Some of the biggest California Workers’ Compensation news to come out of the last quarter of 2013 was U.S. District Court Judge George H. Wu’s issuance of an injunction prohibiting the California Division of Workers’ Compensation from collecting the $100 lien activation fee for liens filed prior to January 1, 2013. The lien activation fee was a result of SB 863’s mandate that workers’ compensation lien holders pay a $100 lien activation fee in order to pursue their liens filed prior to January 1, 2013. The purpose of the mandate was to reduce the number of liens being pursued in the California Workers’ Compensation system. In addition to this added lien activation fee, SB 863 established a new statute of limitations for liens and also enacted a $150 filing fee for new liens but neither of these provisions were being challenged by the lien claimants before Judge Wu.

The injunction, which took effect on November 19, 2013, was the result of Judge Wu giving merit to an equal protection claim set fort in the case of Angelotti Chiropractic v. Baker. Judge Wu balanced the interest of both the DWC (desiring to reduce the large number of liens) and effected lien claimants (having to pay a new fee on previously filed liens) and ultimately found a lack of rationale for exempting some entities, such as certain insurance plans and governmental agencies, and not others. Thus, the mandate was unconstitutional on an equal-protection basis.

The unfortunate result of Judge Wu’s decision for employers, insurance carriers, and administrators, is that it is likely to cause a snowball effect for future litigation regarding the SB 863 mandates. For example, since Judge Wu’s November 12, 2013 injunction was ordered, WorkCompCentral.com claims that, “four additional lawsuits challenging the $150 lien-filing fee, the 18-month statute of limitations on filing a lien, and the prohibition on selling accounts receivable have been lodged since Wu issued his Order.”

The result of this injunction could ultimately cost much more than what was originally anticipated. WorkCompCentral.com also reports that in at least two decisions issued in November, after Judge Wu’s Order, the WCAB rescinded Orders dismissing inactivated liens and remanded the cases for further proceedings at the trial level citing Judge Wu’s Order.

The moral of the story is that all insurance carriers and administrators should be prepared for some of the liens associated with their files, which have been dismissed due to non-compliance with the mandates of SB 863, to rear their ugly heads once again. Lien claimants are fighting the constitutionality of the SB 863 with some success, and their fight is not over.