Approximately three months into the unprecedented pandemic that drastically altered the way of life worldwide, states cautiously began lifting stay-at-home orders. California, one of the states hit hardest by the COVID-19 pandemic, was among these states. The gradual reopening of California’s economy was cut short as a spike in COVID-19 cases in early July 2020 resulted in Governor Gavin Newsom ordering that certain businesses with indoor operations, such as restaurants and movie theaters, cease indoor operations “which promote the mixing of populations beyond households and make adherence to physical distancing and wearing face coverings difficult.[i]” Indeed, the risk of contracting the virus is undoubtedly at the forefront of the minds of both employers and employees as they return to their places of employment. This article explores some of the issues posed by COVID-19 in the context of recent changes to California’s workers’ compensation laws and the impact of these changes on employers, as well as issues concerning employers’ potential exposure to litigation for COVID-19 related claims.

1. A Brief Overview of the California Workers’ Compensation Act

California’s workers’ compensation laws are codified in Labor Code §§ 3200-6200, referred to as the Workers’ Compensation Act. The primary purpose of California’s workers’ compensation statutes is to insure that an injured employee and his or her dependents have adequate means of sustenance while the employee is unable to work[ii]. The laws also promote the employee’s prompt recovery so that he or she can return to the workforce[iii]. Accordingly, the burden of caring for the injured worker and his or her dependents is shifted from society to industry, which assumes the responsibility as a cost of doing business[iv]. The provisions of the Workers’ Compensation Act must be liberally construed in the employee’s favor, and all reasonable doubts as to whether an injury arose out of employment are to be resolved in favor of awarding the injured employee compensation[v].

In order to be eligible for workers’ compensation benefits under California law, two conditions must be present: (1) an employer-employee relationship[vi] and (2) an injury suffered by an employee that arises out of and in the course of the employment relationship[vii].

California defines an employee as every person in the service of an employer under any appointment or contract of hire or apprenticeship, express or implied, oral or written, whether lawfully or unlawfully employed[viii]. Any person rendering service for another is presumed to be an employee[ix]. Independent contractors, defined as any person who renders service for a specified recompense for a specified result, under the control of his principal as to the result of his work only and not as to the means by which such result is accomplished[x], are specifically exempted from this presumption[xi].

For an injury to arise out of the employment, it must occur by reason of a condition incident to the employment[xii]. That is, the employment and the injury must be linked in some causal fashion[xiii]. However, such connection need not be the sole cause of the injury; it is sufficient if the employment is a contributory cause of the injury[xiv]. The employee has the burden of proof by a preponderance of the evidence[xv]

2. Changes to the Workers’ Compensation Act in Response to COVID-19

In response to the pandemic, California Governor Gavin Newsom issued a statewide stay-at-home order on March 19, 2020, applicable to all residents except those needed to maintain continuity of operations of essential critical infrastructure sectors[xvi]. In accordance with this order, the State Public Health Officer designated categories of “Essential Critical Infrastructure Workers” that are exempted from the stay-at-home order, which range from healthcare and emergency services, sanitation, construction, financial services, and food and agriculture services[xvii].

On May 6, 2020, Governor Newsom, recognizing that essential workers are at an increased risk of contracting COVID-19, issued an Executive Order that creates a rebuttable presumption that an employee’s diagnosis of COVID-19 related illness arose out of the course of employment for purposes of awarding workers’ compensation if certain conditions are met[xviii]. These conditions include the following:

  1. The employee tested positive for or was diagnosed with COVID-19 within fourteen (14) days after a day that he or she performed labor or services at the place of employment at the employer’s direction;
  2. The day referenced in subparagraph (a) on which the employee performed labor or services at the place of employment at the employer’s direction was on or after March 19, 2020;
  3. The place of employment was not the employee’s home or residence; and
  4. The diagnosis of a COVID-19 related illness was done by a physician who holds a physician and surgeon license issued by the California Medical Board, and that diagnosis is confirmed by further testing within 30 days of the date of the diagnosis[xix].

