Job Killer Bills Dramatically Increase Workers’ Compensation Costs

AB 664 and AB 196, however, go beyond a mere presumption and conclusively determine that any exposure or contraction of a communicable disease, is a workplace injury.

Two California Chamber of Commerce-opposed job killer bills that will substantially increase workers’ compensation costs by establishing a “conclusive presumption” of workplace injury for contraction of COVID-19 are moving in the California Legislature.

One bill, AB 664 (Cooper; D-Elk Grove), significantly increases workers’ compensation costs for public employers and public and private hospitals by “conclusively” presuming (non-rebuttable) that exposure or contraction of communicable diseases, including COVID-19, are caused by the workplace and defines required compensation to include non-workers’ compensation items such as “temporary housing costs.”

The second bill, AB 196 (Gonzalez; D-San Diego), significantly increases workers’ compensation costs for employers by “conclusively” presuming (non-rebuttable) that contraction of COVID-19 by all “essential workers” is a workplace injury.

Both bills also establish an extremely concerning precedent for expanding presumptions into the private sector for COVID-19 issues, which the Workers’ Compensation Insurance Rating Bureau (WCIRB) recently estimated will add billions in costs to California’s workers’ compensation system.

Presumptions and the Workers’ Compensation System

The function of a presumption in workers’ compensation law is to shift the burden of proof from the employee to the employer. Currently a worker claiming work-related COVID-19 would need to offer some reasonable basis to support their claim that they contracted COVID-19 at work, or that their work put them at a special risk for contracting COVID-19, and their claim would be evaluated as described above.

AB 664 and AB 196, however, go beyond a mere presumption and conclusively determine that any exposure or contraction of a communicable disease, is a workplace injury. A “conclusive presumption” would clearly declare, as a matter of law, that employers must provide workers’ compensation benefits for eligible employees even if the evidence clearly indicates that the infection did not occur at work. Therefore, there would be no ability for the employer to rebut such a conclusive determination.

Of note, although there are examples of rebuttable presumptions in California’s workers’ compensation statutes, there are no conclusive presumptions. Moreover, while a number of states have moved forward in recent weeks to adopt rebuttable presumptions related to COVID-19 for certain workers, none have adopted the conclusive determination proposed by AB 664 or AB 196. These types of actions would transform California’s important workers’ compensation system into a safety net system for non-industrial COVID-19 claims.

Dramatically Increases Costs

Employers in California’s workers’ compensation system, which had a cost of $23.5 billion in 2018, are approximately 67 percent insured and 30.2 percent self-insured (the State of California makes up 2.8 percent). For many large employers and nearly all public entities, the cost of workers’ compensation is largely self-funded and comes directly out of those organizations’ annual budgets.

The WCIRB recently issued a “Cost Evaluation of Potential Conclusive COVID-19 Presumption in California,” which estimated the cost of similar proposals to be somewhere between $2.2 billion and $33.6 billion per year. The WCIRB cites an approximate mid-range cost estimate of $11.2 billion, or a 61 percent increase in the cost of California’s worker’s compensation system (already the second most expensive in the country).

California employers are facing unprecedented financial strain as a result of the COVID-19 crisis and resulting shutdown in operations and new obligations imposed at the federal, state and local levels. Inappropriately adding burdensome costs will certainly further strain or even crush their ability to recover from this pandemic, leading to wide-spread insolvency and bankruptcy.

AB 664

Would Provide Coverage for Mere ‘Exposure’

AB 664 provides that “injury” includes exposure to, or contraction of, a communicable disease (including COVID-19).

In general, workers’ compensation benefits are extended to “cure and relieve” the effects of an industrial injury or illness. If an employee is merely exposed to, or even tests positive for COVID-19 but is asymptomatic, then there is nothing to “cure or relieve” and access to the workers’ compensation system should not be allowed. California’s workers’ compensation system is vulnerable to gaming via litigation, and allowing access to the system for exposures, suspected exposures, physician-directed quarantines, and asymptomatic positive tests would serve little, if any, good for sick workers and their employers, but it would give enterprising attorneys an avenue to exploit our system’s known litigation weaknesses.

Would Include Non-Workers’ Compensation Benefits, Issues

Beyond medical treatment, AB 664 would define “compensation” to include reimbursement for emergency equipment or personal protective equipment (PPE), reasonable living expenses, and temporary housing costs. The CalChamber points out that these are not workers’ compensation expenses and should not be included in the bill.

California’s workers’ compensation system is designed to provide medical treatment, temporary disability payments to the sick and injured who cannot work, longer-term permanent disability benefits, and funds for workers who cannot return to their place of employment following their injury. Including emergency equipment, PPE, housing costs and living expenses as a benefit of the workers’ compensation system during a pandemic and then opening the system to non-industrial infections would be unprecedented and financially devastating to the system.

Creates a Troubling Precedent

Although there is a long history of legal presumptions being applied to public safety employees in the workers’ compensation system, there has never been a presumption applied to private sector employees.

AB 664 and AB 196 would be the first such presumptions applied to private sector employees. Workers’ compensation is designed to apply a consistent, objective set of rules to determine eligibility, medical needs and disability payments for all injured workers in California.

The CalChamber argues that the Legislature should not take on the role of trying to identify likely injuries for every occupation in the state with the goal of creating special rules for those employees. This is an unrealistic expectation in an insurance system that covers thousands of types of employees and employers.

Such a drastic shift in the law will create an astronomical financial burden on California employers and the workers’ compensation system, at a time when they are already struggling for their livelihoods and can least afford it.

Staff Contact: Jennifer Barrera

For more COVID-19-related federal, state and local resources, visit the CalChamber Coronavirus (COVID-19) webpage and access additional COVID-19-related HRWatchdog blogs.