About Us
Services & Training
News & Updates
Our Disclaimer
Contact Us

(June 2002)
Workers' Comp. Relief for Employers

Applies to

All ERISA-covered employers

Effective Date



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.


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.


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.

What This Means

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.

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

You can download the current and past Bulletins in PDF (Portable Document File) format where proceeded by below. All other Bulletins are in standard HTML format. If you do not have Adobe Acrobat Reader, which is required to open, view, and print the bulletins, you can download the application FREE from the link below.
December 2004: Government Rescinds Emergency Meal Regulation Changes
December 2004: Major Changes in Meal / Rest Break Regulations
August 2004: California’s Infamous “Bounty Hunter” Law Reformed
June 2002: Workers' Comp. Relief for Employers
April 2002: Supreme Court Favors Employers in FMLA Ruling
April 2002: Salary Basis Issue Finally Resolved
November 2001: New California Legislation (update)
November 2001: (2 Court Cases) What is Harassment?
October 2001: New Drug & Alcohol Testing Rules
October 2001: Tax Legislation: New Pension Laws
October 2001: Employers Must Explain Family Leave
March 2001: Rest and Meal Periods II
March 2001: Salary Basis Test Changes to Monthly
January 2001: AB 2509 (Wage & Hour Law)
December 2000: Rest and Meal Periods
Dec. 2000: New Calif. IWC Wage Order 16
Dec. 2000: New OSHA Ergonomics Standards
Nov. 2000: New Workplace Investigations Course
November 2000: Calif. Minimum Wage Increase
March 2000: AB60 Update
August 1999: Sick Pay Law
August 1999: Cal Poly Class and GMS
August 1999: Age Discrimination Law
November 1998: Susan Waag CCPA
November 1998: FEHA Liability Reduction
November 1998: Disability Discrimination
November 1998: COBRA
November 1998: CHP Drug Testing
July 1998: Sexual Harassment

Top | Home | About Us | Services | News | Calendar | Links | Disclaimer| Contact Us

WAAG AND CO. • Phone (805) 783-2300 • Toll Free (888) 650-WAAG • Fax (805) 544-4215
P.O. Box 5060, San Luis Obispo, CA 93403 • info@waagandco.com