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Stress in California.

THE ABILITY TO RECOVER DAMAGES from an employer for stress-related disabilities, especially psychiatric disability, is not new to the California workers' compensation system, but the ability to recover for emotional strain wholly unrelated to physical injury is. And despite legislative reforms narrowing the employee's right of recovery, California risk managers are still facing an avalanche of costly occupational stress claims. Although stress claim cases in California are a minority of total workers' compensation filings, litigation surveys suggest these claims are a growing minority- about 99 percent of stress claims are reportedly litigated. In all the claims where there was a stress-related disability, the defense attorneys' bar reported a 700 percent increase in such cases over the last five years. According to the California Workers' Compensation Institute (CWCI), the direct cost of resolving a single stress claim is between $10,000 and $13,000.

California workers' compensation reform legislation, effective in 1990, has attempted to address the growing number of stress claims. The new rule for injuries occurring in 1990 and beyond is that actual events of employment must contribute at least 10 percent to the applicant's disability. Prior to the enactment of this new legislation, the standard for stress cases was established in the leading case of Albertson vs. The Workers' Compensation Appeals Board (WCAB) (Bradley). This 1982 case held that if an employee honestly perceives stress in the workplace and thereby sustains a disability, it is compensable. Compensability is found even if the employee misinterprets the nature of the events taking place or reacts more sensitively than most people.

While the definition of stress in the workplace varies from state to state, there are basically three ways that an employee can acquire psychiatric injuries. The first type of injury arises from the psychological impact of a physical injury, such as in the case of an individual who cannot adjust to the traumatic amputation of an arm or leg. Every state surveyed recognized the so-called physical/mental injury sequelae.

The second type of psychiatric injury is a physical manifestation of mental stress, such as ulcers, heart attacks or high blood pressure. These mental/physical injuries are not always considered to be work-related. Some states, like Arizona and Texas, have very high thresholds for this. type of injury, whereas other states, such as New York and Illinois, are seeing a growing acceptance of these cases as being work-related.

The last type of injury is the mental/mental injury, an example of which would include employees, such as the bank teller robbed at gunpoint, who suffer legitimate, disabling psychological injuries. However, decades of pop psychology have combined with an increasing willingness to blame others for personal problems to produce a new and unique cause of action. Coupled with an increasingly liberal legal system, employers are finding that every employment-related action has an equal and opposite reaction in the workers' compensation arena. One troubling reaction, however, has been the employee disciplined or terminated for poor performance who in turn files a stress case alleging that a supervisor's harassment led to psychiatric injury.

While this article focuses on the alarming rate of stress claims in California, it should be noted that this is not strictly a California phenomenon. Other states also are concerned about the potential increase in mental stress cases. Among the states surveyed, the ones recognizing mental/mental injuries did require the employee to meet a substantial burden of proof, usually, as in New York, Mississippi and Arizona, by requiring the demonstration of unusual or extraordinary stress. Some states also require a specific incident: continuous trauma is not recognized in Illinois, for example. Georgia, Alabama and Texas are among the states that do not recognize mental/mental injuries at all.

Anticipating Fraud

THE POTENTIAL FOR fraud in all workers' compensation cases is of great concern to employers, but it is especially pertinent in stress cases. The subjective nature of tests for recovery coupled with no-fault concepts makes the employer an easy target. As a week-long Los Angeles TV news expose revealed last year, fraudulent stress claim filing has now become a thriving business advanced by unethical medical clinics in cooperation with legal marketing organizations, worker representatives and some attorneys as well. Horrified employers and risk managers watched as hidden cameras recorded paid cappers pulling undercover investigators out of state unemployment office lines, blatantly encouraging them to falsify stress claims for easy money. Hidden cameras further captured on tape multiple instances of legal and medical clinics flagrantly falsifying claims and medical reports to take advantage of the system.

Much to the financial detriment of their companies, risk managers are presently getting little help from the courts. The Workers' Compensation Appeals Board (WCAB) - a court of limited jurisdiction created to adjudicate occupational claims in California - is bound by the Labor Code to make decisions in favor of the injured worker if evidence can be interpreted either in favor of the worker or the company. This "liberal construction clause" means that facts surrounding actual events of employment may still be decided in the employee's favor. In 1990, the California Court of Appeals refused to hear an employer's appeal of a WCAB decision that held that even an employee performing poorly on the job and appropriately disciplined may file a stress claim against the employer (Dept. of Social Services vs. WCAB [Harmon]). Also in 1990, the California Supreme Court ruled in a civil wrongful termination case that the employee has a right to workers' compensation indemnity for stress disability resulting solely from the loss of a job (Shoemaker vs. Dept. of Health Services).

In light of these court rulings and the escalating costs of stress claim investigation and litigation, a proactive management approach has become all the more critical to ferret out and solve problems before they become major ones. Risk managers, human resources professionals and other key managers need to keep abreast of changing trends and requirements in employee relations and be aware that an organization benefits from a well-motivated work force.

Because a substantial percentage of stress claims arise from personality conflicts with supervisors, an organization desiring to manage workplace stress must train these supervisors in effective management techniques. It is these key individuals who should be trained to appropriately relate to subordinates and their problems and to be conscious of the effect their behavior has on workers, precisely because of their position on the front lines.

A corporate philosophy on regular performance reviews, exit interviews, and training should be developed and enforced. Involving employees in the recognition and solution of problems will reduce feelings of anger and alienation. An employee who feels he or she has some degree of control and is positively involved in the management process is much less likely to file a stress claim against the employer and will probably be a better employee overall.

