It’s that time of year again… AUDIT SEASON! We have spent the better part of a year in what seemed to be a neverending shut down of most state, local and federal government directed entities and their respective contributions to our industry.
So now with COVID-19 in the beginning of its long-awaited defrosting, we are seeing the upcropping of the Division of Workers’ Compensation’s Audit Unit and their notification processes coming back to life.
I have spent the better portion of 20 years assisting clients in preparing for audits, defending audit findings, along with teaching fundamental concepts of benefit provisions and notice requirements. Having been in the industry for 34 years, I’ve also been directly involved in the management of claims and understand accepted processes and normal applications of legislation.
The most recent that the audit notifications I have seen have skipped over the year 2017 and included the year 2020. Is this because that in general, we find ourselves behind in most things by a year because of the pandemic? Intentional or not, we now as an industry face scrutiny on our handling of COVID-19 matters in the year 2020.
As if you weren’t struggling enough to keep up with all the COVID-19 news, you will now be subject to the real possibility of your COVID-19 files being audited before the dust has even had a chance to settle. Doesn’t COVID-19 come with a grace period?
Well, don’t panic. Take a deep breath, and first, let’s take a look at what we do know about the relevant laws on sick leave:
- FAMILY FIRST CORONAVIRUS RESPONSE ACT (FFCRA) OR EXECUTIVE ORDER N-51-20 (FEDERAL) – Signed into law March 18, 2020. (Federal) Sunset December 31, 2020. The FFCRA provides free coronavirus testing, 14-day paid leave for American workers affected by the pandemic, and increased funding for food stamps. Under SB 1159 an employee must use all the coronavirus/employer paid sick leave before being eligible for temporary disability. The FFCRA differs from AB 1867 in that employers who chose to continue voluntary paid sick leave due to COVID-19 can claim a tax credit. Although there are some exceptions, the FFCRA generally applied to employers with less than 500 employees.
- AB 1867- SUPPLEMENTAL PAID SICK LEAVE FOR ALL (STATE) – Signed by Governor Newsom on September 9, 2020 and effective September 19, 2020. Sunsets on December 31, 2020. This bill provided up to 80 hours of sick pay dependent on regular schedule of work. This California bill required private employers with 500 or more employees nationwide to provide COVID-19 related supplemental paid sick leave to their California employees. This bill assisted in filling the gap left by the FFCRA.
- AB 1159 – COVID-19 PRESUMPTIONS BILL (STATE) – Signed by Governor Newsom on September 17, 2020 and effective September 17, 2020. Sunsets on Jan. 1, 2023. This bill states that employees must use COVID-19-related paid sick leave before becoming eligible for temporary disability. This is the bill that contains the three COVID-19 presumptions that we have previously covered in prior blog posts.
While the FFCRA and AB 1867 have now officially sunsetted, we should point out that a renewal of the federal sick leave program is reportedly a part of the latest COVID-19 stimulus package being considered on at Congress at time of this publication. While this would not be relevant to 2020 audits, it’s worth considering that the legislative landscape could change in 2021.
So what will the Audit Unit look at when auditing 2020 claims?
We all know that the PAR audit comes down to several factors: compensation due, notices, and frequency of these factors as it relates to correctness and timeliness. The biggest issues we are facing: what benefit notices do we send, and do we owe compensation beyond what our employer paid?
Well, this raises two questions that we are seeing in the work comp industry:
- Should we send an employer wage continuation notice when our employer pays COVID-19 sick leave?
- Should we send a TD denial letter for benefits paid by the employer for COVID-19 sick leave?
I’ve heard unofficial guidance that says, do neither of the above. Instead, send a TD start notice and explain the employer paid COVID-19 sick leave as required by the state and federal legislation talked about above.
This raises the following question:
- What if there is no medical evidence of disability? What if the only piece of paper you have is a positive test? Must we send a TD start notice and then a PD delay?
Sending a TD start notice and a PD delay letter without medical evidence is problematic, because there is no medical evidence to trigger for the start TD notice. Also, there is no “end of TD notice” or any existence of PD to trigger for any type of PD notice.
So, what should you do? In cases where there was a positive test only and no medical evidence of disability, I would suggest a TD denial would be the best way to handle that situation.
Next, what about cases where there is medical evidence indicating TD is due, but the employer is paying mandatory COVID-19 sick leave? In those situations, send a start TD notice with clarification on how the employer paid COVID-19 sick leave and follow the process with either continued TD or a TD end notice, PD Delay or PD Denial.
It is important for claims managers to have conversations about these very questions. Whatever you decide to do, we recommend that you be consistent in your notifications and documentation with proof attached to the file.
What about compensation due? I cannot even count how many files I have audited believing from reading notes something was paid, only to find out what was thought to have been paid was not what was actually paid.
There is a big difference between thinking and knowing with proof in hand. Get your proof and have it ready in your file! Be aware of what surprises may be lurking in your COVID-19 claim files.
Sherri Dozier is a state audit consultant, large loss specialist, and the Director of Client Development and Relations for the Law Offices of Bradford & Barthel LLP. If you have questions about audits, large losses, or other complex workers’ compensation defense issues, please feel free to contact Sherri at firstname.lastname@example.org or by calling 909.224.4658.
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