May 8, 2020

What Gov. Newsom’s Workers’ Compensation Order Means for Employers

UPDATED 7/22/2020: The California Department of Industrial Relations has put out “Questions and Answers on Executive Order N-62-20,” which provides guidance and clarification on this issue, mainly directed at employees. Employers should still use this as a reference and starting point if questions arise about workers’ compensation benefits for COVID-19.

This week, Governor Newsom signed Executive Order N-62-20 creating a presumption of workers’ compensation eligibility for California employees who have contracted or who later contract COVID-19 at any time since reporting to work following California’s March 19 stay-at-home order.  

Although the scope of the order is unclear, it appears to apply to California’s “essential workers,” or in other words, those employees “needed to maintain continuity of critical infrastructure sectors during the COVID-19 response.” The state’s news release about the order further states that the order is meant to provide relief “to Californians who must work outside of their homes during the stay at home order.” However, if an employer had individuals at work (not working from home) after March 19, it is likely this applies to them, even if their business does not fall into a category of California’s essential workforce.

That said, the order presumes that any individuals “on the job” since March 19 were infected at work if they did, in fact, contract COVID-19. The burden of proof is shifted to employers to rebut with conclusive proof that an employee’s illness occurred outside of work. The presumption appears to be in effect until the governor lifts his statewide stay-at-home restrictions (regardless of what localities are doing)—meaning that a California employee is now eligible for workers’ compensation if (1) he or she went in to work at any point after March 19, and (2) contracted or contracts COVID-19 within 14 days of being on site to work. As of today, the order, and its newly created presumption, is indefinite as the state’s stay-at-home order is still in place “until further notice.”

Businesses that were and/or are operating with on-site personnel at any time after March 19 should almost certainly expect workers’ compensation claims if any employees were infected, or get infected, up until the expiration of the stay-at-home order. For this same reason, they should also anticipate increased premiums for their workers’ compensation insurance policies. In fact, the order expressly allows it: “Nothing in this Order shall be construed to limit the existing authority of insurance carriers to adjust the costs of their policies.” The California Workers Compensation Rating Bureau currently estimates that the annual cost of these COVID-19 claims ranges from $2.2 billion to $33.6 billion. There is chance more litigation will stem from these new provisions and possibly overlap with claims arising from other COVID-related leave policies, especially considering that to be eligible for this new workers’ compensation, employees must first utilize any paid sick leave specifically available in response to COVID-19.

While the order removes some burdens for worried frontline workers, it does so at a significant cost to businesses already navigating a variety of COVID-related hardships. The scope of those costs is, at this point, very unpredictable and the situation is still evolving.  Indeed, the California Legislature has two separate workers’ compensation bills pending: AB-644 and SB-1159. This new order’s impact on those pending bills is unclear.

Ultimately, employers grouped into California’s list of essential industries who had employees working outside the home should monitor this issue closely and prepare accordingly. This means evaluating workers’ compensation structures and communicating effectively and often with employees. Additionally, those essential businesses that have not already done so should consider adopting robust measures to protect their employees in the workplace, including symptom screenings at entry points, social distancing policies, and sanitization practices, which can help to minimize the likelihood of COVID-19 contraction in the workplace and reduce the number of workers’ compensation claims as a result.