Be Prepared for SB 1159 and COVID-19 Workers Comp Action-Over Claims

| Jan 12, 2021 | Firm News |

AND REMINDER: COVID-19 Reporting of Infected Employees Due by Thursday, October 29, 2020.

On September 17, 2020, California Governor Gavin Newsom signed into law SB 1159.  That legislation codifies the COVID-19 presumption created by  Governor Newsom’s Executive Order N-62-20.  The new law provides two new rebuttable presumptions that an employee’s COVID-19 illness is an occupational injury and therefore eligible for workers’ compensation benefits if certain criteria are met.  In addition, employees who are sick can stay home and be provided workers’ compensation benefits.

This article will first provide an overview of the new law.  It will then discuss what can occur if an employee who gets sick with COVID-19 receives workers compensation from his or her employer than sues another contractor on the project claiming that contractor negligently caused the COVID-19 outbreak. This type of claim is called an “action-over” and can impact any employer on a multi-employer worksite.

What is SB1159 and what are my obligations as an employer?

As to employees in the construction industry who get sick or injured due to COVID-19 on or after July 6, 2020, if their employer has five or more employees and the employee tests positive for COVID-19 during an outbreak at their specific workplace the rebuttable presumption applies if the employee test positive within 14 days of working at a specific place of employment, and: (1) four employees test positive if the employer has 100 employees or fewer; (2) four percent (4%) of the number of employees who reported to the specific place of employment test positive if the employer has more than 100 employees; or (3) a specific place of employment is ordered to close by a local public health department, the State Department of Public Health, or the Division of Occupational Safety and Health due to a risk of infection of COVID-19.

This law creates a reporting requirement for employers if there is an outbreak. Specifically, when an employer knows or reasonably should know that an employee has tested positive for COVID-19, the employer must report certain information to its Workers Compensation claims administrator. If the employer fails to do so, the civil penalties are up to $10,000 for intentionally submitting false or misleading information, or for failing to report required information.

Employers must: (1) Retrospectively report by Oct. 29 employee positive COVID-19 tests that occurred between July 6 and Sept. 17; (2) Report within three business days any employee positive COVID-19 that occurred on Sept. 18 and going forward.

The law states that “when an employer knows or reasonably should know that an employee has tested positive for COVID-19, the employer shall report to their claims administrator” by email or fax within three days the following: (1) An employee tested positive for COVID-19 (via the polymerase chain reaction, or PCR, test only); (2) The date the employee tested positive (date specimen was collected for testing); (3) The address or addresses of the employee’s place of employment during the 14-days preceding the date the employee tested positive for COVID-19; and (4) The highest number of employees who reported to work at the employee’s specific place of employment in the 45-day period preceding the last day the employee worked at each specific place of employment.

If an employee makes a COVID-19 claim it must be confirmed by a doctor’s diagnosis using specific testing methods.  If an eligible employee makes a claim under Section 3212.88 (i.e., the Outbreak presumption), you will have up to 45 days to investigate and decide whether to accept or deny the claim. If you fail to reject the claim within 45 days, the injury or illness is presumed compensable, and you can then only rebut that presumption with evidence  discovered after the 45-day period.

Regardless of whether an employee files a claim before or after September 17, 2020, the employer is required to notify the employee of acceptance or denial of the employee’s claim by letter, as they must do under current law.

It should be noted that if the presumption does not apply to a particular employee that employee can file a workers compensation claim, but the employee will have to prove that the COVID-19 illness was caused by exposure at the jobsite rather than due to community spread.

What is a rebuttal presumption for this new law?

This means that even when an employee is presumed to have become ill from COVID-19 at work, an employer may dispute that conclusion. In such a case, however, the employer bears the burden of proving that the injury or illness did not occur at work by presenting evidence that the employee did not contract COVID-19 at work or are otherwise ineligible for the presumption. The new law states: ”Evidence relevant to controverting the presumption may include, but is not limited to, evidence of measures in place to reduce potential transmission of COVID-19 in the employee’s place of employment and evidence of an employee’s nonoccupational risks of COVID-19 infection.”  For example, evidence that the illness did not occur at the jobsite could be established by showing that another family member of the employee had the illness.  If the employer disputes the claim, the employee has a right to have the issue heard and decided by a workers’ compensation judge.

What is my possible legal exposure if there is a COVID-19 Outbreak on the jobsite and the employee of another contractor working on the site is diagnosed with COVID-19?

As an example, to explain your possible legal exposure, assume you are the HVAC subcontractor, and your employee is diagnosed with COVID-19.  If the presumption applies your employee will be eligible for workers compensation.  If that same employee claims that the general contractor who you have a subcontract with negligently failed to comply with COVID-19 protocols and as a result was the actual cause of the COVID-19 illness, that employee could sue the general contractor for negligence.

