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PENALTIES, SANCTIONS & CONTEMPT 

Penalties: Labor Code §5814 provides, in part, "When payment of compensation has been unreasonably delayed or refused, either prior to or subsequent to the issuance of an award, the amount of the payment unreasonably delayed or refused shall be increased up to 25 percent or up to ten thousand dollars ($10,000), whichever is less. In any proceeding under this section, the appeals board shall use its discretion to accomplish a fair balance and substantial justice between the parties."

In the Kerley case, the Supreme Court held "that the only satisfactory excuse for delay in payment of disability benefits, whether prior to or subsequent to an award, is genuine doubt from a medical or legal standpoint as to liability for benefits, and that the burden is on the employer or his carrier to present substantial evidence on which a finding of such doubt may be based."

Thus, the key elements for establishing a penalty remain 1)  a genuine medical or legal doubt;  and 2) substantial evidence produced by the employer or carrier to support the doubt.

SB 899 made substantial changes to Labor Code §5814. In a post-SB 899 en banc decision, the Workers' Compensation Appeals Board discussed the history and purpose of penalties and set forth 9 factors for the workers' compensation judge to consider before assessing a penalty. Ramirez appealed and the writ was denied, so the Board's opinion remains the current "gold standard." See Ramirez v. One Beacon Ins. Co.

Sanctions: The Workers' Compensation Appeals Board or its judges "may order a party, the party's attorney, or both, to pay any reasonable expenses, including attorney's fees and costs, incurred by another party as a result of bad-faith actions or tactics that are frivolous or solely intended to cause unnecessary delay....." Labor Code §5813

8 CCR §10561 details what is sanctionable. Other regs allow sanctions in specific instances: A Declaration of Readiness to Proceed that contains a false declaration that "the moving party has made a genuine, good faith effort to resolve the dispute before filing....." ; filing in violation of Labor Code §4903.6; "An attempt by any party or attorney to obtain disclosure" from an interpreter as set forth in Labor Code §5811.

Contempt: Labor Code §5309 allows a workers' compensation judge to "issue writs or summons, warrants of attachment, warrants of commitment, and all necessary process in proceedings for direct and hybrid contempt in a like manner and to the same extent as courts of record. For the purposes of this section, "hybrid contempt" means a charge of contempt which arises from events occurring in the immediate presence of the workers' compensation judge for reasons which occur outside the presence of the workers' compensation judge." Labor Code §4062.3(g) allows a charge of contempt for a party making an ex parte communication to a Qualified or Agreed Medical Evaluator. The contempt power is rarely exercised.

Effect of Settlement: Under Labor Code §5814(c), " Upon the approval of a compromise and release, findings and awards, or stipulations and orders by the appeals board, it shall be conclusively presumed that any accrued claims for penalty have been resolved, regardless of whether a petition for penalty has been filed, unless the claim for penalty is expressly excluded by the terms of the order or award."

Failure to raise issue on Pre-Trial Conference Statement Form: Labor Code §5814(c) further provides: "Upon the submission of any issue for determination at a regular trial hearing, it shall be conclusively presumed that any accrued claim for penalty in connection with the benefit at issue has been resolved, regardless of whether a petition for penalty has been filed, unless the issue of penalty is alsosubmitted or is expressly excluded in the statement of issues being submitted."

Label Item Links Comments
Labor Code Labor Code §5814: see above LC §5814  Note exceptions such as Labor Code §4622 (medical-legal expenses) and LC §4610.1 below. 
Labor Code §5814.6: "Any employer or insurer that knowingly violates Section 5814 with a frequency that indicates a general business practice is liable for administrative penalties of not to exceed four hundred
thousand dollars ($400,000)."
LC §5814.6
  Labor Code §129.5: Administrator Director "may assess an administrative penalty against an insurer, self-insured employer, or third-partyadministrator for any of the following...."
LC §129.5

See, too: Audit Unit
 
An employee shall not be entitled to an increase in compensation under Section 5814 for unreasonable
delay in the provision of medical treatment for periods of time necessary to complete the utilization review...." BUT "In no case shall this section preclude an employee from entitlement to an increase in
compensation under Section 5814 when an employer has unreasonably delayed or denied medical treatment due to an unreasonable delay in completion of the utilization review process set forth in Section 4610."
LC §4610.1  
Sanctions are available for "bad-faith actions or tactics that are frivolous or solely intended to cause unnecessary delay." LC §5813
Regulations/Rules Sanctions 8 CCR §10561

Administrative Penalties DWC Admin. Penalties  
Cases  Kerley v. Workmen's Comp. App. Bd. (1971)
4 Cal. 3d 223: The seminal case and still the test.

Ramirez v. One Beacon Ins. Co./Drive Financial Services (2008) 73 CCC 1324: The WCAB set forth 9 factors for the workers' compensation judge to consider before assessing a penalty.

Runnion v. WCAB (1997) 59 Cal.App.4th 277: A rare instance of the WCAB approving a WCJ's order for   sanctions and contempt for failing to appear. The DCA set aside the contempt order but upheld the sanctions.
Kerley v. WCAB


Ramirez v. One Beacon



Runnion v. WCAB
 
Forms      
Websites    
Practice Tips Read and reread 8 CCR §10561 and make sure not to engage in any of the prohibited conduct. Keep track of and document anything the other side does or does not do so that a petition for penalties and/or sanctions can be put together with compelling exhibits. Do not file unless the facts (and proof) meet the requirements of the relevant statute or reg, and consider the ill will a sanctions petition incurs. Like cayenne, a little goes a long way and should be used judiciously.    
Articles Labor Code Does Not Permit Defendant to Bury Its Head in the Sand to Dodge Its Obligations (noteworthy panel decision) Denial of care
 
Magazine Articles The Defense Perspective: How Not to Create Penalties, or the Defense Attorney is Always the Last to Know by Michael G. McDonald, Esq. How Not to Create Penalties
 
Roundtable    
Miscellaneous      

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