Is a Carve-out in your future
George Kingston
Senior Consultant
Bickmore Risk Services
History of Carve-outs
• California law inspired by Bechtel carve-out
in Massachusetts
• SB 983 enacted 1993 Construction only
• SB 853 enacted 1994 Narrowed the definition
of “in the business of construction”
• 2004 LC 3201.7 enacted
• 1999 there there were 12 carve-outs
operating
Carve-Outs in California
• Currently about 23 approved 5201.5 carveouts
• Currently 2 approved 3201.7 carve-outs
3201.5 vs. 3201.7
3201.5 Construction
The Department of Industrial Relations and the courts of this state shall recognize as valid and
binding any provision in a collective bargaining agreement between a private employer or
groups of employers engaged in construction, construction maintenance, or activities limited to
rock, sand, gravel, cement and asphalt operations, heavy-duty mechanics, surveying, and
construction inspection and a union that is the recognized or certified exclusive bargaining
representative that establishes any of the following:
3201.7 All other employers
Except as provided in subdivision (b), the Department of Industrial Relations and the courts of
this state shall recognize
as valid and binding any labor-management agreement that meets all of the following
requirements:
(1) The labor-management agreement has been negotiated separate and apart from any
collective bargaining agreement covering affected employees.
(2) The labor-management agreement is restricted to the establishment of the terms and
conditions necessary to implement this section.
(3) The labor-management agreement has been negotiated in accordance with the
authorization of the administrative director pursuant to subdivision (d), between an employer or
groups of employers and a union that is the recognized or certified exclusive bargaining
representative that establishes any of the following:
Features of Carve-Outs
3201.5
ADR
Exclusive medical providers
Exclusive list of QMEs
JLM Safety Committee
Return to work program
VR Program
Coordination with Group Benefits
Drug Testing
Incentive Programs
Restriction of Attorneys
3201.7
ADR
Exclusive medical providers
Exclusive list of QMEs
JLM Safety Committee
Return to work program
VR Program
Coordinate with Group Benefits
Drug Testing
Incentive programs
What is a Carve-Out
1. Remove a WC program from the State
mandated WC system
2. Improve Benefit Delivery
3. Limit litigation
4. Controls Medical Treatment
5. Resolve disputes Quickly
6. Control medical treatment
7. Improve Safety Efforts
What is a Carve-Out
1. Remove from State Mandated System
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Alternative dispute Resolution
State WC Judges do not jurisdiction over claims
Arbitrators replace WC Judges
Substitute private PD raters for state raters
Substitute private VR vendors for state VR
Eliminate State QME process
What is a Carve-Out
2. Improve Benefit Delivery
• Control mediator and arbitrator response
time
• Control Examining physician response time
What is a Carve-Out
3. Limit Litigation
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Restrict attorney involvement
Limit medical legal examinations
Prompt benefit delivery
Reduced conflict
Reduced need for defense attorneys
What is a Carve-Out
4. Control Medical Cost
• Limit physicians that can treat
• Limit Physicians that can act as a QME or
IME
• Limit changes in Treating Physician
• Limit over treatment over utilization
What is A Carve-out
5. Resolve Disputes Quickly
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Alternative Dispute resolution
Ombudsman
Mediator
Joint Labor Management Committee
Use private raters rehab vendors
Eliminate long waits associates with WC Judges
Incentivize Quick response form mediators,
arbitrators and others
What is A Carve-Out
6. Control Medical Treatment
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Establish exclusive medical provider panel
Establish exclusive examiner Panels
Limit changes in treating phuysician
Limit examining physicians
Limit second opinions
What is A Carve-Out
7. Improve Safety Efforts
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Required Safety Staffing
Required Minimum Safety Standards
Drug Testing
Safety Inspection Program
Incident and Near Miss Reporting
Management Reports
What a Carve-out Isn’t
• Method to reduce employee benefit
• Method to avoid WC obligation
• Proven method to reduce WC costs
Alternative Dispute Resolution
1. Ombudsman
Gate Keeper
First level of dispute resolution
2. Mediator
3. Arbitration replaces WC Judge
Appeal from decision of Mediator
Same rules as hearing before a WC Judge.
4. WCAB
Full court in San Francisco
5. State Court of Appeals
Possible Carve-Out Components
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Return to work incentives
Mandatory return to work
Increased indemnity benefits
Financial incentives to physicians
Drug testing
Safety programs
LACCD Carve-out
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23 signatory construction unions
2000 Employers
Limits employee to one change of PTP
Limits employee to one second opinion
Limits physicians to MPN and group panel
Attorney involvement barred until arbitration
No control of PTP
Established a JLMC
Established Alternative Dispute Resolution
City of Los Angeles
• Covers service and engineers union members
• Establishes an ADR with Ombudsman
• There are no other features to this Carve-Out
City of Long Beach
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Peace Officers and Firefighters
List of specialists for IME
City MPN for treatment
IME has sole discretion to select specialist for
review of case
• IME decision is final without appeal
• No other features
• No ADR
What to consider
• Analyze current WC program
• Recognize weaknesses and problems
• Determine what feature of carve-out will
resolve problem areas
• Establish benchmarks for comparison
• Establish expectations
• Avoid anecdotal performance measurements
• Be suspicious of unsupported claims