Municipal Pooling Authority (MPA)

 

By Julianne Broyles, CAJPA Legislative Advocate

California Advocates

 

Gov. Arnold Schwarzenegger in January presented his proposed budget for 2010-2011 and immediately declared a fiscal emergency and a special legislative session to deal with the state's multi-billion-dollar deficit.
 
The on-going fiscal crisis and budget deficit, as in the past few years, are expected to again dominate the Capitol's focus as lawmakers and the governor grapple with revenues that are falling far short of expenditures and debt payments.
 
In calling a fiscal emergency special session, Gov. Schwarzenegger is asking for immediate legislative action to begin solving the crisis. He has again pledged no new taxes, although his budget proposal does include a plan to impose a fee on homeowner insurance policies to pay for responding to wild fires and other natural disasters.
 
Employers also are directly affected by the fiscal crisis. They have been subjected to new and increased assessments levied by the Legislature and collected by the Department of Industrial Relations.
 
Employer assessments intensified with the 2004 workers' compensation insurance reforms that made employers liable for 100 % of the funding for the Division of Workers' Compensation (DWC) (which is part of the Department of Industrial Relations).
 
In 2004, the assessments were about $120 million. Just five years later, the Legislature and administration have instituted even more assessments on employers without any prior discussion or notice as part of the closed-door budget discussions.
 
Today employers are assessed nearly $500 million annually to cover the expenses of various units within the DWC. A sizeable percentage of that total comes from local public entities (see chart).  These assessments are slated to increase again in 2010, in some cases 82% to 170% over last year's rates.
 
Because of the huge assessments, employers believe that oversight and accountability on expenditure of the money is critical. As a result, both public and private employer organizations will be pressing for enactment of statutory oversight in 2010. The administration has been resisting formalized oversight, preferring an informal advisory group to be established by the DWC.
 
Generally, it appears 2010 will be another uneven, contentious legislative year with multiple special sessions running concurrently with the regular session - a pattern that has continued from the past few years.
 
If any progress is to be made on any major issue, it likely will be part of the larger budget negotiations that have been conducted privately in the past between the governor and legislative leaders of both parties from the Senate and Assembly.
 
The negotiations, however, have been contentious because of the polarized points of view held by legislators and key players in the system. For instance, unions are calling for increases in workers' compensation benefits while employers remain adamant that any increase be coupled with realistic reforms.
 
At the same time, Democrats are calling for tax increases to cover shortfalls and Republicans are just as determined that no new taxes be enacted. The Legislature is just beginning the last of a two-year session and only time will tell how the fiscal crisis and related issues will be resolved.

 

Robert's Rules in Real Life

By Larry H. Fields, Partner

Malmquist, Fields and Camastra, LLP
 

On February 17, 2009, the Department of Industrial Relations (DIR) issued its Qualified Medical Evaluator Regulations.  In very significant sections, the regulations are specific and compelling as to the repercussions facing a QME who violates some of these sections.
 
By now, you have already become familiar with the new regulations. But have you considered the fallout in dealing with a case where there are Workers' Compensation Appeals Board (WCAB) rulings finding reports  from a QME that  are invalid or otherwise found  to  be inadmissible at trial?
 
The new QME regulations now contain potentially significant consequences for those QME's (and at times AME's) who violate newly amended or newly issued regulations governing their practice in  the area of workers' compensation forensic reporting. This brief analysis will focus on those consequences, particularly what power the Administrative Director has to deter the violators, especially as to providing sanctions.
 
The regulations dealing with QME discipline begin with §60(a).  This is not a new section but lets us know that the Administrative Director may suspend or terminate a physician from the QME list without a hearing where any of a number things take place.  These include situations where the physician's license has been revoked, suspended or terminated by his/her licensing board, convicted of a felony or misdemeanor related to the conduct of his/her practice, been placed on probation by his/her licensing board, or failed to pay the appropriate fee for being a QME panel member.
 
§60(b) also states that the Administrative Director after allowing a hearing based on a complaint can suspend, terminate or place a QME on probation for 10 different types of violations.  Some of these include:  violation of Labor Code §139.3 or 4628 (disclosure requirements); failure to follow or comply with Labor Code § 139.2(j)(1) to (6) or 139.2(b) or (c);  failure to comply with the appointment availability requirements set forth in §33; failure to disclose conflicts of interest set forth in §40 or 41 or 45; an ex parte communication in violation of Labor Code §4062.3; where the QME has solicited the injured worker to take over treatment; and failure to disclose a financial interest set forth in §1 and 29.
 
§61 sets forth the hearing process.  Generally, the Medical Director will make a formal complaint setting forth a "prima facie" case to the Administrative Director.  If it is allowed then the Administrative Director will notify the QME in writing of the determination and allow a hearing if requested.  The hearing will take place before an Administrative Law Judge or hearing officer who then files a written proposed decision with the Administrative Director.  The decision is to set forth specific findings as to the violations in §60(b).  Thereafter, the QME has 30 days within which to file a petition for reconsideration with the Administrative Director.  Further appeal thereafter is to be by way of writ of mandate with a 30 day time limit.  Writs of mandate are generally filed in the superior courts.
 
