SB 863 Information
The following article will outline changes in the new copy service fee schedule, provide commentary on the new law, describe the 30 day rule, and highlight the importance of independent discovery. It will also address concerns over reduced rights and where ambiguity may lead to unintended disputes.
The mandate for changes to “copy and related services” was signed in August 2012 in the form of SB 863, codified in Labor Code § 5307.9. The fee schedule will be active July 1, 2015 in the California Code of Regulations, Title 8 DWC Administrative Rules §§9980-9983.
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30 DAY RULE
Application and Recommendations
CCR8 §9982(d)(1) creates a 30 day waiting period. This 30 day clock begins only two ways:
(1) the applicant sends a letter of representation, making an informal discovery request (also known as a demand and outlined in CCR 10608) of records in the possession of the claims administrator, the Claims File as defined in CCR8 10101.1; or
(2) the applicant uses a copy service to subpoena the Claims File from the insurance company.
After the 30 calendar days are up, all other requests needed to support the claim may be subpoenaed. Bottom line: asking for the Claims File, formally or informally, starts the 30 day clock.
Diligent applicant attorney accustomed to ordering records immediately upon signing a new client will not see an interruption to their process of ordering records. Your copy service should be able to manage the time period on your behalf. Gemini has already updated its system to accept and manage all possible scenarios, to ensure compliance and minimize risk to its clients. We also understand that attorneys vary in their risk exposure tolerance and may choose to challenge norms and take an aggressive stance; Gemini welcomes partnership with any such firms.
For applicant attorneys, Gemini recommends citing CCR §10608 in the letter of representation sent to the defense. This puts applicants in control by starting the 30 day clock immediately and gives the defense an fair opportunity to provide the claims file to you. If you would rather subpoena the claims file we will simply hold applicants’ remaining requests for the required 30 day period and send subpoenas when timely. When a letter of rep/demand with CCR §10608 is used, Gemini recommends filing the application for adjudication on the time day or very soon after.
What happens when there is neither a CCR8 §10608 request or subpoena for the Claims File to activate the 30 Day Rule? Since the applicant is afforded due process independent discovery, will copy and related services not activated by the 30 Day Rule be subject to the fee schedule? Once again, this fee schedule seems to provide an unintended loophole that threatens the legislative intent. If this were to be challenged in court, surely the legislative intent would win, but the legality the 30 Day Rule itself would likely also be challenged as an unconstitutional infringement on applicant’s due process.
CCR8 §9980(e) “Set of records” refers to records or documents that have been recorded on paper, electronic, film, digital, or other format from “one custodian of records under one subpoena or authorization”. In short: one set of records from one custodian as a result of one subpoena. This section does not preclude one different set of records, from the same one custodian, with one new subpoena. A solution to uphold the intent behind this section might be to simply state: same records (the custodian criteria is superfluous). To challenge “same records”, a judge could perform a brief inspection of the records. Gemini suggests only subpoenaing the same custodian when there are new records available
CCR8 §9981(b)(2) Each bill for services must include a statement that there was no violation of Labor Code section 139.32 with respect to the services described. LC §139.32. clarifies: it is unlawful…to use services provided by another entity, if the other entity will be paid for those services and the interested party has a financial interest in the other entity. This section was intended to caution copy service providers. For example, if a copy service is providing free or unreasonably discounted other work, it could be considered an inducement, not classified as “reasonable” thereby creating the potential basis for a misdemeanor under LC §139.32(g)(1).
Traditional sales and marketing practices such as buying meals, drinks, one-time entertainment or giving branded office supplies are not inducements. The standard is, not surprisingly, reasonableness. In an incisive 2014 article, Dave DePaolo urged the DWC to “provide some clarity as to how LC 139.32 must be complied with (by copy services) in this regulation if we are to cleanup the copy service industry.” Until there is further clarity provided by the DWC, encourage your copy service to be transparent.
CCR8 §9982(a). This code makes the subject of the application of the fee schedule clear: “copy and related services…except services under a contract between the employer and the copy service provider”(Defense market rates, as reported by the Berkeley Research Group’s copy service report, p. 108). CCR8 §9982(a) provides an economic benefit for non-contracted defense copy services to be paid according to fee schedule rates.
