Executive Order Creates Worker’s Comp Liability for Small Business Owners

Thomas Jefferson stated following a period political and economic uncertainty: “if we can but prevent the government from wasting the labors of the people, under the pretense of taking care of them, they must become happy.” In the wake of the COVID outbreak, much of the legislative action has been carried out by executive order. Recently an executive order was issued creating presumptive workers’ comp liability for businesses when employees test positive for COVID-19.

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Executive Order Creates Workers’ Comp Liability for Small Business Owners
By: D. Keith B. Dunnagan, Esq.

As we begin to move to a phased re-opening (whatever that means) Gov. Newsom is continuing to exercise tremendous authority and legislate through executive orders. Most recently, Gov. Newsom on May 6, 2020 issued Executive Order N-62-20. This order creates the potential for significant liability for businesses.

It is no secret that small businesses have been particularly hard hit by the government shutdowns intended to contain the spread of COVID-19. As if that was not enough, in this executive order, Gov. Newsom declares that, “Any COVID-19 related illness of an employee shall be presumed to arise out of and in the course of the employment for purposes of awarding workers’ compensation benefits.” To qualify for COVID-19-related worker’s compensation benefits, an employee need only show that (1) the employee tested positive for COVID-19 within 14 days of doing work at the employee’s place of employment; (2) the work was done after March 19, 2020; (3) the place where the work was done was not at the employee’s home; and (4) that diagnosis was made by a California-licensed physician.

If such a claim is accepted, the compensation benefits include hospital, surgical, medical treatment, disability indemnity and death benefits. While the order says the presumption is rebuttable, the low bar effectively renders it impossible to rebut. How would any business be able to show that a COVID-19 diagnosis was not related to the business activity?

As the economy slowly begins to re-open and people begin to move about at parks, retailers, and big box stores that were never restricted, or to socialize with friends, people could test positive for COVID-19 from any number of social or business interactions. The Governor’s order assumes that people will only get exposed in their workplace. To place this onus on small business creates a legal conundrum and unnecessarily exposes businesses to increased liability and potential increased premiums from workers’ comp predicated on a presumption rather than on any actual proof that an employee was exposed at work.

Nonetheless, business will slowly begin to reopen. Until the courts reopen, and cases move through the system to sort out the legalities of these governmental actions, business owners would be wise to be cautious and implement workplace safety protocols. As the shelter orders begin to get modified, business owners should be aware of the Cal/OSHA, CDC and EEOC guidelines related to COVID safety in the workplace. It will be important to develop policies and procedures for interacting with employees, including: maintaining social distancing, reminding employees of good hygiene practice, encouraging employees to stay home when they are sick, and in some scenarios and businesses, requiring temperature checks (allowed under EEOC Guidance dated March 18, 2020). The guidance recognizes that a business can encourage safe health practices, but policing and compelling safe practices is much more difficult.

Some businesses may even determine it is wise to record employee temperatures (allowed under EEOC Guidance dated April 9, 2020). If you do record the temperatures of employees in logs, be mindful of the current EEOC requirements, which can be found here. The EEOC currently requires that any medical information retained, such as temperature logs, must be stored in a file separate from the general personnel file, and the policies of checking temperature must be uniform through the job class (i.e., you can’t require one person to do the test and relieve another). Remember to periodically check federal, state and local guidelines to make sure your business maintains compliance.

We can all agree that precautions should be taken to reduce the spread of this disease. Employers and employees alike want happy and healthy workplaces. However, it is bad policy to place the potential liability on the backs of small business after nearly eight weeks of compelled shutdowns while providing no real way for businesses to defend themselves. In fact, even if the business takes precautions and if an employee violates the policies, the employer may yet be punished under this new executive order.

Creating a presumption of liability when people are beginning to slowly move about the consumer marketplace fails to account for the probability of “community spread” COVID-19 and instead places that liability squarely on the shoulders of employers facing potential increase in workers’ compensation premiums. As small business owners desperately want to get back to work, some may be hesitant as they weigh the risk of liability against the benefits of reopening.

The information contained in this article is for informational purposes only and not to be construed as legal advice. If you have questions, you should seek competent legal representation to assist you.


The attorneys of BPE Law Group, PC. have been advising our clients on real estate, business and estate planning issues for over 20 years and have assisted numerous clients in probate, business and real estate matters and have represented and advised brokers on their professional obligations as well as consumers on their rights. If you have questions concerning legal matters, give us a call at (916) 966-2260 or e-mail Keith at kbdunnagan@bpelaw.com. Our flat fee consult for new clients may get you the answers you need for the questions you have.

The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are facing a legal issue of any kind, get competent legal advice in your State immediately so that you can determine your best options.