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July 20, 2010
$550,000 for Discouraging Comp Claims: How to Avoid a Similar Fate

The California Labor Code requires employers to provide workers’ compensation coverage to their employees and to pay for benefits if an employee becomes injured or ill because of work. Due to the costs, some employers don’t comply with their obligations—at times going so far as to actively discourage their employees from filing legitimate claims. But as one California employer recently discovered, taking this route can be far more costly in the long run—and can even lead to criminal charges.

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Managers Plead Guilty to Misdemeanors

The Amador County District Attorney’s Office and the California Department of Insurance launched a criminal investigation in 2007 after store managers at a Raley’s in Roseville were alleged to have discouraged an injured worker from filing a workers’ comp claim.

The investigation revealed that this was no isolated incident. Raley’s managers regularly suggested that injured employees turn to their own health insurance for work-related injuries, rather than report injuries to the required state agencies. Criminal charges were brought against two store managers, who pleaded guilty to misdemeanor violations. Prosecutors also filed a civil lawsuit against Raley’s under the unlawful business practices laws.

Raley’s on the Hook for Penalties

In the settlement of the unlawful practices case, Raley’s agreed to change its workers’ comp policies—including mandatory training for store managers, improved recordkeeping, and contracting with a phone-in medical advice company to evaluate injuries and recommend treatment.

It also agreed to pay $550,000 in penalties and in costs of the investigation and enforcement as well as $30,000 to fund training for law enforcement investigators. The settlement includes an added $150,000 sanction if other violations occur during the next 5 years.

Your Obligations Under Workers’ Comp Laws

To avoid penalties and possible criminal sanctions, you should never try to deflect employees’ workers’ comp claims. You can help defend your business from such accusations by aggressively tackling all of your responsibilities under the workers’ compensation law.

You must do the following:

  • Obtain workers’ comp insurance or qualify to become self-insured.
  • Provide a workers’ comp pamphlet to new employees that explains their rights and responsibilities under the workers’ comp laws.
  • Post the required workers’ compensation poster (available at www.dir.ca.gov/dwc/forms.html) in a place where all employees can see it. Failure to post the poster is a misdemeanor and can result in a civil penalty of up to $7,000 per violation.

When an injury or illness occurs, you must:

  • Provide a workers’ comp claim form to the affected worker within 24 hours of when the injury or illness is reported.
  • Return a completed copy of the claim form to the worker within 24 hours of receipt.
  • Forward the claim form, along with the employer’s report of occupational injury or illness, to the claims administrator within 24 hours of receipt.
  • Authorize up to $10,000 in appropriate medical treatment within 24 hours of receiving the claim.
  • Provide transitional light-duty work whenever appropriate.

Practice tip: Failing to provide workers’ compensation coverage is itself a criminal offense. You could face a fine of up to $10,000, imprisonment in the county jail for up to one year, or both—as well as penalties up to $100,000.

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