Most applicant-side copy services do not have negotiated/contracted rates due to an adversarial environment: objections and motions to quash discovery are commonplace, inhibiting collections efforts, leading to price increases. In the applicant situation, the party responsible for payment is different than the party that requested the service. All of this creates the perfect storm that correct regulations should solve, a storm this regulation aims to solve.
Loopholes and Limited Discovery
CCR8 §9982(b)(c) is dangerously ambiguous. This code section seems to provide opposition to independent discovery rights, create a loophole to charge outside of this fee schedule and may also limit reimbursement for discovery that meets certain application criteria (yet, the section does not clarify the criteria). This section also seems to partition the claims file, specifically outlined in CCR8 §10101.1 Contents of a Claim File, further clouding independent discovery rights. The risk to applicant attorneys is a less-than-clear guideline leading to inevitable dispute.
Additionally, this section may harm the cost containment intent of the regulation: the ambiguous “if – then” criteria of this section creates confusion ripe for a less-forthright, overly entrepreneurial copy service to charge far above and outside regulated fees. If the goal is to create a clear fee schedule, this section is an apparent departure.
CCR8 §9982(d)(2). This section specifies that payments under the fee schedule apply only to a “professional photocopier” as defined in CA Business & Professions Code §22451, which is important for two reasons: payment and standards. First, copy services now have a standard according to which insurance companies must pay. Second, stakeholders can be assured of professional standards. Cal. Bus. & Prof. Code §22458 “A professional photocopier shall be responsible at all times for maintaining the integrity and confidentiality of information obtained under the applicable codes in the transmittal or distribution of records to the authorized persons or entities.”
Section 22454(a) requires at least one person involved in the management of a professional photocopier shall be required to hold a current commission from the Secretary of State as a notary public in this state. Given the sensitive nature of evidence, this standard was necessary to clarify and it is an appropriate requirement.
30 Day Rule Overview: Then and Now
Previously, applicant attorneys could order records as soon as they took on a new case. After July 1, 2015, applicants should follow CCR8 §9982(d)(1) which prescribes a 30-day waiting period on ordering records from the date of initial request to the claims administrator. The 30 day clock can begin only two ways but both are a request for hte claims file. First, the applicant can send an informal discovery request (we recommend citing CCR8 §10608) also known as a demand letter, usually contained in the attorney’s letter of representation, to the insurance company. Second, alternatively, the applicant can use a copy service to subpoena the Claims File from the insurance company. Then, 30 days from either of those actions, the applicant should order all records necessary to develop the case record.
New Rule for Ordering Updated Records
Under CCR8 §9982(e)(1) the claims administrator is not liable for payment of records previously obtained by the same party from the same source unless applicant also submits a Declaration of good cause.
• Applicants should be prepared to submit a Declaration of Good Cause every time there is an order for updated records. Updated records are useful when the most current information is needed, such as for a settlement conference, hearing, or trial.
• This statement need only be a brief and concise declaration that the applicant is subpoenaing the records under this authority and a note as to why the records are relevant.
Example of Declaration of Good Cause
The law office of [applicant law firm] represents [injured worker] in [ADJ and/or Claim Number]. Applicant [injured worker] has been treating continuously since the last subpoena duces tecum, dated [insert date of last subpoena] and a complete set of the most current records from [medical location] is required.
Substitution of Attorney
Records previously obtained by the “same party from the same source” likewise applies to a substitution of attorney situation. CCR8 §9982(e)(1)(a) explains that good cause includes new counsel seeking records. In a substitution of attorney situation, ordering original discovery or updated records is explicitly allowed.
Value Added Services Prohibited
§9982(e)(2) “summaries, tabulations, and indexing” are prohibited services for reimbursement by the claims administrator. At this time, Gemini will continue providing indexing to its clients until further notice.
