Sweeping Expansion of Workers Comp Benefits Could Hit Struggling CA Businesses Hard

Sweeping Expansion of Workers Comp Benefits Could Hit Struggling CA Businesses Hard

There’s been a growing debate in California and nationally about extending workers’ compensation benefits for workers who are impacted by the coronavirus pandemic.

Some states are moving to make front line workers battling COVID-19 to be eligible for workers’ comp.  Politico reports that “at least five smaller states have made it easier for high-risk workers such as doctors, nurses, and firefighters to claim workers’ compensation benefits.”

“Many workers with COVID-19,” they write, “may already be eligible for workers’ compensation benefits, but only if they can prove they contracted the disease at work.”

Proving whether an employer is liable or not for a workers’ comp claim is often very complex in normal times, involving years of investigation and litigation.  It’s even more complicated trying to prove where one contracted a highly-contagious, airborne illness.

With the swoop of a pen last week, Gov. Newsom has put his thumb on the scale on the issue in a way that will expose California employers to billions in new costs.

“I’ve just signed . . . an executive order to extend . . . workers comp benefits . . . broadening beyond just the health care and first responder sectors to all sectors of our economy under what we call a rebuttable presumption,” Newsom said in his Wednesday press conference.

“This ensures that if you test positive or are diagnosed with COVID-19 that is later confirmed through subsequent testing and you report to work between March 19 and 60 days from today, and that positive test or diagnosis within 14 days of reporting to work, it is presumed that you contacted COVID-19 through the course of your employment and you are covered through workers compensation,” state Department of Industrial Relations chief deputy director Victoria Hassid explained.

California has long been known as having one of the nation’s most expensive workers’ compensation systems.

According to the latest figures from the Oregon Consumer and Business Services department, which compiles an annual state ranking, California had the nation’s second-highest workers’ comp costs in 2018, though down from their nation-leading ranking the prior year.

Newsom’s announcement will surely increase workers’ comp costs at a time when many employers are hanging on by thread due to the COVID-19-related economic downturn.

In a statement, the California Chamber of Commerce said, “imposing a legal presumption that any employee who contracts the coronavirus is covered by workers’ compensation benefits shifts the cost of this pandemic to employers.”

Several initial studies forecast just how more expensive things could get for employers.

The Worker Compensation Insurance Rating Bureau of California recently released a report detailing potential cost increases in a variety of scenarios.

“The annual cost of COVID-19 claims on (essential critical infrastructure) workers under a conclusive presumption ranges from $2.2 billion to $33.6 billion with an approximate mid-range estimate of $11.2 billion, or 61% of the annual estimated cost of the total workers’ compensation system prior to the impact of the pandemic,” they wrote.

Before Newsom’s executive order, Insurance Journal reported that the State Compensation Insurance Found announced they would accept any claim by any essential worker regardless of their ability to prove that they contracted COVID-19 at work – at a projected cost of $115 million.

Calmatters reported in late April that the state had received over 1,500 workers’ comp claims related to COVID-19 by mid-April.  That figure is sure to skyrocket under Newsom’s executive order.  In addition, two measures introduced in the Legislature (Assembly Bill 664 and Senate Bill 1159) would also expand workers’ comp eligibility for COVID-19 cases.

Before the coronavirus devastated the state’s economy, PRI’s Dr. Wayne Winegarden recommended in his “Breaking Down Barriers to Opportunity” series that state policymakers take steps to reduce high workers’ comp costs to encourage entrepreneurship and make it easier and less expensive for working class Californians to start or expand a business and hire new workers.

Adding this significant potential burden to California employers may not only be the final nail in the coffin for some struggling businesses, but it is another hurdle – along with the state’s expanded enforcement of AB 5 – that will make it so much more difficult and expensive for Californians who have lost their jobs to try and earn a living from home.

Tim Anaya is the Pacific Research Institute’s senior director of communications and the Sacramento office.

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Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.