CalChamber-Opposed Bill Increasing Workers’ Comp Costs to Be Heard in Committee on Tuesday

A California Chamber of Commerce-opposed bill that will severely alter the workers’ compensation system and increase business costs will be considered by the Assembly Insurance Committee on Tuesday.

The bill, SB 335 (Cortese; D-San Jose), fundamentally alters longstanding rules and timeframes related to investigating the eligibility of workers’ compensation claims such that it substantially reduces the time an employer has to investigate a claim and significantly increases the cost of care an employer would be required to provide during that investigation.

In a letter sent to the members of Assembly Insurance, a coalition of business groups, which includes the CalChamber, points out that SB 335 is fundamentally unfair to employers, who deserve a fair opportunity to complete an investigation and make a thoughtful determination about the validity of a claimed injury.

Less Time for Investigations

For most claims, SB 335 reduces from 90 days to 45 days the period of time that employers are allowed to investigate a claim for benefits before making a coverage decision. For claims covered by legal presumptions, the investigation period is reduced even further, to 30 days.

This timeframe reduction is problematic because during the investigation period, an employer or their insurer needs to talk to witnesses, obtain related medical records, schedule a medical evaluation and receive a written report from the doctor, and potentially identify and recover additional records that might be relevant to the claimed injury.

Moreover, during the investigation period, the injured worker is receiving medical care to cure or relieve their injury. Medical care is provided during the investigation period for treatment rendered up to $10,000. Additional medical treatment is not covered once a claim is denied; therefore, shortening this timeframe may have a negative impact on the injured worker’s ability to seek medical care.

If/when a medical evaluation is needed to make a compensability determination, all parties may utilize the Qualified Medical Evaluation process. Based on the statutory timeframes provided for this process (which is 90–120 days during the COVID-19 pandemic), it is impossible to complete this process within the proposed investigatory timeframes in SB 335, thus putting an undue strain on the Division of Workers’ Compensation (DWC), the coalition argues.

The most probable outcome from the proposed changes in SB 335 is a higher number of denials of coverage as a result of not being able to complete the initial discovery process. This is because employers will not be able to identify, acquire, and evaluate the records and information necessary to make a fair determination. The coalition points out that employers will not have time to identify a medical evaluator, set an appointment, deliver appropriate records, and obtain a high-quality medical report to determine causation and inform their decision making.

Increases Employer-Funded Medical Costs

SB 335 also increases the amount of mandated employer-funded medical care that must be provided to injured workers—from $10,000 to $17,000—during the period of time a claim is being investigated, even if the claim is ultimately denied.

The increase has no objective justification, the coalition says, because workers receiving treatment during the investigation period don’t, on average, come close to spending the full $10,000 provided to them under current law. The average amount of medical treatment paid during the investigation period is well below $2,000.

Moreover, in the event of a serious injury exceeding $10,000 in medical care, in which compensability is being determined, existing law allows an employer to provide such care and benefits without admitting liability pursuant to Labor Code Section 4909.

If SB 335 passes, it is very likely that injured workers will receive even less care during the investigation period instead of more, because employers will have only 30 and 45 days to investigate before a final decision is made, the coalition warns.

Imposes Unfair Penalties

Finally, SB 335 would significantly alter the way penalties are calculated. Presently, if there is an unreasonable delay or denial of a payment, there may be a penalty of up to twenty-five percent of the amount or $10,000. Requests for these penalties are often used in litigation as leverage for increased settlement values.

SB 335 proposes to change the way those penalties are calculated so that the amount due would be based on a percentage of the workers’ entire workers’ compensation reward. Such a shift in the law would undo important reforms from 2004 that were put into place to curb abuses of penalty claims that had plagued the system.

Staff Contact: Ashley Hoffman

Ashley Hoffman
Ashley Hoffman joined the California Chamber of Commerce in August 2020 as a policy advocate specializing in labor and employment and workers’ compensation issues. She was named a senior policy advocate starting January 1, 2024 in recognition of her efforts on behalf of members. Hoffman holds a B.A. with high honors in political science from the University of California, Santa Barbara, and earned her J.D. from the UCLA School of Law where she was a Michael T. Masin scholar, an editor at the UCLA Law Review, and staff member for the Women’s Law Journal. See full bio.