§62 (Part One) sets forth sanction guidelines for QMEs which include factors to be considered in determining discipline, mitigating evidence that can be presented by the physician, and terms of probation including optional sanctions.
 
§62 (Part Two) sets forth the various disciplinary sanctions that can be imposed by the Administrative Director.  Thus, for example, where there is a violation of a material statutory or administrative duty the section sets forth a list of nine different instances calling for the maximum sanction of QME status revocation.  It also sets forth alternative sanctions, including minimum sanctions, for violation of a material or administrative duty in 18 different categories.  Space does not permit covering all of these and it is suggested that you take the time to review the same, as it will become apparent that potential QME violations are more prevalent than it would seem.
 
These new regulations are intended to put some "teeth" into the enforcement arm of the Administrative Director.  Additionally, by accessing the Medical Unit at the DWC website at www.dir.ca.gov/dwc/medicalunit/discipline, one can find a list of QME's who have been disciplined, a list of "precedential decisions", and even a complaint form.
 
So what do you do when you have learned that a panel QME who has submitted a report in your case is or has been disciplined?  The main issue is not whether the doctor's report is admissible into evidence (although admissibility should be placed in issue if you are the one seeking to exclude the report) but what weight should be given to the opinions in the report.  Depending on the nature of the violation and the discipline or sanction imposed, the party opposing the report should argue that it cannot be deemed to be substantial evidence in support of the claim for benefits by the party seeking its admission into evidence.  Having been disciplined is evidence of perhaps deliberate actions taken by the doctor which indicate his or her disregard for the statutory obligations under which QME selection is allowed.  In some cases statutory violations render the report inadmissible.  See Labor Code §4628(e) which indicates that the failure of the doctor to comply with the medical legal reporting requirements set forth in the section renders the report inadmissible and the defendant shall have no liability for payment of the doctor's bill.  Using Labor Code §4628 by analogy as to other violations of the QME regulations should be proffered to exclude the disciplined QME's report into evidence and perhaps non payment of the bill.
 
Larry H. Fields is the founding partner of The Law Offices of Malmquist, Fields and Camastra, a workers' compensation defense firm in Glendale, CA.

By John Stephens, Senior Vice President, P&C Public Agency Practice Leader, Keenan & Associates
 
Employment litigation against public entities has become a growth industry. Recent studies have shown employment litigation nationally has increased by approximately 30% over the past three years, while 43% of employment lawsuits are filed against public entities. During 2002-2008, the average jury verdict nationally against public entities was $648,057 with plaintiffs prevailing more than 50% of the time. In 2008, plaintiffs prevailed 61% of the time.  
 
In California, during 1995 - 2005, the mean amount of jury verdicts for employment cases was $1.3 million and the median verdict amount was $375,000. Regardless of the amounts, the most alarming statistic is that plaintiff verdicts are rapidly increasing and the only way to change this is to implement aggressive employment practices prevention, training and best practices.  

 

(If graph quality is distorted on screen, please print to read.)
 

All National Statistics are sourced from: Employment Practice Liability: Jury Award Trends And Statistics, 2009 Edition, Published by JVR.

Recent California Public Agency Verdicts  

Whether you are a city, county, school district, community college or transit agency you face significant employment liability risks.  The fact that plaintiffs nationally, in 2008, prevailed 61% of the time for employment lawsuits is an indication of how juries are responding to these matters. There is little leniency toward employers who fail to prevent employment-related abuse to occur within their agency and among their employees. Following are 8 recent employment-related lawsuit examples where the plaintiff prevailed against their California public employer: 
 

 
Fight or Settle
It's not whether you are right or wrong, it's what can you prove in the court of law, or rather, in front of a jury.  The decision to settle a case rather than go to trial is often difficult.  You need to weigh the facts and merits of the case, but even if you choose to settle, the costs of settlement can be extreme.  The mean settlement of an employment case for the past three years (2006-2008) nationally is above $500,000.  The median settlement for these same years is about $75,000.

Some agencies choose to settle claims based upon pure economics. Settling is often the most "cost effective" solution.  While this may be true in the short term, this can create a precedent within your community as plaintiff attorneys line up to take aim at the bull's eye on your agency's back.  It's important to always weigh the pros and cons of settling any case. 
 
Of course, making the decision to fight an employment case must also be carefully evaluated.  The average cost of defending an employment litigation case through trial is between $150,000 - $200,000. And this does not include the hours and time it takes for your agency to deal with discovery issues, attending the trial and the adverse impact this has on morale.
 
What Can You Do
Albert Einstein once said, "Learn from yesterday, Live for today, Hope for tomorrow..."  While Einstein wasn't speaking about employment-related matters, I believe there is a lot to be gained from this.  As I put my Employment Practices Prevention hat on, I would offer this; "Yesterday is gone. Today, we are living in an online and mobile world. Tomorrow, Gen X, Y and Z will demand more mobile offerings." 
 