The Executive Order is expressly limited to diagnosed cases between March 19, 2020 and July 5, 2020[xx]. An employer may introduce evidence to rebut or dispute the presumption within 30 days after the claim is filed[xxi]. Unless the employer can produce evidence to rebut the presumption during that time frame, the injury is presumed to be compensable[xxii]. After the 30 day period, an employer can only dispute the claim using new evidence discovered more than 30 days after filing[xxiii].

3. Effect of Executive Order N-62-20 on California Employers’ Rights and Duties Under the Workers’ Compensation Act

Employers are understandably concerned about the changes to existing law created by the Executive Order and its potential impact on their operations, both logistically and financially. Key changes that merit consideration are discussed below.

The most drastic change created by the Executive Order that establishes the rebuttable presumption of causation is that it effectively removes an employee’s burden of producing evidence of a work-related injury before he or she becomes eligible for benefits. Instead, the burden is shifted to the employer, who must prove that the work performed by the employee was not the cause of the illness. This can be very difficult to prove, as it would involve thorough investigation of an employee’s activities outside of work, which can be time-consuming, costly, and potentially encroach on an employee’s privacy rights. Additionally, the Executive Order is silent as to the type of evidence that can be introduced to rebut the presumption that the COVID-19 related illness was work-related.

Furthermore, under the Executive Order, an employer’s period to deny a claim is significantly cut short, from 90 days under the Labor Code, to just 30 days from the date the claim form is filed[xxiv]. Therefore, employers must report any COVID-19 claims to their insurance carriers to avoid missing this crucial deadline.

Governor Newsom’s Executive Order is silent as to the definition of a “COVID-19 related illness,” despite the term appearing prevalently throughout the text of the document. While a diagnosis of COVID-19 seemingly satisfies the requirements set forth under the Executive Order, it is unclear as to what “related illnesses” qualify, which will undoubtedly create confusion as to eligibility of claims.

The Executive Order is also silent as to the type of employees who can claim the presumption. As California enters Stage 2 of the Governor’s Pandemic Roadmap to reopening California’s economy, businesses previously deemed “non-essential” are beginning to transition their employees back to work. Although the Order was originally issued to protect specific categories of workers deemed “essential” to the State’s infrastructure, the Executive Order covers all COVID-19 related illness claims through July 5, 2020. Therefore, claims by “non-essential” employees, which were not previously contemplated by the Executive Order, will fall within its purview, which is ostensibly at odds with the Governor’s intent in issuing the order. The California Workers’ Compensation Ratings Bureau estimates that the presumption created by Executive Order No. N-62-20 for claims by essential workers will cost between $2.2-33.6 billion[xxv]. Considering that this calculation did not take into account claims by non-essential workers, the potential cost is disconcerting for many California employers who are concerned about increases in workers compensation insurance premiums as a result of the presumption. Indeed, in the month following the Governor’s issuance of the Executive Order, over 5,000 California employees filed COVID-19 related workers’ compensation claims.[xxvi]

Lastly, the Executive Order also provides that compensation shall extend to all workers’ compensation benefits generally available to claims by injured workers under existing laws[xxvii]. Sick employees must exhaust their state and federal sick leave benefits before they are eligible for temporary disability benefits under workers’ compensation laws[xxviii].

4. Employer Liability In the Event that an Employee Contracts COVID-19 While Working

Courts have interpreted the rule of liberal construction to require that the statutes are liberally construed in favor of awarding workers’ compensation, not in favor of permitting civil litigation[xxix].

In California, with limited exceptions, the right to recover benefits under the Workers’ Compensation Act is “the sole and exclusive remedy” of the employee or his or her dependents against the employer[xxx]. The exclusive remedy rule prevents not only employees, but also their dependents, from bringing civil actions against employers[xxxi].

The following are the statutory exceptions to the exclusive remedy rule under the Workers’ Compensation Act:

(1)       Willful physical assault by the employer

(2)       Aggravation of the employee’s injury by the employer’s fraudulent concealment of the existence of the injury and its connection with the employment;

(3)       Injuries proximately caused by a defective product manufactured by the employer that is thereafter provided for the employee’s use by a third person[xxxii].

