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When a Presumption is Not a Presumption

If an injured worker’s claim is not denied within 90 days following the submission of the worker’s claim form, the claim is presumed compensable under Labor Code Section 5402(b)’s presumption of compensability. Ordinarily, any evidence that could have been obtained within those 90 days is excluded when trying to rebut the presumption.

In Shake Khachatrian v. State of California Attorney General’s Office, California Department of Justice, Legally Uninsured, Adjusted by State Compensation Insurance Fund (3/16/2019), ADJ10908110, Opinion and Decision After Reconsideration, the Board was tasked with the question of whether evidence to prove a good faith personnel defense that could have been obtained within 90 days following the injured worker’s submission of his or her claim form is admissible, and, thus, exempt from section 5402(b)’s presumption of compensability.

We will first provide some background to the issues presented in the case, then provide a brief overview of the facts, and end with an analysis of the Board’s decision. As stated below, the Board held that the good faith personnel action defense is exempt from the Labor Code 5402(b) presumption of compensability; thus, evidence that could have been obtained within the 90 days following the submission of a claim form is admissible.

Background of the Issues

The case involves the presumption of compensability and the good faith personnel defense, each of which will briefly be discussed below.

Presumption of Compensability

Labor Code § 5402(b) states, “If liability is not rejected within 90 days after the date the claim form is filed under § 5401, the injury shall be presumed compensable under this division. The presumption of this subdivision is rebuttable only by evidence discovered subsequent to the 90-day period.”

Once an injured worker submits his or her claim form to the employer, the employer has 90 days to deny the claim. If a denial is not made within 90 days from the date the injured worker submits the claim form, then it is presumed the injured worker is eligible for workers’ compensation benefits. In other words, the injured worker’s claim is compensable. Only evidence that could not have reasonably been obtained within the 90 days may be used to rebut the presumption.

Good Faith Personnel Action Defense

The good faith personnel action defense under Labor Code § 3208.3(h) provides “No compensation under this division shall be paid by an employer for a psychiatric injury if the injury was substantially caused by lawful, nondiscriminatory, good faith personnel action.”

In Ferrell v. County of Riverside (2016), 81 Cal.Comp.Cases 943, the Board stated the term “personnel action” is “conduct either by or attributable to management including things as done by one who has the authority to review, criticize, demote, or discipline an employee . . . Personnel actions may include but are not necessarily limited to transfers, demotions, layoffs, performance evaluations, and disciplinary actions such as warnings, suspensions, and terminations of employment.” The action must a regular and routine employment decision that is carried out for a business purpose as opposed to a targeted, discriminatory, or spiteful action.

Overview of the Facts of the Case

Applicant, Shake Khachatrian, was a legal secretary who alleged a cumulative trauma (CT) injury to her psyche, brain (sleep), head, and headaches during the period of September 1, 2015 through September 8, 2016. She claimed she was the victim of bullying and harassment in the course of her employment with the State of California Attorney General’s Office.

The case proceeded to trial on May 23, 2018. The defendant stipulated that the denial of the claim was untimely. On June 7, 2018 the court issued a Findings of Fact, which held that any evidence or testimony that could have been obtained with reasonable diligence within 90 days of the filing of the claim shall be excluded. Furthermore, the court found that the Labor Code 5402(b) presumption of compensability applies, in this case, under these set of circumstances, to the good faith personnel defense under Labor Code § 3208.3(h).

Defendants filed a Petition for Reconsideration of a workers’ compensation administrative law judge’s (WCJ) Findings of Fact of June 7, 2018.

Analysis of the Board’s Decision

The Board reviewed the Court of Appeal decision of Rebecca James v. Workers’ Compensation Appeals Board (1997) 55 Cal. App. 4th 1053, 62 Cal. Comp. Cases 757, which held that “the provisions of § 5402 do not apply to employees claiming psychiatric injuries who have been employed for less than six months where the injury is not caused by a sudden and extraordinary employment incident.”

Thus, under the James decision, even where the section 5402(b) presumption of compensability would otherwise apply, a defendant may still prove that an applicant worked for the employer for less than six months and there was no sudden and extraordinary employment incident, even if evidence proving those facts could have been reasonably procured within 90 days of the applicant filing the claim form.

In reaching its conclusion, the James court relied upon Labor Code § 3208.3(c), which states “[i]t is the intent of the Legislature in enacting this section to establish a new and higher threshold of compensability for psychiatric injury under this division,” and on the “[n]otwithstanding any other provision” phrase opening Labor Code § 3208.3(d). The James court affirmed that the “[n]otwithstanding any other provision” phrase in section 3208.3(d) overrides any other statute in the Labor Code, including section 5402(b).

The Board noted the resemblance between the “[n]otwithstanding any other provision” phrase in section 3208.3(d) and section 3208.3(h)’s opening phrase that “[n]o compensation under this division shall be paid . . . if the injury was substantially caused by a lawful, nondiscriminatory, good faith personnel action.” Agreeing with the reasoning used in James, the Board concluded, “when a psychiatric injury is presumed compensable under section 5402(b), defendant is not precluded from asserting and presenting evidence on the good faith personnel action defense under section 3208.3(h), regardless of when the evidence was reasonably obtainable.” The Board stated this conclusion is consistent with the intent of the Legislature delineated in section 3208.3(c), which is “to establish a new and higher threshold of compensability for psychiatric injury under this division.”

Commissioner Marguerite Sweeney dissented, arguing the purpose of section 5402(b)’s presumption of compensability was to expedite the claims process by limiting the time an employer has to investigate a claim without being penalized for a delay. She goes on to explain that section 5402(b) creates an evidentiary presumption and restricts the evidence that can be used to dispute an injured worker’s claim. Evidentiary presumptions, she states, are generally considered procedural rather than substantive.

Commissioner Sweeney takes issue with the majority’s holding that the substantive rules for proving and defending against psychiatric injury claims in Labor Code section 3208.3 impliedly modified the procedural rules set forth in Labor Code section 5402(b). She indicates the absence of any intention in section 3208.3 to alter the evidentiary rules of section 5402, which is in direct contravention of statutory construction.

The dissent goes on to state James was wrongly decided, but as an inferior court, she is constrained to follow it. She does, however, find a distinction between James and Khachatrian. James held that the section 5402(b) presumption of compensability does not apply to the six-month rule of section 3208.3(b), whereas Khachatrian concerns the good faith personnel defense. Acknowledging the Legislature intended to make proving a psychiatric claim more difficult and defending such claims less burdensome, Commissions Sweeney would have denied defendant’s Petition nonetheless, as the substantive provisions of section 3208.3 accomplish these same goals.

The Board rescinded the WCJ’s decision and returned the matter to the trial level to determine the merits of the good faith personnel action defense in this case.

Conclusion

This is the third case to hold the good faith personnel defense is exempt from the Labor Code section 5402(b) presumption of compensability. Two previous cases, Insalaco v. Workers’ Compensation Appeals Board (1999) 64 Cal. Comp. Cases 1407 (writ denied) and Carrasco v. California Department of Corrections and Rehabilitation (2018) 20 Cal. App. 5th 796, 83 Cal. Comp. Cases 193 also reached the same conclusion that section 5402(b) does not preclude evidence supporting the good faith personnel action defense, regardless of when that evidence was obtainable.

What distinguishes this case from the previous two is Commissioner Sweeney’s dissent. It remains to be seen how this issue will progress, but for now, the good faith personnel defense is exempt from Labor Code section 5402(b)’s presumption of compensability.

By Nicolas S. Scibetta, Esq., Associate Attorney, Oakland Office May 2019