Monday, May 6, 2013

Moral Turpitude Takes Big Money to Correct

There are times when employees and vendors abuse the workers' compensation system.

And there are times when employers, carriers and administrators abuse employees...

I get mad at fraud. I hate cheats.

But I have absolutely no mercy whatsoever for the people that hide behind their corporate powers and resources to exploit workers, whether injured, abled or disabled.

It was widely reported that a jury last week awarded $240 million to 32 mentally disabled workers at an Iowa turkey-processing plant to compensate for what attorneys with the the U.S. Equal Employment Opportunity Commission described as abuse by the Texas company that employed and housed them.

The EEOC attorneys are being nice - what this employer did to these people is not abuse. It is pure exploitation of workers who had absolutely no way to defend themselves.

The federal court jury found that Hill Country Farms, doing business as Henry's Turkey Service, of Goldthwaite, Texas, had created an unlawful hostile environment for the men and discriminated against them on the basis of their disability, awarding them $7.5 million each.

The complaint filed by the EEOC against Hill Country Farms describes despicable behavior. The workers at the West Liberty, Iowa, plant were hit and kicked by Hill Country employees, called names, denied bathroom breaks and restrained or confined to rooms. Injuries and complaints of pain or requests for doctor's visits were ignored, the complaint said.

A federal judge last September found that Henry's Turkey Service had violated the Americans with Disabilities Act by paying the workers "severely substandard wages" - $65 a month rather than the average of $11 to $12 per hour given to non-disabled workers who performed the same work, according to the EEOC. Senior U.S. District Judge Charles R. Wolle awarded the workers $1.3 million for the pay discrimination.

Hill Country's original intent, more than 30 years ago, was to give the disabled a job. What started out as something good devolved over time into the despicable situation for which the company is now going to pay - and rightly so.

In my mind those damages are inadequate and I shudder at the thought that there are probably other similarly situated employers taking advantage of the mentally disabled and placing these otherwise defenseless people into such horrific, abusive, environments.

I'm not a fan of turkey in the first place. I sure won't be buying any Hill Country products.

A similar, and just as egregious, situation out of California in the workers' compensation context was reported this morning in the WorkCompCentral news.

Third party administrator, Sedgwick Claims Services, has (finally) been reported to the DWC Audit Unit (of which I have in the recent past been critical, not for their lack of services, but for their castrated enforcement powers) for what I can only call the most heartless, immoral behavior I have seen reported against a carrier or TPA in some time.

In sending a case to the Audit Unit, the Workers' Compensation Appeals Board expressed utter disgust at Sedgwick's behavior:

“We have rarely encountered a case in which a defendant has exhibited such blithe disregard for its legal and ethical obligation to provide medical care to a critically injured worker,” the Appeals Board said. “Sedgwick CMS, acting as claims administrator for the Kroger Co./Ralph’s Grocery Co., demonstrated a callous indifference to the catastrophic consequences of its delays, inaction and outright neglect. In light of defendant’s repeated, unreasonable delays and denials, and its willingness to ignore a 2006 finding and award issued by the Workers’ Compensation Appeals Board, we will refer this case to the Audit Unit of the Division of Workers’ Compensation.”

What did Sedgwick do to draw such ire?

Charles Romano sustained an injury on Dec. 20, 2003, while stocking shelves for Ralph’s in Camarillo, CA (coincidentally only a couple miles from WCC headquarters). After undergoing surgery on Aug. 29, 2005, he contracted methicillin-resistant staphylococcus aureus that caused his lungs and kidneys to fail and paralyzed him below the shoulders.

That's a bad situation. So Sedgwick made it worse.

Sedgwick refused to authorize the treatment. Even after a judge ordered Sedgwick to pay for treatment in October of 2006 Sedgwick failed to authorize critical services, or pay for any services.

In fact, according to the board opinion, the adjuster routinely denied treatment or withheld authorization without even consulting any medical professional or referring to utilization review.

The board said Sedgwick continued to delay and deny care until Romano died. Sedgwick failed to authorize his hospitalization at Community Memorial Hospital where he died on May 2, 2008, from cardiorespiratory arrest, respiratory failure and pneumonia brought on by his MRSA infection, according to the board's findings.

Sedgwick didn’t make any payments for medical care until June 23, 2008.

