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CHSWC MembersCHSWC Members

Allen L. DavenportAllen L. DavenportLeonard C. McLeodLeonard C. McLeodTom Rankin Tom Rankin Alfonso SalazarAlfonso SalazarKristen SchwenkmeyerKristen SchwenkmeyerRobert B. SteinbergRobert B. SteinbergDarrel “Shorty” Thacker Darrel “Shorty” Thacker John C. WilsonJohn C. Wilson

Presentation byPresentation byChristine BakerChristine BakerExecutive OfficerExecutive Officer

California Department of Industrial RelationsCalifornia Department of Industrial Relations

Commission on Health and Safety Commission on Health and Safety and Workers’ Compensationand Workers’ Compensation

Carve-Outs in California

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Carve-Outs

California has an exciting opportunity to serve as a national leader in the areas of worker protection, benefits, and reduced costs with a carve-out program.

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What are Carve-Outs?

Carve-outs were developed to provide the opportunity to establish an improved benefit-delivery system for injured workers and to encourage labor and management to collaborate toward this end.

Carve-outs provide an alternative to the dispute resolution procedures in the state workers’ compensation system.

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Carve-outs:Key Benefits

The benefits of carve-outs may include:

Improved safety programs and fewer injury and illness claims.

Effective medical delivery and improved quality of medical care.

Cost savings for unions, employers and workers through fewer claims, fewer disputes, and discounts from insurers.

Reduced disputes through an alternative dispute resolution process.

Improved collaboration between unions and employers.

Increased satisfaction of all parties.

The opportunity for continuous improvement by renegotiating the terms of the carve-out on an as-needed basis.

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Carve-outs:Key Components

The potential components of a carve-out are: Alternative dispute resolution process. An agreed list of medical providers, qualified medical

evaluators, and agreed medical evaluators. Joint-labor management safety committee. A return-to-work program offering a light-duty modified job or

alternative job. A vocational rehabilitation or retraining program that includes

an agreed list of providers.

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Carve-Outs:Alternative Dispute Resolution

The Alternative Dispute Resolution (ADR) process in a carve-out generally includes 3 stages:

• Ombudsman: In the initial stage, the ombudsman, a neutral third party, can provide information to injured workers and attempt to avert or resolve disputes.

• Mediation: If dispute resolution is not successful in the first stage, the process may move to a second stage, or mediation, in which a mediator, a neutral third party, assists in resolving the conflict.

• Arbitration: If dispute resolution is not successful in the second stage, the dispute may move to the third stage, or arbitration. In this stage, both sides have an opportunity to present witnesses and evidence and to engage in cross-examination.

If either party is not satisfied with the decision attained through arbitration, the employer or the employee may appeal to the WCAB Reconsideration Unit and, ultimately, to the State Court of Appeal.

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Carve-Outs:Legislation in California

Key legislation:

1993 – SB 983 (New LC§ 3201.5). Permitted employers and employees in the construction and related industries to engage in collective bargaining for alternative workers’ compensation procedures.

2002 – AB 749 (New LC§ 3201.7). Permitted carve-outs in the aerospace and timber industries.

2003 – SB 228 (LC§ 3201.7). Repealed AB 749 and provided for carve-outs in any unionized industry.

2004 – NEW SB 899 (LC§§ 3201.5 and 3201.7). Employer and union may negotiate any aspect of benefit delivery if employees are eligible for group health and non-occupational disability benefits.

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New Legislation: SB 899 (Poochigian)

SB 899 would amend Labor Code Sections 3201.5 and 3201.7.

SB 899 would authorize parties to carve-out agreements to negotiate any aspect of the delivery of medical benefits and the delivery of disability compensation to the employees who are eligible for health care coverage for non-occupational injuries and illnesses through their employer.

SB 899 passed the Senate, passed the Assembly, and was enrolled on April 16, 2004.

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Carve-Outs: Construction vs. Other Unionized Industries

CATEGORY CONSTRUCTION ALL OTHER INDUSTRIES

Initiation of agreement Jointly initiated by labor and management.

Union initiates with filing a petition with the AD.

Labor-Management agreement

Negotiated with the collective bargaining agreement

Negotiation separately from the collective bargaining agreement.

Union qualifications Recognized or certified exclusive bargaining representatives of the EEs or the ER (for other qualifications, see CCR Section 10200)

Recognized or certified exclusive bargaining representatives of the EEs or the ER (for other qualifications, see CCR Section 10200)

Employer qualifications

The ER must have an annual WC premium of at least $250,000 or the self-insured equivalent; groups of ERs – 2 million or the self-insured equivalent.