Yesterday, training was too infrequent, not effective or just plain obsolete.  Today, we live in a world where legislation, regulation and litigation against public agencies dominate.  At the same time, demographics are rapidly changing.  Baby Boomers are retiring and Gen X'ers and Y'ers will soon occupy the majority of the work force.  This will create both generational and communication challenges.  Finding time to train employees is a continual challenge, though today you have greater training flexibility.  As a Gen X'er writing this paper, I know my preferred method of learning: online training.  I want to learn on my time and at my pace. What amazes me are my 7, 5 and 3 year old computer savvy little girls who know more about computers than I knew in college.  They are proof we are truly living in an online and mobile world. 
 
Today, public agencies are being forced to operate with fewer and fewer resources and as a result, tomorrow will bring unprecedented employment litigation.  Training is critical.  All too often I see public agencies sued or settle for exorbitant amounts of money due to a situation that could have been prevented with proper training.  The reality is that a jury will not be sympathetic because your agency lacked resources and failed to provide the necessary or available training. 
 
Employment Practices Technology and Prevention Tools
Unless you are currently training 100% of your employees on a regular basis, you should explore online training.  Demographics are changing, resources are shrinking and an effective online training system could help reduce your agency's exposures and costs.  Online training allows you to reach hard to gather groups or those working in remote areas.  You'll want to make sure the training can be customized to make the courses and content relevant to your agency and your employees.  The main issues to consider are is it easy to use?  Is it compliant with California laws, such as AB 1825?  Does the online system provide data warehousing?  What is the cost?  

 

Bottom Line
California public agencies are being forced to do more with less, or as one public official told me, "We must now do less with less."  Employment Practices litigation is on the rise and in these economic conditions, claims and jury verdicts will continue increasing.  If you take anything out of this article, make sure you have open lines of communication with all departments within your agency (HR, Business, Risk Management, Legal) and explore online training.  We see too many claims go sideways because one department was doing what they thought was right and never involved others.  The more expertise you bring in on the front end, the better chance you have at defending the claim or settling for less. 
 
Lastly, I'd like to thank Louis Leone, Esq. of Stubbs & Leone, LLP for his assistance, research and employment litigation expertise, which enabled me to write this article.    
 
John Stephens is Senior Vice President P&C Public Agency Practice Leader for Keenan & Associates, the 14th largest insurance brokerage firm in the United States, and the largest independent broker in California.  

By Jason Schmelzer
California Coalition on Workers' Compensation (CCWC)

 

It is true that California's public and private sector employers have been protected from skyrocketing workers' compensation costs since the passage of SB 899 (Poochigian - R) in 2004.  According to the Oregon Department of Business and Consumer Services, California went from the second most expensive state in the US in 2006 to the thirteenth most expensive state in 2008.  While this is an impressive decline in cost, California employers should realize that our costs are still extraordinarily high when compared to other states, 121% of the median to be exact. 
 
The unfortunate truth is that California employers are likely only months away from another period of substantial increases in cost.  There are two major reasons for this coming rise in cost.  The first is related to developments within the workers' compensation system itself.  The Workers' Compensation Insurance Rating Bureau (WCIRB) has now twice recommended increases of over 20% in California's premium benchmark.  The WCIRB cites sharp increases in medical treatment costs and new case law that will drive permanent disability benefits and litigation costs higher.
 
The second reason that costs are primed to increase is political.  Governor Schwarzenegger has actively worked to ensure that California's public and private employers enjoy a balanced workers' compensation system.  There is no guarantee that the Capitol's corner office will be occupied by a like-minded executive starting in 2011.  It is very possible that California will elect a Governor that is sympathetic to calls for benefit increases, elimination of objective medical standards, and new penalties on employers.  The implementation of these policies would clearly push California's costs ever higher. 
 
Employers across the state are all facing unique pressures.  Public entities are struggling with unprecedented budget cuts, and businesses are struggling with worldwide recession.  What is absolutely clear is that employers do not have the ability to easily absorb a return to massive cost spikes. 
 
California's employers need to plan for the future - the very near future - and get re-engaged on workers' compensation before the pendulum can prematurely swing back the other way.  Public employers are vital to the success of any effort to hold the line on workers' compensation costs, especially as the legislature continues to look locally for general fund savings.
 
The California Coalition on Workers' Compensation (CCWC) is an association comprised of California's public and private employers.  CCWC's members, including cities, counties, joint powers authorities and businesses of all sizes, have worked together to maintain balance in California's workers' compensation system for nearly two decades.  CCWC was one of the organizations responsible for the successful negotiation and passage of SB 899 in 2004, and CCWC has been a tireless advocate for employers since.
 
CCWC encourages public employers to get re-engaged in workers' compensation policy so that we can help keep your costs low.  Consider for a second that the average cost of an indemnity claim in California is well over $50,000.  If public employers were to invest even 10% of the cost of one claim in the effort to keep costs low, the resulting savings would more than justify the cost.

Check the CAJPA website for details on exhibiting and sponsoring at the 2010 Fall Conference that is set for September 7-10 in South Lake Tahoe.

 

Hotel room blocks are now open at the three host hotels - Harrah's, Harvey's and Embassy Suites.

 

Details on hotel pricing and how to make reservations are also posted on the website.