Additionally, an employer who fails to secure workers compensation insurance can be sued in tort by an employee or his or her dependents[xxxiii].

Employers abiding by California’s workers’ compensation insurance requirements are not necessarily insulated from lawsuits filed by employees for damages arising from work-related exposure to COVID-19. Although the situations in which an employer can be sued in civil court outside of the workers’ compensation system are limited, employees may attempt to rely upon an exception to the exclusive remedy rule to seek compensation outside of the Workers’ Compensation system to maximize their potential recovery.

The liberal construction of the Workers’ Compensation Act in favor of extending benefits has been applied to cases involving the exclusive remedy rule, even when the employee is seeking to avoid workers’ compensation coverage[xxxiv]. In other words, application of the remedies afforded to employees by the Workers’ Compensation Act is the exception, not the rule. Accordingly, the exclusions under the Workers’ Compensation act are construed narrowly. In the context of COVID-19, fraudulent concealment is the exception that appears most susceptible to an influx of litigation. For example, an employee who contracts a COVID-19 related illness may allege that he or she in the course and scope of their employment was exposed to another employee whom the employer knew or should have known had been infected with the virus.

To recover under California’s fraudulent-concealment exception to the exclusivity of workers’ compensation, an employee must prove that the employer knew of his work-related injury, the employer concealed that knowledge from him, and the injury was aggravated as a result of such concealment[xxxv]. If any one of these conditions is lacking, the exception does not apply[xxxvi]. This fraudulent-concealment exception is an extremely limited one[xxxvii]. Courts have emphasized that this exception to exclusive remedy rule would apply to few situations[xxxviii].

The fraudulent concealment exception is widely used in toxic tort matters, which involve alleged exposures over an extended period of time that resulted in latent diseases. Courts in these cases have held that causes of action for fraudulent concealment are barred by the exclusive remedy provisions of the Workers’ Compensation Act even if the employer is alleged to have induced the employee to accept employment by representing the workplace would be safe[xxxix]. Otherwise, the purpose of the entire workers’ compensation system would be undermined[xl]. Even in cases which allege that the employer failed to provide appropriate controls and personal protective equipment, the Courts have drawn a distinction between “exposure” and “injury,” and held that the former cannot support an exception to the workers’ compensation laws for fraudulent concealment[xli].

Even if an employee successfully pursues the fraudulent concealment exception in a civil action, it is important to note that this does not allow him or her to convert a workers’ compensation claim into a tort claim[xlii]. The exception only allows recovery for the aggravation of the personal injury caused by the concealment. Recovery for damages “from contracting the disease in the first instance” can only be obtained through the workers’ compensation program[xliii]. While it is too early to tell whether a COVID-19 related injury allegedly resulting from an exposure in the workplace will result in claims that may fall within the fraudulent concealment exception to the Workers’ Compensation Act, the potential for such a claim certainly exists.

5. Enforceability of Liability Waivers Related to COVID-19 Related Litigation

In California, an individual may waive the advantage of a law intended solely for his or her benefit, but a law established for a public reason cannot be contravened by a private agreement[xliv]. California courts have interpreted the legal theory underlying the Workers’ Compensation Act is a presumed “compensation bargain,” wherein the employer assumes liability for industrial personal injury or death without regard to fault in exchange for limitations on the amount of that liability[xlv]. The employee is afforded relatively swift and certain payment of benefits to cure or relieve the effects of industrial injury without having to prove fault but, in exchange, gives up the wider range of damages potentially available in tort[xlvi]. In turn, society as a whole is relieved of the burden of caring for the injured workman and his family, and the burden is placed upon the industry as a cost of doing business[xlvii]. It then follows that California’s workers’ compensation laws are firmly grounded in public policy. Requiring employees to waive workers’ compensation claims as a precondition of returning to work may be interpreted as violating public policy. California law is unequivocal and well settled in that contracts that contravene public policy are illegal and unenforceable[xlviii].