The ER must have an annual WC premium of at least $50,000 or the self-insured equivalent; groups of ERs – $500,000 or the self-insured equivalent.

Attorney representation

The right to representation by counsel may be negotiated as part of labor-management agreement.

The labor-management agreement must not deny the right of any EE to representation by counsel at all stages of ADR.

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Steps to Create a Carve-Out in the Construction Industry

1) Union and employer submit original application to AD of the Division of Worker’s Compensation (DWC).

2) Employer submits a copy of the collective bargaining agreement with the approximate number of employees covered under the agreement.

3) Employer submits evidence of a valid and active license where a license is required to do business.

4) Employer submits a statement that nothing invalidates the collective bargaining agreement.

5) Employer submits name, address, and phone number of contact person(s).6) Employer submits evidence that the employer is engaged in construction or

related industries.7) Employer submits evidence of an insurance program large enough to meet

statutory requirements.8) Union submits LM-2 or LM-3.9) Union submits name, address, and phone number of contact person(s).10) Union submits evidence that it is a bona fide labor organization.11) AD checks that the application is complete.

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Steps to Create a Carve-Out in Other Unionized Industries

1) Union files a petition with AD of the DWC to enter into a carve-out.

2) AD checks that petition is complete.

3) AD verifies petitioner’s status as the exclusive bargaining agent.

4) AD issues a letter advising the union and the employer of eligibility to enter into negotiation for a period not to exceed one year for the purpose of reaching agreement on the carve-out.

5) Union and employer negotiate a carve-out agreement.

6) Union and employer submit application to the AD.

7) Employer submits a copy of the collective bargaining agreement with approximate number of employees covered under the agreement.

8) Employer submits evidence of a valid and active license where license is required to do business.

9) Employer submits a statement that nothing invalidates the collective bargaining agreement.

10) Employer submits name, address, and phone number of contact person(s).

11) Employer submits evidence of an insurance program large enough to meet statutory requirements.

12) Union submits LM-2 or LM-3.

13) Union submits name, address, and phone number of contact person(s).

14) AD checks that the application is complete.

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The Key Participants in a Carve-out: Roles and Responsibilities

Unions, workers, employers, ombudsmen, mediators and arbitrators all play critical roles in a carve-out to ensure that everyone’s best interests are served.

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The Key Participants in a Carve-out: Roles and Responsibilities

Unions

The key areas that union may focus on include:– Medical services and choice of physician.– Resolution of medical and legal disputes.– Preservation of wages and benefits.– Return to work (includes modified duty or

alternative work).– Protection for job discrimination.– Disability rights.

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The Key Participants in a Carve-out: Roles and Responsibilities

Workers

The key responsibilities include:– Learn about and participate in the employer’s

safety program.– Report claims as soon as possible by contacting

the ombudsman.– Participate in an alternative dispute resolution

process to resolve workers’ compensation disputes.

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The Key Participants in a Carve-out: Roles and Responsibilities

Employers

The key responsibilities include:– Qualify to establish a carve-out by maintaining the

proper workers’ compensation insurance coverage.– Develop a joint labor-management contract with

specific language about how the union will participate in a carve-out.

– Work with labor to develop and implement a safety program to reduce job accidents and their associated costs.

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The Key Participants in a Carve-out: Roles and Responsibilities

Ombudsmen

The key responsibilities include:– Act as a neutral party to provide information and

resolve disputes.– Maintain confidentiality.– Strive for objectivity and impartiality in order to

consider the concerns of all parties known to be involved in a dispute.

– Develop a range of options to resolve problems and facilitate discussion.

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The Key Participants in a Carve-out: Roles and Responsibilities

Mediators

The key responsibilities include:– Facilitate self-determination; the mediation

process relies upon the ability of the parties to reach a voluntary, uncoerced agreement.

– Ensure mediator impartiality.– Maintain confidentiality.

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The Key Participants in a Carve-out: Roles and Responsibilities

Arbitrators

The key responsibilities include:– Be knowledgeable in the workers’ compensation

dispute process.– Appoint an authorized health care professional to

assist in the resolution of any medical issue.– Render a decision (award) within a specified

number of days from the completion of the proceedings.

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The Appeals Process in a Carve-out

The reconsideration unit of the Workers’ Compensation Appeals Board (WCAB) -- if either party is not satisfied with the decision of an arbitrator, then the workers of the employer may appeal to the reconsideration unit of the WCAB to review the decision in the same manner as it would review a decision of a state workers’ compensation judge.

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The Appeals Process in a Carve-out

If either party is not satisfied with the decision of the Workers’ Compensation Appeals Board (WCAB), then the worker or the employer may appeal to the state court of appeal.

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