The Fee Schedule
In 2012, the Workers’ Comp Executive Digest reported “copy services are a large part of the lien backup in the California WCAB and decreasing that problem is likely part of the motivation for the Administration” in creating a fee schedule. The DWC posted this Initial Statement of Reasons (“ISOR”) citing a Commission on Health and Safety in Workers’ Compensation (CHSWC) 2011 report, which reported a lien problem that was “choking the system” and that a “large number of copy service liens added burden on the courts” and that much litigation could be avoided. Though most of SB 863 has been in place since January 1, 2013, the copy service fee schedule portion was revised several times and with much debate.
The history of debate focused on the following: the rate and what services included would be included, how and why to segregate the services, release of information (ROI/custodian of records) fees, potential disputes based on the rates, and the difference between applicant and defense services. In early stakeholder meetings, two positions dominated: First, that the fee schedule would include the kitchen sink of services and as a consequence be so pricey it would become untenable. Second, the regulations would further the language that justifies objections to independent discovery rights, cutting off payment to copy services where the applicant’s attorney has asserted those rights. Now, the finalized copy service fee schedule will be in place July 1, 2015, after which the following standard fees listed below will apply.
Result: New Law
CCR8 § 9983 Fees for Copy and Related Services: The reasonable maximum fees, not including sales tax, payable for copy and related services are as follows:
(a) A $180 flat fee for a set of records, from a single custodian of records, which includes, but is not limited to mileage, postage, pickup and delivery, phone calls, repeat visits to the record source and records locators, page numbering, witness fees for delivery of records, check fees, fees for release of information services, service of the subpoena, shipping and handling, and subpoena preparation.
(b) $75 in the event of cancellation after a subpoena or request for records by authorization has been issued but before records are produced, or for a certificate of no records.
(c) $20 for records obtained from the Employment Development Department.
(d) $30 for records obtained from the Workers’ Compensation Insurance Rating Bureau.
(e) Release of information services of witness costs for the retrieval and return of physical records held offsite by a third party are included in the flat fee. Disputes over the production of records may be resolved by filing a petition with the Workers’ Compensation Appeals Board or by filing a petition with the superior court pursuant to Labor Code section 132. Release of information services of witness costs for retrieval and return of physical records held offsite by a third party are governed by Evidence Code Section 1563.
(f) In addition to the flat fee, the following separate fees apply: (1) Ten cents ($.10) per page for copies above 500 pages. (2) $5.00 for each additional set of records in electronic form ordered within 30 days of the subpoena, or $30 if ordered after 30 days and the copy is retained by the registered photocopier. If the injured worker requests an additional set of records in electronic form ordered within 30 days of the subpoena , the claims administrator is liable for one additional set of records in electronic form for no more than $5.00 for the additional set of records if ordered within 30 days and for no more than $30 if ordered after 30 days and the copy is retained by the registered photocopier. All other additional sets of records are payable by the party ordering the additional set. (3) X-rays and scans are to be paid at $10.26 per sheet, and $3 per CD of X-rays and scans.
Pros and Cons
How did we get to $180? No calculations or methods have been revealed by the Department of Workers’ Compensation. Along the lines of Ockham’s razor, the simplest answer is often the best answer: The BRG report stated that defense mean invoices was $108.98, applicant mean was $251.20 and not surprisingly the average of the two is $180.09. Labor Code 5307.9 mandated a fee that represented “maximum fees payable” not average fees payable. Significant difference in the volume of data, 1,600 defense invoices to 600,000 applicant invoices, also questions the weight of this decision. This fee may be livable, not reasonable or the intent of legislation.
While opponents copy service bills in general may have parsimonious outlook, we encourage readers to consider Dave DePaolo’s vivid illustration of the alternative: the cost of hiring an attorney to perform the same work would result in an outrageous cost differential.
A flat fee does not meet the legislative mandate “shall require specificity in billing”, accurately representing the activities performed. Photocopying and service of process are two distinct activities outlined and codified by the California Business and Professions Code. Unfortunately, it seems the authors may have unintentionally traded simplicity for the risk of legal challenge.
