On June 1, 2021, the California Senate passed Senate Bill 335. The bill could have significant impacts on employers if it is signed into law.

45-day decision deadline for denying a claim under Labor Code § 5402 –

Labor Code § 5402(b) provides that:

If liability is not rejected within 90 days after the date the claim form is filed under Section 5401, the injury shall be presumed compensable under this division. The presumption of this subdivision is rebuttable only by evidence discovered subsequent to the 90-day period.

Under current law, an employer has 90 days to make a decision regarding compensability, with the injury presumed compensable if liability is not rejected within 90 days. SB 335 proposes to reduce the timeframe for denying a workers’ compensation claim under § 5402(b). If passed – SB 335 would require employers to make a compensability decision within 45 days for most claims. You read that correctly – SB 335 would limit the employer’s time for conducting a compensability investigation by half.

The timeframe would be even shorter for claims brought by certain members of law enforcement or first responders for conditions that are subject to compensability presumptions under Labor Code sections 3212 – 3213.2. SB 335 would require a decision within only 30 days in those cases.

Does SB 335 affect Covid-19 claims?

SB 335 similarly proposes changes to the deadline for denying Covid-19 related claims under Labor Code § 3212.88 for employees who test positive during an outbreak at the places of employment not covered under other sections.

Under the current law, if liability for a claim of a COVID-19-related illness is not rejected within 45 days after the date the claim form is filed pursuant to Section 5401, the illness shall be presumed compensable. SB 335 seeks to bring this code section in line with the 30-day deadlines already in place under § 3212.86 and 3212.87.

What about medical treatment during the delay stage?

SB 335 also seeks to increase an employer’s liability for medical treatment while the claim is on delay and compensability is being investigated.

Labor Code § 5402(c) currently requires an employer provide medical treatment until the date that liability for a claim is accepted or rejected, with the employer’s liability for medical treatment limited to ten thousand dollars ($10,000). The medical treatment cap would increase to $17,000 during the delay period under SB 335.

Even more penalties of SB 335: The bill seeks to add section 5814.3 to the Labor Code –

The bill proposes to add § 5814.3 to the Labor Code, which could increase penalties for employers with workers entitled to presumptions under Labor Code § 3212-3213.2.

The proposed text of § 5814.3 reads:

1. Notwithstanding Section 5814, if payment of compensation has been unreasonably delayed or refused, either prior to or subsequent to the issuance of an award, for claims of injury or illness covered under Sections 3212 to 3213.2, inclusive, the full amount of the order, decision, or award shall be increased by 10 percent. Multiple increases shall not be awarded for repeated delays in making a series of payments due for the same type or specie of benefit unless there has been a legally significant event between the delay and the subsequent delay in payments of the same type or specie of benefit that establishes the employer’s or insurance carrier’s liability. The question of delay and the reasonableness of the cause shall be determined by the appeals board in accordance with the facts. This delay or refusal shall constitute good cause under Section 5803 to rescind, alter, or amend the order, decision, or award for the purpose of making the increase provided for in this section.
2. This section shall apply to all injuries, without regard to whether the injury occurs before, on, or after the operative date of this section.

If made into law, what do these proposed changes mean for employers and adjusters?

SB 335 was referred to the Assembly Committee on Insurance after being passed by the Senate and is currently under review. Critics of the bill consider these proposals a greater burden on the employer in a system that is already liberally construed in an applicant’s favor. The shortened timeframes also seem to conflict with other relevant timeframes under the Regulations, including those related to timely scheduling and completing Qualified Medical Evaluations.

As part of the process of a bill being considered for law, SB 335 was reviewed by the Senate Appropriations Committee earlier in the year to determine its potential fiscal impact on the state. The committee projected that the passage of SB 335 would increase the State of California’s own internal workers’ compensation expenses as a whole. One could reasonably anticipate private employers will similarly be affected should the bill be signed into law.

Most claims will not be litigated before a 30 or 45-day decision deadline, so early reporting and early investigation are key! You can contact our office any time if you have questions regarding compensability determinations and deadlines or to follow up on the status of SB 335.