Cooperation is needed between the employer and its carrier or claims administrator to establish policies and procedures that are aimed toward preventing the occupationally disabled employee from becoming alienated by the complexity of a system that often seems combative and unfeeling. In the event of serious injury, either psychological or physical, the use of personal representatives and medical management specialists who work as liaisons with the injured employee are very useful. Insofar as possible, sympathetic attitudes and swift and efficient claims processing is also very useful, so that all benefits for an admitted injury are provided on a timely basis. An injured employee should feel that the system cares.

Steps to Take

GIVEN THE ATTITUDE of the courts and the impact of the new procedural reforms in workers' compensation, the employer's traditional knee-jerk reaction to stress claims may no longer be the best posture. An outright denial by the employer, without a proper and complete investigation, often forces the employee into a combative and litigious posture. Therefore, an organization is well advised to develop specific practices to handle unusual or questionable claims:

Investigate immediately. Once an allegation is made or a problem surfaces, the employer should launch an immediate investigation conducted by an expert in this type of claim. The investigation should contain interviews and statements from supervisors and co-workers, and even neighbors when appropriate. Civil and criminal index searches should be performed to obtain information on possible nonindustrial problems and stressors. Copies of all personnel documents should be obtained.

Often, the investigative process itself, if undertaken early enough, may allow the parties to air grievances in a manner that will head off future litigation. This also means the employer should investigate tell-tale signs of pending trouble: mood swings, altercations with other employees, reports of family or personal problems, and reports of alcohol or drug problems.

The employer should try to make the employee feel that the employer is not an adversary in these situations but is there to assist insofar as possible. If the employer conducts a thorough investigation, it is likely that the results will be used and expanded upon by the field adjuster or investigator.

Maintain precise records. It is imperative that the employer keep meticulously documented records and files. Results of investigations and conversations are useful not only in allowing for calm and dispassionate analysis of a problem, but also in providing later documentation of non-industrial stressors should it become necessary to defend a stress case filed by the employee. A log of absences and tardies, including the reasons given by the employee, may prove useful in not only detecting a trend but also in later defending a stress claim.

Have a medical specialist on hand. Claims personnel and employer risk managers should have a credible mental health specialist (a psychiatrist and, if appropriate, an internist) available to see employees on short notice. An informal relationship established between .the company and a local mental health specialist as has been traditionally the case with orthopedists - is becoming increasingly common. It is suggested that the specialist should be given the opportunity to tour the facilities and speak with the employees to get a feel for the work environment. When stress-related symptoms are claimed, the employee should be immediately sent to this doctor. The employer can exercise complete medical control for the first 30 days from notification of a claim's filing, after which the employee is entitled to a choice of physician.

Provide benefits until the investigation is completed. Rather than denying or delaying the claim at the outset, consider providing all benefits until investigative results show the claim should be denied. (Labor Code allows an employer to provide benefits without admitting liability.) The benefits to the employer and the carrier are: retention of medical control, ability to terminate benefits in a timely manner based on opinion of treating doctor, and less susceptibility to state audit penalties from the Office of Benefit, Assistance and Enforcement.

Hire expert counsel. If the claim is litigated, promptly assign the matter out to counsel with stress claim expertise equipped to deal with the new WCAB fast track procedural requirements - the WCAB, by law, has a very limited time to set a hearing date once a case is filed. In many stress cases, a thorough deposition will be required to determine the employee's explanation for the causes of disability, to prevent the employee from later changing the story, and to further investigate sources of possible nonindustrial stressors that may account for the claimed disability. A deposition can also uncover potential fraud elements, such as the employee who admits to having been advised to file the claim by a capper while waiting in a doctor's office or standing in an unemployment line.

Limiting Abusive Claims

SHOULD SOME LIMIT be placed on the no fault doctrine? As a matter of public policy, recent decisions of the courts have had the effect of encouraging stress cases to be filed by employees who are appropriately disciplined or terminated. If an employer cannot discipline an employee without fear of expensive retaliation in the workers' compensation system, appropriate management may become very difficult. Some further tightening of the requirements for proving and maintaining occupational stress cases stemming from discipline or termination should be considered for policy reasons.

More controls are needed to punish those who systematically defraud the system with false claims. California took a step in this direction with the January 1992 enactment of Senate Bill 1218. This legislation is directed at eliminating fraud in the workers' compensation system by creating enforceable consequences for lawyers, doctors and others who engage in suspicious practices. The law also created the Bureau of Fraudulent Claims to enforce the statute's provisions.

There is much the employer, risk manager and claims professional can do to anticipate, prevent and control stress-related occupational claims. This relatively new claim, with the potential for significant costs being assessed to the employer, requires a serious rethinking of traditional reactions and responses from management techniques to effective claims management of potentially disputed cases by all parties. Apart from the proper response from management, the only other remedies for dealing with stress claims include the need for additional legislative protection and expanded regulation of doctors and employee representatives who take advantage of the system.

Howard J. Stevens is an associate with the law firm Vermes, Rovenger & Kelley in Santa Ana, CA.
COPYRIGHT 1992 Risk Management Society Publishing, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Title Annotation:stress-related disability awards
Author:Stevens, Howard J.
Publication:Risk Management
Date:Jul 1, 1992
Previous Article:Tort reform takes a turn.
Next Article:Holding directors to a higher standard.

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