One could debate whether copy and related services are “a product”, subject to sales tax. Nevertheless, State Board of Equalization sales tax audits performed in recent years have established these services as “a product”, increasing state revenue, fair or not. With a flat fee model, sales tax is applied to 100% of the fee, more good news for the state.
In an unexplained decision, SB 863 originally made the copy service 100% responsible for all release of information (ROI) fees. Perhaps this is because the Berkeley Research Group copy service report barely mentioned ROI fees or custodians of records, though this fee is required for nearly every set of subpoenaed records. The BRG report only nods at the custodian as being part of the process. Rightly corrected by administrators at the Department of Workers’ Compensation, the ROI fees are now liable to the claims administrator unless records are “held offsite by a third party”. It is laudable that the DWC has acknowledged that reality.
The BRG report proposed an adjustment for disputed fees. Early stakeholder meetings debated, without resolution, the mechanics of such an adjustment. Strong opinion on one side persuaded the administration to trust that dispute would be significantly reduced as a result of a fee schedule, that an upward adjustment for dispute was unnecessary. The Administration quickly scrapped the idea. The genesis of dispute, at least for Gemini, is 100% the responsibility of the defense. Although Gemini has heard more than a few defense-side professionals purport the idea that copy services have a desire to self-generate dispute, we cannot conjure a single logical or economic reason to do so. Ideally, dispute is reduced overall and an upward adjustment is not necessary in order to have a fair fee schedule.
On a positive note, insurance companies now can easily pay copy services the exact amount owed, in a timely fashion (60 days) at a standard rate. The obligation for the defense to pay, not the applicant, derives authority from LC §4620-4622.
Use the Law, Keep Moving Forward
The authors of SB 863, LC 5307.9 and this new fee schedule regulation have perpetuated the false notion that injured workers are not entitled the due process right of independent discovery. Both sides should be afforded the same justice that the discovery process is designed to achieve.
Independence from outside influence is the foundation of discovery, and has its roots in the due process clause of the Constitution (U.S. Const. amend. IV and XIV). Statutory constructions are meant to be “liberally construed” in favor of discovery, not against it (Greyhound Corp. v. Superior Court (1961), 56 Cal.2nd 355, 382-383, 388).
The requirements of due process can vary in procedure depending on what is “appropriate to the nature of the case,” Mullane v. Central Hanover Trust Co., 339 U.S. 306, 313 (1950). However, it is still possible to identify the core goals of due process. First, “procedural due process rules are meant to protect persons not from the deprivation, but from the mistaken or unjustified deprivation of life, liberty, or property.” Carey v. Piphus, 435 U.S. 247, 259 (1978).
Second, “procedural due process rules are shaped by the risk of error inherent in the truth-finding process as applied to the generality of cases.” Mathews v. Eldridge, 424 U.S. 319, 344 (1976). “At times, the Court has also stressed the dignitary importance of procedural rights, the worth of being able to defend one’s interests even if one cannot change the result.” Carey v. Piphus, 435 U.S. 247, 266-67 (1978). “The core of these requirements is notice and a hearing…due process may also require an opportunity for confrontation and cross-examination, and for discovery; that a decision be made based on the record.”
Who Gets to Choose the Copy Service?
The “selection of the method of discovery is made by the party seeking discovery; it cannot be dictated by the opposing party.” (Irvington-Moore, Inc. v. Superior Court (1993) 14 Cal.App.4th 733, 739). Pember v. Superior Court (1966) 240 Cal.App.2d 888, 889-890 also iterates: the method of discovery is made by the party seeking discovery. Applicant attorneys do not have any legal obligation to rely on defense-side copy services for complete records: applicants can order from any copy service of their choosing in order to develop the record.
California Civil Procedure 2017.010 clarifies: “Unless otherwise limited by order of the court in accordance with this title, any party may obtain discovery regarding any matter, not privileged, that is relevant to the subject matter involved in the pending action or to the determination of any motion made in that action, if the matter either is itself admissible in evidence or appears reasonably calculated to lead to the discovery of admissible evidence.” In this context, evidence is “relevant” if it might reasonable assist a party in evaluating a case (Glenfield Dev. Corp. v. Superior Court (1997) 53 Cal.App.4th 1113). Labor Code 4658 can create problems for applicants dealing with permanent disability, when the defense doesn’t have the necessary information; thus, applicants should exercise the right to independent discovery so they have all records needed to achieve timely settlement at a MSC.