This situation is referred to as an “action over third-party claim”. It is the type of lawsuit in which an injured employee, after collecting workers compensation benefits from the employer, files a tort claim against a third party whose negligence allegedly caused the employee’s injury. California’s workers’ compensation laws do not preempt such employee civil damages remedies against nonemployee third parties whose tortious misconduct contributed to the injury.

If an action over third-party claim lawsuit is filed, under the example the general contractor will defend the lawsuit, by in part, invoking the indemnity clause in the subcontract. Indemnity clauses are the key contractual devices used to shift liability risks associated with a construction project from one party to another. In essence, one party (the indemnitor) promises to pay the other party’s (the indemnitee) attorney’s fees and any judgment within a defined scope of claims.  Depending on the contract you signed, your company could end-up paying the general contractor’s legal and judgement costs in response to the action-over claim being made by your employee.

What can be done to defend against an action over COVID-19 third-party claim and indemnity claim? Documentation of compliance with workplace safety rules is essential.

The new COVID-19 workers compensation presumption is limited to workers compensation and do not apply to action over third-party claims.  The action over claimant will have the burden of proof to establish your company’s negligence was the cause of that person becoming ill.

A negligence action can be predicated on a defendant’s violation of a statute, ordinance or public entity safety regulation, plaintiffs may be entitled to the benefit of the “negligence per se” doctrine in establishing their prima facie case. This doctrine presumes defendant’s duty and breach (failure to exercise due care); and the only issue left for plaintiff to prove is whether the violation proximately caused the injury or death.

Workplace safety laws and derivative orders/regulations adopted pursuant to California’s Occupational Safety and Health Act of 1973 (Cal-OSHA, Labor Code § 6300 et seq.) are used by plaintiffs to show the appropriate duty or standard of care to the same extent as any other regulation or statute in an injury action against their employer or a third person (other than the State). In theory, compliance with these laws and regulations can be used

An injured plaintiff may also use workplace safety laws (and derivative orders/regulations) adopted pursuant to California’s Occupational Safety and Health Act of 1973 to show the appropriate duty or standard of care in a negligence lawsuit.  However, Labor Code § 6304.5 does not override a passive hirer’s nonliability for injury to a contractor’s employee. I.e., the hirer’s violation of a Cal-OSHA safety law or order cannot be relied on to establish liability … except where the hirer affirmatively contributed to the employee’s injuries.

Clearly to avoid taking on liability for violating a statute, ordinance or regulation it is critical that your company has complied with them.  You should create and retain all documentation that establishes your compliance.

Construction contracts cannot include indemnity, insurance, or defense contractual obligations by a subcontractor for the active negligence or willful misconduct of a general contractor, his/her agents, or certain other subcontractors.  In essence, if the general contractor failed to enforce COVID-19 workplace safety guidance from the Occupational Safety and Health Administration (OSHA), the Centers for Disease Control and Prevention (CDC) and local health authorities that inaction could be deemed as active negligence.  If there is such active negligence, then the subcontractor’s obligations under the indemnity clause could be limited.

What else can I do to limit my exposure?

  1. Keep up to date as to all Covid-19 California, Federal and local regulations.
  2. Follow all workplace safety guidance from the Occupational Safety and Health Administration (OSHA), the Centers for Disease Control and Prevention (CDC) and local health authorities to minimize the risk of employees contracting COVID-19 on the job.
  3. Ensure that the other contractors working on the project are complying and if they are not so notifying the general contractor.
  4. Review the indemnity clause in your contract.
  5. Establish methods to retain data that can be used to rebut the presumption, such data includes, but is not limited to, hours worked and locations by individual employees.
  6. Since some comprehensive general liability policies may have exclusions for communicable diseases, pandemics and action over third-party claims, you should discuss your insurance coverage with your insurance broker.
  7. Become familiar with SB1159, review your policies and procedures to ensure compliance, and begin submitting reports on any employees who have tested positive for COVID-19 since July 6, 2020.

This article, ©2020, was written by William C. Last, Jr. Mr. Last is an attorney who has been specializing in Construction Law for over 40 years.  In addition to belonging to a number of construction trade associations, Mr. Last holds a California “A” and “B” license. Mr Last has been designated as a Super Lawyer and a Fellow,  Construction Lawyers Society of America.  He can be contacted at 650-696-8350. A number of his past articles can be found on his website (lhfconstructlaw.com). This bulletin is published periodically to provide general information about current legal issues. The articles are not intended to be a substitute for the advice of an attorney as to a specific problem. If you have a specific legal question or need legal advice, you should contact an attorney.

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