Additionally, courts may interpret these waivers as unconscionable contracts of adhesion. These types of contracts, which are heavily disfavored, are typically imposed and drafted by the employer, the party of superior bargaining strength, and relegate to the employee only the opportunity to adhere to the contract or reject it[xlix].

6. Steps an Employer May Take to Avoid the Risk of COVID-19 Related Workers’ Compensation Claims

Employers may take several proactive measures to safeguard their businesses and employees and limit exposure to COVID-19 related workers’ compensation claims. The most important step employers should take is to ensure they have an active workers’ compensation insurance policy in place that complies with the requirements of Labor Code § 3700 et seq. Employers should also make every effort to expediently report any COVID-19 related claims to their workers’ compensation insurance carriers to ensure they comply with the shortened deadlines imposed by the Governor’s Executive Order. An employer’s failure to timely deny or investigate COVID-19 workers’ compensation claims could significantly impact their ability to defend against the rebuttable presumption created by the Executive Order.

Employers should also work with in-house or outside counsel to review their existing safety policies, procedures to ensure they address the risks of COVID-19 exposure to employees and supplement these practices with new protocols aimed at minimizing the risk of exposure where necessary.

On May 14, 2020, California’s Division of Occupational Safety and Health (“Cal/OSHA”) issued its “Interim General Guidelines on Protecting Workers from COVID-19.” While this interim guidance does not impose new legal obligations on California employers, it provides employers and workers with information for preventing exposure to COVID-19 in the workplace. Cal/OSHA’s guidelines include, but are not limited to the following:

  1. Actively encourage sick employees to stay home.
  2. Immediately send employees home or to medical care, as needed, if they have a frequent cough, fever, difficulty breathing, chills, muscle pain, headache, sore throat, or recent loss of taste or smell.
  3. Ensure employees who are out ill with fever or acute respiratory symptoms do not return to work until both of the following occur:
    1. At least three full days pass with no fever (without the use of fever-reducing medications) and no acute respiratory illness symptoms; and
    2. At least 10 days pass since the symptoms first appeared.
  4. Encourage employees to telework from home when possible.
  5. Practice physical distancing by cancelling in-person meetings, using video or telephonic meetings, and maintaining a distance of at least 6 feet between persons at the workplace when possible.
  6. Provide employees with personal protective equipment, such as face masks and gloves[l].

Employers should also review all applicable guidelines issued by the public health departments of the municipality and/or county of their place of business, as well as any industry-specific guidelines promulgated by state and federal regulatory authorities to ensure compliance prior to returning their employees to work.

Given the recent spike in cases, employers must remain vigilant of the potential for COVID-19 related claims. Employers should take every precaution to ensure their operations are compliant with local, state, and federal guidelines that are aimed at minimizing their employees’ exposure to the virus, such as face coverings and social distancing. Taking proactive measures to safeguard employees from COVID-19 related illnesses offer the best protection for employers seeking to minimize the risk of workers’ compensation claims during the ongoing pandemic. Additionally, employers should consult trusted counsel to review potential pitfalls that could lead claims by employees that may fall outside the workers’ compensation system and develop a strategy for addressing the same.

 

[i] https://www.cdph.ca.gov/Programs/OPA/Pages/NR20-143.aspx

[ii] Bussear v. Workers’ Comp. Appeals Bd. (1986) 181 Cal. App. 3d 186, 189.

[iii] Id.

[iv] Id.

[v] Labor Code § 3202; Wright v. State of California (2015) 233 Cal. App. 4th 1218, 1229.

[vi]Labor Code § 3600

[vii] Cty. of Los Angeles v. Workers’ Comp. Appeals Bd. (1981) 30 Cal. 3d 391, 396.

[viii] Labor Code § 3351

[ix] Labor Code § 3357

[x] Labor Code § 3352

[xi] Labor Code § 3357; See also Labor Code § 5705 (providing an employer an affirmative defense based on claim that a worker was an independent contractor or “or otherwise excluded” from the Workers Compensation Act.)

