Michael P. Georgariou II, Attorney at Law

10/07/2026

Good article from Bill Zachry explaining some of the problems with workers' compensation in California.

Misplaced Financial Incentives Are Actually the Biggest Problem inWork Comp
By Bill Zachry | Strategic Advisor at Plethy

After working my entire career to make workers' compensation work well, one lesson keeps proving itself: good people working inside a badly designed incentive structure can produce bad outcomes.

When a problem appears, we tend to blame the people involved and add a rule, a review, a regulation or another layer of oversight. Each fix adds complexity, and too often it leaves in place the misplaced financial incentive that helped create the problem.

Sometimes the new rule creates incentives of its own. People adapt. Costs move somewhere else. And the next problem gets built on top of the last solution.

We need to start by remembering what workers' compensation was designed to accomplish.

The system should prevent injuries, deliver prompt and appropriate medical care, return injured workers to productive employment whenever possible, compensate them fairly, and resolve claims efficiently.

I call that the Ideal System.

Once we keep those objectives in view, we can ask a different question when something isn't working:

What are we actually incentivizing people to do?

Consider a few examples.

An adjuster measured primarily on closing claims will close claims. Whether the injured worker recovered and successfully returned to work may be a separate question that nobody is measuring.

When an employer or insurer pays a utilization review company for each medical treatment request it reviews, the payment structure rewards the volume of reviews. It does not reward timely and appropriate approval of necessary treatment. The utilization review company isn't doing anything wrong. It is responding to the financial structure we created.

A claims examiner carrying a caseload too large to permit early contact will make late contact, regardless of how dedicated that examiner may be.

A fee structure tied to the size of a disability award creates a very different incentive from one focused on recovery and return to work.

None of these examples requires anyone to violate a law, break a rule or behave unethically. That is what makes misplaced financial incentives so difficult to see.

People can follow every rule and still produce an outcome that moves the system away from what it was designed to accomplish.

Measurement can create the same problem. Once a number becomes the target, people naturally begin managing toward the number. A closure rate can improve while recovery, return to work and overall claim outcomes get worse.

Before we add another rule, regulation, metric, payment method or business practice, we should ask five questions:
1. Does it move us toward the objectives of the Ideal System?
2. What behavior does it actually reward?
3. How will rational, good-faith participants respond?
4. What unintended consequences are likely, and who will bear them?
5. How will we measure whether it actually improved outcomes?
This isn't only a legislative or regulatory problem.

Many misplaced incentives are sitting inside our own organizations—in contracts, performance metrics, compensation structures, vendor agreements and business practices. We don't have to wait for legislation to change those. If we created them, we can change them.

There is one question I would like the workers' compensation community to begin asking:

If this incentive works exactly as designed, will the injured worker, the employer and the system all be better off?

If the answer is no, we should look at the incentive before we blame the people responding to it.

Raja Sundaram, Dr. Feinberg and I recently explored this issue at the National Workers’ Compensation Conference. But the conversation goes much deeper than what we could cover in one session.

That’s why I took a deeper look at how misplaced financial incentives have become embedded throughout the workers’ compensation system, the unintended consequences they create, and what we can do differently.

If we want better outcomes, we need to look beyond whether people are following the rules and ask whether the rules, measurements and financial structures themselves are encouraging the outcomes we want.

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09/17/2026

The California Department of Industrial Relations is facing serious questions over its use of money dedicated to the workers’ compensation system to pay for internal employee investigations, consultants and other expenses with little connection to workers’ compensation. After a Sac Bee Investigation of DIR contracts from 2020 through 2026 found more than $30 million paid from the Workers’ Compensation Administration Revolving Fund (WCARF) for such purposes. Labor Code Section 62.5 limits use of the fund to administering workers’ compensation, a return-to-work program for injured workers and enforcement against uninsured employers, and specifically states that the money “may not be used or borrowed for any other purpose.”

Among the most troubling examples is the investigation of former Cal/OSHA district manager Michael Loupe. DIR reportedly spent an estimated $80,000 from the workers’ compensation fund investigating seven allegations against Loupe, including the bizarre accusation that he fired a toy bow and arrow at photographs of Gov. Gavin Newsom and other state officials. After an 18-month investigation, Loupe was cleared of every allegation. Loupe, a decorated Army veteran and Bronze Star recipient, said the ordeal caused tremendous stress, contributed to a stroke and ultimately forced him to retire. Former Cal/OSHA compliance officer Garrett Brown called DIR’s use of the fund “a huge slush fund” and “a stunning breach of public trust.”

The spending extends well beyond the Loupe investigation. DIR paid Sacramento-based Shaw Law Group $317,786 from WCARF to conduct employee investigations and has yet to produce records showing that the fund was reimbursed. More than $20 million in contracts also went to CPS HR Consulting, now headed by former DIR Director Katie Hagen. DIR maintains that using one fund initially and later transferring costs to the appropriate funding source is common practice. Yet despite repeated requests, the department has not demonstrated that the workers’ compensation fund was actually repaid. It now says it expects to provide an update by September 7.

These revelations are especially maddening given the well-documented problems within Cal/OSHA. A recent state audit found severe staffing shortages and significant failures in the agency charged with protecting California’s workers, including thousands of inadequately investigated cases and approximately 1,800 cases closed without referral for possible criminal prosecution. At the same time, former Cal/OSHA employees who raised concerns about staffing, pay and agency operations have alleged that they faced retaliation and internal investigations. DIR apparently had substantial resources available for consultants and investigations of its own employees, even as Cal/OSHA struggled to adequately investigate serious workplace injuries and deaths.