"[The adjuster] studiously avoided information that might lead to the provision of benefits, a tactic that may have saved her employer some money in the short run – at great cost to Mr. Romano – but which clearly violated the demands of (Labor Code) Section 4600,” the Appeals Board said.

The board imposed LC 5814 penalties - but the punitive effect of 5814 was completely castrated under the Schwarzenegger reforms - and clearly had no deterrent effect on this administrator:

“The WCJ’s report makes it clear that he imposed the harshest penalties possible under (Labor Code) Section 5814 because of defendant’s extensive history of delay in the provision of medical treatment; the effects of those delays on a paralyzed, catastrophically ill employee; the length of the various delays; and defendant's repeated failure to act when the delays were brought to its attention. Indeed, defendant's broad and extended pattern of unreasonable delays rises to the level of ‘institutional neglect,’” the board said.

The castration of Labor Code section 5814 penalties that was a part of the Schwarzenegger reforms was not reciprocated with increased enforcement powers in the Audit Unit. Yes there was some alteration of the penalties and review elements, but the Audit Unit remained (and still does) incredibly insufficient as a deterrent to aberrant claims administration behavior.

Sedgwick is a privately held company, so its financials are not available for public scrutiny, but you can bet that the company has vast resources (it was purchased in 2010 by a private equity group for $1.1 billion) given its market position and the management of a large public grocery chain's workers' compensation risk.

Let's get real. A single $100,000 penalty by the Audit Unit is laughable. Cost of doing business. Certainly not a deterrent. Perhaps an embarrassment, but nothing to shake the boots of those occupying the executive suite.

What's the answer to such abuse? Perhaps a $240 million judgment from a federal jury would be more appropriate, more noticeable, more attention getting.

Perhaps the loss of Kroger, Inc.'s business for such malfeasance would bring attention to those in charge for failing to properly educate, monitor, and counsel those on the line for doing jobs properly.

And I know I'm going to hear from industry people that this situation is an anomaly, that it isn't normal, and that most of the industry doesn't behave in such manner.

I don't care. Listen people - are you professional? Do you hold yourself to a high standard? Does professionalism include ethical boundaries in your day to day work?

How can this industry profess to be laudable and above reproach - going after fraudulent claimants, employers and vendors - when we can't even keep our own house clean? I don't care that YOU wouldn't do such things - the fact is that someone in our industry does, and it is all of our jobs to call them on it, to make them accountable, to make them PAY for ruining the lives of others, when it is our job to help improve those lives.

In my mind Hill Country Farms and Sedgwick are in the same boat. Both have failed us with moral turpitude. Both have done worse than abuse the system - they have abused PEOPLE.

The insurance industry didn't like LC 5814 because the applicant attorneys used it for profitable gain in unreasonable ways - at least that was the Schwarzenegger argument.

Now we have a system of enforcement that is laughable and nearly ineffective. It seems to me that Romano's case is so far outside the realm of reasonableness that it likewise is far outside the constrictions of exclusive remedy.

Audit Unit, schmaudit unit ... money is a powerful motivator and for big companies it has to be BIG MONEY.

The solution? Either give the Audit Unit BIG MONEY enforcement powers, or let the PEOPLE have at it outside the exclusive remedy.


  1. A reader pointed out this contradiction in messages being sent by the Sedgwick group:

    "Dave North [president of Sedgwick] was easy going with everyone and talked about workers’ compensation. He unabashedly effused that the predictive modeling discussion is so tiring. 'You have to change the behavior,' he said, and that way the change in the behaviors will change the outcome.

    The question of course is whether this applies to Sedgwick's internal operations as well...

  2. The WCAB persists in fawning on the emperor's new clothes. To call Sedgwick's actions deplorable and rare in the same statement caused be to wretch.

  3. As an applicant's attorney with more than 27 years representing injured workers, I can honestly state that my practice has gone from spending most of my time doing the necessary things to move my cases forward and obtain treatment and reasonable benefits due to my clients to spending more than 50% of my time trying to prod carriers and defense attorneys, send letters to AME's and QME's about medical treatment issues and deal with UR denials or, worse yet, the failure of carriers to send requests to UR time and time again. I even reported one adjuster to the Audit Unit after I could not resolve gross negligence with him or his supervisor and, unfortunately, you never know if they even read your documents.