As California employers prepare for the gradual re-opening of business, they must now take into consideration Governor Gavin Newsom’s Executive Order N-62-20 executed on May 6, 2020, making any COVID-19 infection diagnosed within two weeks of an individual working outside of their home presumptively work-related. This has the effect for employers of reversing the burden of proof in workers’ compensation cases. Instead of the burden belonging to the worker to establish that they contracted COVID-19 on the job, this Order places the burden squarely on the shoulders of the employer to prove that the worker’s infection is not work-related. Importantly, however, the presumption does not apply if the employee worked from home. By its terms, the order will only apply to injuries which occur between March 19 and July 6, 2020.

Covered Employees

Qualified employees must either (1) test positive for COVID-19 within 14 days after performing work; or (2) be diagnosed with COVID-19 by a licensed physician within 14 days after performing work and have that diagnosis confirmed by further testing within 30 days of the diagnosis. The positive test and/or diagnosis must occur between the date the Stay-at-Home order was issued (March 19, 2020) and July 6, 2020. Employees claiming COVID-19-related illness are eligible for all workers’ compensation benefits and there is no waiting period for temporary disability benefits. However, an employee entitled to COVID-19 paid sick leave must exhaust that paid leave first. Employers may submit evidence to rebut the presumption that a COVID-19 diagnosis is work-related within 30 days.

What This Means for Employers

While many business commentators are condemning this as a significant blow to California employers who are already reeling from the economic impact of COVID-19, its actual impact is likely to be more nuanced. For example, absent this Order, many employee COVID-19 medical expenses would have been borne by employer-sponsored group health insurance or directly by employers which self-insure. Self-insured employers which would have carried 100% of the expense without the Order may actually benefit to the extent they are insulated from the claims today and future workers’ comp rate adjustments rise at rates that distribute the extra COVID-19 costs across a range of employers. This may be more of a break-even for employers who purchase health insurance from third parties like HMOs because shifting claims to workers compensation should reduce rate increases for the general group health plan. It is true employee absences under the Order may trigger Workers’ Compensation Temporary Disability pay. But those absences might otherwise have triggered other employer-funded disability leave benefits. In other words, for many employers, this may not be such a big blow.

Unfortunately, the employers who will most clearly lose are those who may also be most vulnerable. Small businesses that rely on part-time staffing so that they do not need to provide health insurance face the greatest harm because they will not be the beneficiary of simply shifting the insured risk from one policy to another. The reckoning will come as workers’ compensation insurance rates will no doubt increase at a time when employers can least afford to take that additional financial hit.

Can the Presumption Actually Be Rebutted

The Order also is silent as to how an employer should go about rebutting a presumptive work-related COVID-19 diagnosis. Even if the employer has no other COVID-19-positive employees, a claimant is likely to note CDC findings that up to 25% of individuals who are COVID-19 positive never show symptoms. Obvious cases where someone an employee lives with tests positive first may be more rebuttable, but again, given the diverse rates at which symptoms materialize, rebutting the presumption promises to be very difficult. A potential “silver lining” is the ease with which employees can now pursue workers’ compensation claims as a result of the Order may reduce the number of civil lawsuits filed for tort damages – which are often lengthier and more expensive to resolve, with greater potential for higher damage awards.

The Rationale and Potential for Legal Challenges

Last week, Governor Newsom announced a four-phased plan for reopening businesses in California.  Phase 2 provides guidance on the graduated reopening of low-risk businesses, but still encourages employees who can work from home to continue to do so. It is likely this Order was issued to support the continued “telework” efforts within the state. It is also noteworthy that just two days before Governor Newsom issued this Order, elected officials from the second most densely populated county in the state announced they would not enforce the Stay-at-Home order and publicly challenged the Governor to “bring the CHP out or call out the National Guard.” In a subsequent press conference, the Governor refused to be baited into a war of words with those county officials but did repeat that he would continue to use tools at his disposal to protect public health. The presumption created by the Order incentivizes employers to encourage or require employees to continue to work from home, notwithstanding the gradual lifting of restrictions, and creates greater consequences for businesses that ignore the Orders.

As many as eight other states’ Governors have attempted similar executive action creating a COVID-19 workers’ compensation presumption with mixed results. In Illinois, a temporary restraining order was recently granted blocking enforcement of a similar workers’ compensation presumption adopted on an emergency basis by the Illinois Workers’ Compensation Commission. It remains to be seen whether California’s Order will be challenged; it has been fiercely and publicly criticized by small business groups such as the National Federation of Independent Business and the California Business Roundtable.