Cal/OSHA and DIR seems to fail to put California’s workers first. Injured workers and their advocates are continually told about limited resources, staffing shortages and administrative challenges, yet DIR apparently found millions of dollars in a fund dedicated to the workers’ compensation system to pay for consultants, human resources projects and investigations of its own employees. Workers’ compensation funds exist to administer and strengthen the system serving injured workers, not to function as a convenient source of money for unrelated departmental expenses. California’s workers deserve a Department of Industrial Relations that treats those resources, and its responsibility to protect working people, with far greater care.

07/15/2026

Very bad news! Thanks for nothing, California legislators and Gov. Newsom.

The 2026 budget trailer bill (SB 171) was signed by Governor Newsom on July 13. The changes to the Subsequent Injuries Benefits Trust Fund (SIBTF) will significantly narrow eligibility for many injured workers, particularly those with pending claims that are not yet final.

From the perspective of injured workers, the principal impacts include:

* Many pending SIBTF claims may no longer qualify. The legislation applies most of the new eligibility standards to open claims that have not yet resulted in a final award or settlement. Thus, applicants who filed under the prior law may now have to satisfy more restrictive requirements.

* Preexisting disability must be proven with evidence that existed before the industrial injury. Claimants generally cannot rely on post-injury medical opinions to establish that a prior condition was labor-disabling. Instead, there must be substantial contemporaneous evidence—such as prior medical records, testimony, or other documentation—that predates the subsequent injury. This will be a major hurdle for many workers who had genuine impairments but never sought treatment before being injured at work.

* The definition of “labor-disabling” is substantially narrowed. A preexisting impairment generally must have had a demonstrable effect on the employee’s ability to work, earnings, or work activities before the later industrial injury. Conditions that were symptomatic but did not measurably affect employment may no longer qualify.

* Fewer workers will reach the disability thresholds necessary for SIBTF benefits. The bill changes how permanent disability is calculated for SIBTF eligibility by eliminating certain rating adjustments and effectively overruling case law that had made it easier for some applicants to qualify. This is expected to reduce the number of workers who satisfy the statutory thresholds.

* Some workers with 100% permanent disability awards may no longer be eligible for additional SIBTF benefits. The legislation limits access for claimants who already have total permanent disability awards in certain circumstances.

06/08/2026

California Supreme Court Hears Oral Arguments in Mayor v W.C.A.B.

The California Supreme Court heard oral arguments on June 2 in Mayor v. Workers’ Compensation Appeals Board (Ross Valley Sanitation District) (Supreme Court Case No. S287261), a closely watched case that could have significant implications for how workers’ compensation cases are administered throughout California. At issue is whether the Workers’ Compensation Appeals Board (WCAB) retains authority to act on petitions for reconsideration after the statutory 60-day period set forth in former Labor Code section 5909, particularly when administrative delays prevent the Board from receiving or processing a petition within that timeframe.

The dispute stems from a March 2023 award of permanent total disability benefits to an injured worker. After the employer filed a petition for reconsideration, the WCAB ultimately granted reconsideration in August 2023, explaining that an administrative irregularity had delayed receipt of the petition and prevented action within the statutory period. The First District Court of Appeal later concluded that the WCAB lacked jurisdiction to act outside the 60-day deadline, relying on its earlier decision in Zurich American Insurance Co. v. WCAB (2023) 97 Cal.App.5th 1213. (Note: While this case was pending, the California Legislature amended Labor Code Section 5909 so that the 60-day countdown now begins when the case file is transmitted to the Appeals Board rather than when the petition is filed, though this does not directly alter the outcome of the Mayor dispute.)

As is often the case, the court gave no indication of how it will ultimately rule, though some observers viewed portions of the argument as favorable to the petitioner, Joseph Mayor. The case was submitted following argument, and a decision is expected in the coming months. Regardless of how the Court will ultimately rule, Mayor is likely to become one of the most consequential workers’ compensation procedural decisions in recent years, shaping how reconsideration petitions are handled and defining the balance between statutory deadlines and due process protections.

05/11/2026

California’s workers’ compensation system returned more than $1 million in administrative penalties through audits in 2024, according to a newly released annual report from the California Division of Workers’ Compensation’s Audit & Enforcement Unit. The report details the results of 40 audits conducted on insurers, self-insured employers, and third-party administrators, covering nearly 2,700 claim files statewide. Auditors identified 4,531 violations and assessed more than $1.35 million in penalties, with approximately $1.01 million ultimately subject to collection.

These findings offer another window into ongoing compliance problems within the workers’ compensation system. Among the most concerning statistics in the report was that auditors found unpaid indemnity benefits in more than 10% of reviewed claims. As a result, the Audit Unit issued 275 notices of compensation due totaling more than $442,000, including unpaid temporary and permanent disability benefits owed to injured workers. The report also found that eight audit subjects failed initial performance reviews and were moved into more extensive compliance audits, with five ultimately failing the second-stage review entirely, receiving penalties for all violations found.

The findings of this audit show the limits of the current enforcement structure. Although thousands of violations were identified, 32 of the 40 audited entities avoided financial penalties because they met or exceeded minimum performance standards under California law. Even where violations were found, many employers and carriers were only required to pay benefits that should have been issued in the first place. Separately, the Audit & Enforcement Unit reported handling 560 complaints in 2024, recovering an additional $1.18 million in payments to injured workers and providers through complaint-driven investigations.

This report reinforces concerns that delays, underpayments, and claims handling violations remain persistent features of the system rather than isolated incidents. It also emphasizes the critical role applicants’ attorneys continue to play in identifying compliance failures and ensuring injured workers receive the benefits they are legally entitled to. As enforcement challenges and audit findings continue to undermine injured workers, the need for strong advocacy and accountability within the system remains as important as ever.