Moreover, applicants must have records to support a litigated claim pursuant to Evidence Code §500: “a party has the burden of proof as to each fact the existence or nonexistence of which is essential to the claim for relief that he is asserting.” Civ. Proc. Code §2018.020 further seeks to protect an attorney’s right to investigate records, favorable and unfavorable, without the other side taking “undue advantage of their adversary’s industry and efforts.”
Here, this supports the argument that applicants should have the option to order from whichever copy service proves the discovery services they need. The right of the applicant attorney to have independent discovery and to subpoena any non-privileged records, from any copy service, is supported by:
- Allison v. Workers’ Comp. Appeals Bd. (1999)
- The U.S. Constitution (amend. IV and XIV)
- The California Constitution Article XIV, Section 4
- California Code of Regulations, Title 8 DWC Administrative Rules §10626
- California Code of Civil Procedure §1985.3, §2016.040, §2017.010, §2018.020, §2031
- CAL. LAB. CODE §3762, §3208.3, §5307
- California Civil Discovery Act (1986), CCP §§2016-2036
- People v. McKenzie (1983)
- Greyhound Dev. Corp. v. Superior Court (1961)
- Darbee v. Superior Court (1962)
- Pember v. Superior Court (1966)
- Irvington-Moore Inc. v. Superior Court (1993)
- Liption v. Superior Court (1996)
- Fairmont Inc. Co. v. Superior Court (2000)
Remember, applicant attorneys can start the 30 Day clock with a request for the Claim File, which happens one of two ways: either (1) a demand letter [informal discovery] citing §10608 sent to the claims administrator, or (2) by subpoenaing the claims file. After those 30 days have passed, any and all records may be subpoenaed as needed for the case. Independent discovery is the legal right of the injured worker; without it, due process is not afforded equally. Applicant attorneys are not required to rely on the defense’s copy service for discovery. Any applicant attorneys who order updated records should be prepared to submit a declaration of good cause, unless there has been a substitution of attorneys, in which case no declaration is needed.
Gemini wishes to thank the applicant attorneys, insurance professionals, and defense attorneys who magnanimously contributed their time and expertise for this paper, and so many conscientious clients who sent in their valuable questions on these topics.
Gemini Duplication is proud to be California’s premier workers’ compensation records management and retrieval service. With a foundation that embodies care, knowledge, service and skill, we guarantee that the Gemini experience will be like none other. Gemini’s cutting-edge technology and superior customer service streamlines law firm records ordering and retrieval. GenieDocs records are OCR, fully searchable, and auto-organized. GenieDocs is a registered trademark of Gemini Duplication and is currently the only cloud-based document management software of its kind, specifically designed for workers’ compensation law firms.
DAN MORA, FOUNDER / PRESIDENT / CEO
Dan Mora founded Gemini 11 years ago and has been dedicated to the workers’ compensation industry for over 13 years. He takes a strong interest in the ongoing legislation and how it affects clients. This constant dedication to learning is also a tremendous component of Gemini culture. Dan is intimately involved with operations and sales and is dedicated to his responsibility for the long-term viability of Gemini. Coming from an entrepreneurial family, Dan enjoys the responsibility of leading his organization and thrives on the challenges he faces every day. All inquires for this article should be directed to Dan Mora.
HANNAH S. PENCE, MS, CRP / MARKETING MANAGER
Hannah comes from a large family of attorneys and previously worked in civil litigation firms for over ten years. Hannah has been with Gemini since early 2014 and also served the Sacramento region as Gemini’s account manager. She enjoys the challenge of marketing communications in the legal field and holds a Bachelor’s of Science in Business Marketing (2007), Paralegal Certificate (2010), Master’s in Justice Management (2015), and Certificate in Content Strategy (2015).