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(June 2002)
Workers' Comp. Relief for Employers
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All
ERISA-covered employers
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Immediately
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As
Waag and Co. noted in the November 2000 edition of The
Strategic EMPLOYER newsletter (page 6), for several years
employers have been forced to continue paying their normal
share of health insurance premiums indefinitely for employees
out on a workers’ compensation leave of absence. A new
en banc ruling by the Workers’ Compensation Appeals Board
(“WCAB”), combined with some other federal cases,
has changed that. As explained below, the decision of Navarro
v. A&A Farming means that employers with ERISA-covered
health plans do not need to continue paying for health insurance
for employees on workers’ compensation leave – provided
that specific factors apply.
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In Maraviov
v. Tenet Health Systems, the WCAB ruled that when an
employee went out on workers’ compensation leave, the
employer could not stop contributing to the employee’s
health insurance premiums. To do so, said the WCAB, would
put the employee in an adverse situation solely due to having
a work-related injury or illness. For this reason, the WCAB
held that the employer’s failure to continue health
insurance benefits for such an employee would violate Labor
Code §132a. Labor Code §132a (“§132a”)
forbids discrimination against a worker because of a work-related
injury or illness or a workers’ compensation claim.
In Maraviov, the WCAB also held that §132a
was not preempted by ERISA (explained below).
The
WCAB’s position was that by no longer paying its normal
share of premiums, the employer was discriminating against
the injured worker, even if the employer’s policies provided
that all workers on leave were treated in the same manner.
Given that §132a is an anti-discrimination statute, the
ruling in Maraviov was highly criticized, since injured
workers who were treated in the same manner as all
other workers on leave would be deemed victims of discrimination,
which by definition means they would have been treated differently.
The California Supreme Court recently granted review of a different
case to decide the issue of what constitutes “discrimination” under §132a,
which may resolve this incongruity. See, State of Cal.
Dept. of Rehab. V. WCAB (Lauher), review granted 10/24/01.
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More
recently, the WCAB issued a pair of rulings in Navarro,
in which an employee was on a leave of absence due to a work-related
injury. The employer’s health plan stated that only active
employees would receive health benefits, and employer contributions
would be discontinued after a disabled employee had been off
work for 90 days, whether or not the disability was work-related.
The employer sent the employee a notice of his rights under
COBRA (which would enable the employee to continue his health
benefits by paying his own premiums). The employee claimed
that this violated §132a under Maraviov.
The
employer in Navarro responded by asserting that the
health plan was controlled by “ERISA,” the federal
laws governing all employee welfare benefit plans. Under ERISA,
no state may directly or indirectly take action (through legislation,
courts or administrative proceedings) that will “relate
to” an ERISA plan. The WCAB agreed that by requiring
an employer to extend health insurance benefits to injured
workers, §132a would indirectly be regulating ERISA plans
in violation of ERISA. Since ERISA trumps §132a (“ERISA
preemption”), the §132a claim must be dismissed.
In Navarro,
the WCAB expressly disapproved of the Maraviov decision.
Because the Navarro case was decided en banc (i.e.,
the full board) and the Maraviov case was not, the
ruling in Navarro prevails. While the Navarro case
involved a multi-employer insurance trust, even an ERISA-covered
employer’s purchase of group health insurance without
a trust is an ERISA plan. (See the U.S. Supreme Court decision
in District of Columbia v. Greater Washington Board of
Trade.) Accordingly, the result should be the same in
situations involving an ordinary program of the employer contributing
toward the purchase of group health insurance.
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For most
employers, this means that a worker out on workers’ compensation
leave may be given a standard COBRA notice when s/he normally
would no longer be receiving employer-paid benefits. In order
for this to be the case, certain factors must be considered:
- Is the employer covered by ERISA? Every
employer is covered by ERISA except government employers and
church employers.
- Do you have an ERISA health plan? If
the employer is covered by ERISA, then the health plan would
be
too. This includes situations where the employer does little
more than contribute toward the premiums for purchasing group
health insurance. However, if you have 100 or more participants
in the plan at the beginning of your plan year, you must file
a Form 5500 with the Department of Labor (“DOL”).
Failure to file does not change the ERISA preemption issue
in a §132a situation; however, it may mean huge penalties
with the DOL. If you have not filed the Form 5500, contact
a qualified ERISA attorney, who may be able to help you avoid
burdensome penalties through a lesser expensive amnesty/settlement
program.
- Does your health plan/policy provide that only active
employees are covered? Employers should review their
health insurance contract and their personnel policies regarding
who is eligible for health insurance under the plan. If your
plan and policies state that employees on a leave of absence
will continue to have employer contributions made toward
their health coverage, then you must comply with those provisions.
Also, how you have treated other inactive workers in the
past may be a factor. You should check with qualified employment
counsel regarding whether your health insurance plan, your
policies and practices will require you to continue paying
premiums in a given situation.
- Is the injured worker eligible for FMLA? If
an employee is eligible for leave under the Family & Medical
Leave Act (“FMLA”), then the employee must be given
the leave with the employer continuing to pay its normal portion
of health insurance premiums in accordance with the FMLA. FMLA
leave includes leave due to the worker’s own illness
or medical condition, regardless of whether or not the condition
is work-related and covered by workers’ compensation.
FMLA is not subject to ERISA preemption. Once the FMLA leave
is exhausted, if the employee is still out for workers’ compensation
leave, you would then provide the employee with a notice of
his/her COBRA options.
- What
should you do with respect to employees currently out on
workers’ compensation leave (or other leave)
for whom you are still paying premiums? If, after
reviewing the above factors, you conclude that an employee
on leave is ineligible for having the employer continue paying
his/her premiums, you should consult with qualified employment
counsel regarding the proper approach to ending the unnecessary
payment of premiums for the ineligible employees.
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This
material is a general overview of the subject matter, and
is not meant to provide professional opinions regarding any
specific case, matter, or set of facts, or to substitute
for the professional advice of Waag and Co. Instead, please
contact Susan S. Waag, Esq. for additional information. Use
of this information is allowed, provided that credit is given
to: Susan S. Waag, attorney; Waag and Co.; September 2001
Employer Bulletin; INFO@WaagandCo.com;
(805) 783-2300
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