The regulations for administrative penalties pursuant to Labor Code § 5814.6 (Sections 10225, 10225.1 and 10225.2 of the California Code of Regulations) have been approved by the Office of Administrative Law.
Labor Code Section 5814.6 authorizes the Division of Workers' Compensation's administrative director to impose penalties in amounts up to $400,000 against employers and insurers who knowingly and unreasonably delay or refuse payment of compensation to injured workers in violation of Labor Code section 5814, with a frequency that indicates a general business practice.
In contrast to the new, SB 899 version of Section 5814 -- which actually reduced the potential penalty payable to the employee for violating the section -- the same section also included language which permitted drafting of regulations for imposing larger fines (but not payable to the injured worker) on those showing a pattern of repeat violations.
Many think that the potential severity of these new penalties will foster a more proactive policy on the part of insurers and administrators to self-impose the vastly cheaper 10% penalties at the first hint that a delay may have occurred (a remedy which subsection (b) of Section 5814 permits in lieu of larger penalties in certain circumstances).
The press release advising of the approval of the regulations included the following:
"Unreasonable delays or denials of compensation to injured employees undermine the central purpose of California's workers' compensation system. The law provides a remedy for such abuse by authorizing workers' compensation judges to impose penalties for violations found in individual cases. These regulations provide a remedy where multiple violations by a particular claims administrator demonstrate the existence of a general business practice of knowingly causing unreasonable delays or denials.
"Penalties will be assessed as specified in the regulations and all penalties collected will be deposited into the Workers' Compensation Return-to-Work Fund, established to promote the early and sustained return to work of employees following work-related injuries or illnesses.
"The proposed regulations implement, interpret and make specific the provisions of Labor Code section 5814.6 by:
• Defining particular entities subject to the administrative penalties.
• Specifying criteria the DWC administrative director must consider in finding that violations were committed knowingly.
• Specifying the criteria the administrative director must consider when determining the frequency of violations indicates the existence of a general business practice.
• Establishing a schedule of penalties to be imposed based upon the nature, severity, frequency and duration of the relevant violations."
The new rules will go into effect on May 26, 2007.
To read the new rules,
PLEASE CLICK HERE. *
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