[xii] Maher v. Workers’ Comp. Appeals Bd. (1983) 33 Cal. 3d 729, 733.

[xiii] Id.

[xiv] Id.

[xv] Labor Code, § 3202.5; McAllister v. Workmen’s Comp. Appeals Bd. (1968) 69 Cal. 2d 408, 416.

[xvi] Executive Order N-33-20 (https://covid19.ca.gov/img/Executive-Order-N-33-20.pdf)

[xvii] Essential Workforce https://covid19.ca.gov/img/EssentialCriticalInfrastructureWorkers.pdf

[xviii] Executive Order N-62-20 (https://www.gov.ca.gov/wp-content/uploads/2020/05/5.6.20-EO-N-62-20-text.pdf)

[xix] Id.

[xx] Id.

[xxi] Id.

[xxii] Id.

[xxiii] Id.

[xxiv] Labor Code § 5402

[xxv] Cost Evaluation of Potential Conclusive COVID-19 Presumption in California’ Workers’ Compensation (https://www.wcirb.com/sites/default/files/documents/wcirb_april_2020_cost_evaluation_of_conclusive_covid-19_presumption.pdf)

[xxvi] https://calmatters.org/economy/labor/2020/06/covid-workers-comp-compensation-claims-california-lockdown/

[xxvii] Id.

[xxviii] Id.

[xxix] King v. CompPartners (2018) Inc., 5 Cal. 5th 1039, 1051.

[xxx] Labor Code, § 3602, subd. (a)

[xxxi] Id.

[xxxii] Labor Code, § 3602, subd. (b)

[xxxiii] Labor Code, §§ 3706, 3602, subd. (d)

[xxxiv] Shoemaker v. Myers (1990) 52 Cal. 3d 1, 19.

[xxxv] Silas v. Arden (2012) 213 Cal. App. 4th 75, 91

[xxxvi] Jensen v. Amgen, Inc. (2003) 105 Cal. App. 4th 1322, 1324

[xxxvii] Id. at 1324.

[xxxviii] Id. (“[W]e cannot believe that many employers will aggravate the effects of an industrial injury by not only deliberately concealing its existence but also its connection with the employment.”)

[xxxix] Spratley v. Winchell Donut House, Inc. (1987) 188 Cal. App. 3d 1408, 1412–13.

[xl] Id. at 1413. (“The reason for the foregoing rule seems obvious. It is not uncommon for an employer to ‘put his mind’ to the existence of a danger to an employee and nevertheless fail to take corrective action. [Citation.] In many of these cases, the employer does not warn the employee of the risk. Such conduct may be characterized as intentional or even deceitful. Yet if an action at law were allowed as a remedy, many cases cognizable under workers’ compensation would also be prosecuted outside that system. The focus of the injury in a case involving work-related injury would often be not whether the injury arose out of and in the course of employment, but the state of knowledge of the employer and the employee regarding the dangerous condition which caused the injury. Such a result would undermine the underlying premise upon which the workers’ compensation system is based.”)

[xli] Foster v. Xerox Corp. (1985) 40 Cal. 3d 306, 311; Rodriguez v. United Airlines Inc. (N.D. Cal. 2013) 5 F. Supp. 3d 1131, 1137.

[xlii] Foster v. Xerox Corp. supra, 40 Cal.3d at 310.

[xliii] Id.

[xliv] Civil Code § 3513.

[xlv] Shoemaker v. Myers supra, 52 Cal. 3d at 16.

[xlvi] Id.

[xlvii] Bussear v. Workers’ Comp. Appeals Bd. supra, 181 Cal. App. 3d at 189.

[xlviii] Abramson v. Juniper Networks, Inc. (2004) 115 Cal. App. 4th 638, 658.

[xlix] Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226 Cal. App. 4th 74, 84.

[l] Cal/OSHA Interim General Guidelines on Protecting Workers from COVID-19 (https://www.dir.ca.gov/dosh/coronavirus/General-Industry.html)