Personally in this day and age, I’d never start a business in California — certainly not one that hired many employees. The risk/reward ratio is TERRIBLE. One gets FAR better odds at a casino.
Below is yet another trap for hapless employers who are “employee intensive” in their business. One or two of these groundless lawsuits can eat up much or all of a year’s profits.
CA is a litigation lawyer’s “workers’ paradise.” And the collusion between workers and attorneys seeking windfall profits (the profits of others) is bound to grow as word gets out.
Cumulative trauma law bedevils employers, hands fired employees a payday
The Monteleone family opened Barone’s Italian Restaurant in Valley Glen 70 years ago, and has seen its share of employee turnover.
But Tom Monteleone got a nasty lesson in California’s employee relations law last week.
One of his cooks was terminated after a few weeks of erratic behavior. The cook, who had been with Barone’s for 25 years, fought back, Monteleone said. The employee retained an attorney, found a doctor to diagnose him with a work-related injury and alleged he had cumulative trauma.
The law permits employees to claim that repetitive stress over a period of time has caused damage and entitles them to cash.
“Late Reported” Cumulative Injury Claims
One of the primary reasons is a provision of the state code doesn’t allow for a report date for an injury when it considers a cumulative trauma claim. Among the largest increases among cumulative claims is so-called “late reported,” regarding injuries that had not previously been reported.
Therefore, Barone’s fired employee was allowed by a panel of the California Workers’ Compensation Appeals Board to walk away with a five-figure payday from Monteleone.
It was done so at the behest of the state, which gave the worker $25,000. Monteleone had asked that he allow his lawyer to contest the departed employee’s allegations but was refused.
“They don’t even ask me if I want to settle, I don’t get to challenge whatever he says,” Monteleone said. “It’s between the insurance company lawyer and the employee.”
His insurance bill increases to pay a portion of the $25,000 over a three-year period, he figures. Start adding up these claims and it begins to amount to something.
Becoming a Trend
Which is what Monteleone sees happening. A couple years ago, he fired two employees who were stealing from him. Shortly after terminating the employees, he received a notice that both workers were filing a claim, again under the state’s cumulative trauma provision.
Both won five-figure payouts.
“The law is clear and it’s unique to California,”said Dan Pondella, the insurance agent who handles Monteleone’s workers compensation policy. “Anyone can claim cumulative trauma and get paid, even if they worked for years and never said a word. And in this case, even if they get fired for stealing.”
Pondella blames the attorney lobby and state lawmakers for failing to buck the heavy influence and create a better state for employers.
“I would say at least 80 percent of our clients have had cumulative trauma cases,” Pondella said. “Manufacturing firms can move, and they go to Texas where the workman’s compensation insurance is a third of what it is here. Someone like Tom, who is running a family business that has been here for generations, he can’t move so easy. Instead, if he wants to stay in business, he now has to pay that extra amount for the next three years.”
The focus of business advocacy groups like the California Small Business Association as pertains to worker’s compensation is a larger look.
“When it comes to those kind of claims, the employer doesn’t have a leg to stand on,” said Lynn DellaCroce, an agent with HUB International Insurance Services in Santa Maria. She said Monteleone was “damn lucky” to get off for $25,000.
Like other worker’s comp claims, the judge in the case relies on state law, which allows that if 1 percent of your injury can be attributed to employment, your claim, if it satisfies other criteria, is valid.
The state in 1994 enacted reforms that required employers to establish a procedure to chronicle potential cumulative injuries, which are attributed to repetitive movement.
At the time, proponents of the change claimed it would benefit employers through prevention. Much of the focus then was on carpal tunnel syndrome, which arose as more computer-related work including typing became more common. But loopholes and questionable – – albeit successful — claims have provided dubious benefits employers.
High CA Payouts
There are 24 worker’s compensation appeals boards around the state, where claims are heard. California employers pay out the highest worker’s compensation insurance rates in the U.S., according to a national study. There are numerous reasons to apply for payments, most prevalently from actual on-the-job injuries. Wedged in there are claims for cumulative trauma. California is considered the most liberal in the nation when it comes to handing these awards out, with a ready base of lawyers and doctors set up to establish the malady.
