conflate problems with some cumulative trauma claims with peace officer misrepresentations caught on video.

Julius Young is a claimants' attorney for the Boxer & Gerson law firm in Oakland. This column was reprinted with his permission from his blog, www.workerscompzone.com.