Update May 29: This blog has been updated to reflect current guidance about COVID-19 and workers' compensation benefits.
Employees who were not furloughed or laid off because of the COVID-19 pandemic and economic fallout continue to work. While some became "remote" workers overnight, others–like many in the food and beverage industry–still go to work. These "essential" employees confront the risk of contracting COVID-19 at work.
Emergency legislation on federal, state, and local levels has increased paid and unpaid sick leave time off and unemployment insurance benefits for COVID-19-related absences and loss of work. But what about the essential employees who contract COVID-19 at work?
There is always a risk of getting sick or injured at work, which is why the state workers' compensation insurance systems exists. The broad mechanics of the workers' compensation insurance system are simple. The employer pays insurance premiums for a workers' compensation insurance policy that provides employees coverage and benefits for any illness or injury "arising out and occurring in the course of their employment." The workers' compensation systems provides a mechanism to administer worker's compensation benefits to employees, and circumvents costly (and often slow) civil courts in resolving coverage disputes.
An injury, like falling or cutting your hand at work, is one that obviously is "arising out and occurring in the course of their employment." Not so clear is whether an employee contracts a fast-spreading, novel airborne illness while working during a pandemic. This dilemma is now a reality.
How can the workers' compensation system operate during a pandemic? In considering emergency adjustments to the workers' compensation system, state governors and legislators are grappling with how to best balance the interests (and livelihoods) of businesses (so insurance premiums don't skyrocket), employees (so they have benefits when they need them most) and the public at large (ensuring employees at essential businesses continue to come to work). Throwing stimulus money at the problem does not solve it, because workers' compensation is not a government benefit (unlike unemployment insurance).
Legislation is pending or has passed in many major states addressing COVID-19 and workers' compensation benefits. The trend is so prevalent that the National Council on Compensation Insurance, which "gathers data, analyzes industry trends," tracks this information. Many states have extended coverage to first responders and healthcare workers, and Congress is considering federal legislation extending coverage to TSA workers. This still leaves all other employees of essential businesses facing a new risk (COVID-19) in the same system.
To no surprise, the most decisive and boldest approach so far comes out of California. On May 6, Governor Gavin Newsom issued an Executive Order making it easier for employees to prove that they contracted COVID-19 at work and thus get workers' compensation benefits. The Executive Order changes all existing California workers' compensation policies by making it so that COVID-19-related illnesses of employees who worked outside their homes from March 19 through July 5, 2020 shall be "presumed to arise out of and in the course of the employment." The California Labor Commissioner FAQ is here.
Basically, the California Governor flipped the script on the burden of proof, so that employee workers' compensation claims related to COVID-19 are presumed to be covered. The reasoning is obvious: provide benefits to essential workers and streamline the workers' compensation proof and claims process. As with any emergency legislation, there may be unintended consequences.
- Higher Insurance Premiums. Workers' compensation insurance is already expensive in California. The Executive Order expressly allows "insurance carriers to adjust the costs of their policies." The cost of workers' compensation coverage will almost certainly increase to account for payout of benefits on covered COVID-19-related claims.
- Overloading Existing State Systems. A rebuttable presumption of workers' compensation coverage effectively uses the California state workers' compensation system in a similar way that the federal CARES Act uses the state unemployment insurance systems as a mechanism of getting relief to employees via enhanced unemployment insurance benefits. State unemployment insurance benefits are for those who have no work, while workers' compensation insurance benefits are for those who get sick or injured at work and would otherwise be working. The state unemployment systems have struggled; whether workers' compensation systems fare better remains to be seen.
- Deterring Businesses From Returning Employees to Work. Many employees of essential businesses never stopped working, and California has created a path to reopen non-essential businesses. The California Department of Public Health has issued a memorandum to California county governments setting criteria the "Stage 2" phase of reopening, with industry-specific guidance. But, the risk of COVID-19-related employee workers' compensation claims may deter businesses from returning employees to the worksite before July 5, 2020 (when the rebuttable presumption ends), because the rebuttable presumption does not apply to employees working from home during this period. This may be an unintended consequence of an Executive Order seeking to extend benefits to employees.
Protection in Civil Lawsuits. COVID-19-related claims addressed through the workers' compensation system may provide employers with protection in employee civil lawsuits. In California, civil lawsuits for negligence and wrongful death claiming that the employee contracted the virus at work due to unsafe work practices of the employer may be barred by the "workers compensation exclusivity doctrine" to the extent the employee received workers' compensation benefits. This trade-off may be slight compared to the expected rising costs of coverage. It is not a civil liability shield or immunity for businesses, but it does provide a clear path to prevent an employee from getting both workers' compensation insurance benefits and civil damages for COVID-19.
The facts, laws, and regulations regarding COVID-19 are developing rapidly. Since the date of publication, there may be new or additional information not referenced in this advisory. Please consult with your legal counsel for guidance.
DWT will continue to provide up-to-date insights and virtual events regarding COVID-19 concerns. Our most recent insights, as well as information about recorded and upcoming virtual events, are available at www.dwt.com/COVID-19.