The last attempt to temper the state’s cumulative trauma law came in 2004 from then-state Assembly Member Guy Houston, R-San Ramon. The measure died immediately.
“It’s a law that penalizes the employer when, if I had been advised that there were problems that someone was having, I could have done something about it,” Monteleone said. “But the state just goes along with whatever is alleged.”
Richard Rider30 September, 2015, 09:43
You’ll get much better odds gambling at a casino than opening a business in California.
California small businesses failed in 2011 at a rate 69% higher than the national average — the worst state in the nation.
http://money.cnn.com/2011/05/19/smallbusiness/small_business_state_failure_rates/index.htm(based on Dunn & Bradstreet study)
CA needlessly licenses more occupations than any state – 177. Second worst state is Connecticut at 155. The average state is 92. But CA is “only” the 2nd worst licensing state for low income occupations.
Richard Rider30 September, 2015, 09:44
CA has the highest/worst state workers’ compensation rates in 2013, up from 3rd in 2012. CA rates 21.3% higher than 2nd highest state, 88% higher than median state. Yet we pay low benefits — much goes to lawyers. http://riderrants.blogspot.com/2014/10/california-has-worst-workers.html
In 2012, our supply of California businesses shrunk 5.2%. In ONE year. NOTE: That’s a NET figure – 5.2% fewer businesses in CA in 2012 than were here in 2011. Indeed, in 2012, CA lost businesses at a 67.7% higher rate than the 2nd worst state!http://riderrants.blogspot.com/2013/07/in-2012-ca-lost-businesses-at-677.html
The top U.S. CEO’s surveyed rank California “the worst state in which to do business” for the 11th straight year (May, 2015).
From 2007 through 2010, 10,763 manufacturing facilities were built or expanded across the country — but only 176 of those were in CA. So with roughly 12% of the nation’s population, CA got 1.6% of the built or expanded manufacturing facilities. Stated differently, adjusted for population, the other 49 states averaged 8.4 times more manufacturing growth than did California.
http://www.cmta.net/20110303mfgFacilities07to10.pdf — prepared by California Manufacturers and Technology Association
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Costa Mesa30 September, 2015, 09:47
I can identify with the Monteleone family’s pain and frustration.
Thanks to dishonest employees, lawyers and doctors, these fraudulent claims are being used as a “retirement package” by people who feel they are “entitled”. These dishonest doctors and lawyers have created a cottage industry based on a loophole in the W/C law that was actually meant to help the asbestos workers. My husband and I own a manufacturing business located in Costa Mesa California and employee 54 people. We had several of these claims and tried in vain to fight each one in court. One post term employee who had never missed a day of work or complained about pain, etc. received compensation of $32,000 plus medical because the judge determined as follows: “Well, she’s been working in the industry for 20 years – she’s bound to have suffered some cumulative trauma during that time”. She was 45 years old and had only worked for us for 3 years! She then called other employees who had been laid off and told them she had “won” $32,000 and 3 more claims were filed. The insurance company decided to “mitigate our losses” and settled with each one (without taking depos) for $18,000 – $20,000. My mod rate went through the roof and so did our profits and thereby the compensation funds we were planning to give back to our employees. During that time, we did not have a single legitimate claim.
I went to Sacramento with Worker’s Compensation Action Network to lobby the legislators on this issue, but you know how that goes. Lots of lip service about how important small business is to the economy, etc. I decided to re-focus my energies on my business.
I’ve spoken to many employers over the years. This issue is responsible for negligent retention which results in low employee morale and lost profits that can otherwise be put back into the business. Employers are hesitant to let employees go because they fear a post termination continuous trauma claim that can run into tens of thousands of dollars paid to the employees and increased worker’s comp costs for employers.
Until enough employers address this issue with their legislators and help tighten up the laws, employees, lawyers and doctors will continue to abuse the system.