En Banc Decision Upholds Due Process Rights of Lien Claimants for July 1, 2017 Lien Dismissal Per LC 4903.05

On October 26, 2017, the Workers Compensation Appeals Board issued an en banc decision, Jose Guillermina Rodriguez, ADJ8588344 (MF) and consolidated cases, upholding lien claimants’ due process rights to a fair hearing on the issue of whether their liens had been dismissed by operation of law pursuant to the lien declaration filing requirements of Labor Code Section 4903.05(c).

En banc decisions of the Workers’ Compensation Appeals Board are binding precedent on all Appeals Board panels and workers’ compensation judges. (Title 8, California Code of Regulations Section 10341.)

Labor Code Section 4903.05(c)(2) provides that all lien claims filed after January 1, 2013 for expenses pursuant to Labor Code Section 4903(b) which are not exempt from the lien filing were required to file a lien declaration specifying one of six qualifying grounds for the lien claim. Section 4903.05(c)(2) states that “lien claimants shall have until July 1, 2017, to file a declaration…” (Emphasis added.) Under the statute, failure to file a compliant lien declaration timely would result in dismissal of the lien claim by operation of law.

The Division of Workers’ Compensation (DWC) issued a Newsline bulletin on August 14, 2017, announcing that the DWC would dismiss on the following day “more than 292,000 unresolved liens by operation of law” for failure to timely file a compliant lien declaration.

The DWC then published an online search tool that identified those liens that it had deemed dismissed by operation of law. Liens for which declarations had been filed after Friday, June 30, 2017 were included and noted as dismissed by operation of law.

July 1, 2017, the deadline specified in the statute, fell on a Saturday.

Following the publication of the search tool identifying liens as dismissed by operation of law, over 1,200 Petitions for Reconsideration were filed by lien claimants who had filed their lien declarations by the close of business on Monday, July 3, 2017, and whose liens had been noted by the DWC as dismissed by operation of law.

On October 3, 2017, the DWC issued another Newsline bulletin advising that it would “lift the notation in its Electronic Adjudication Management System (EAMS) that indicates all liens with Labor Code Section 4903.05(c) declarations filed on July 2 and July 3 were dismissed.” The DWC explained, “Because July 1 fell on a weekend, workers’ compensation administrative law judges will adjudicate the timeliness of the lien declarations filed on July 2 and July 3 on a case-by-case basis. DWC’s reversal of the dismissal notation is not a decision or order on the timelines of the declarations, and shall not be construed as such.”

On October 26, 2017, the WCAB issued an en banc decision consolidating these cases as “The Lien Cases.” The Board held that the administrative action taken by the DWC in removing the notation that these liens had been dismissed by operation of law had rendered the issue moot. The Board made clear that it was not issuing an opinion regarding whether these lien declarations had been filed timely.

The Board also went on to state:

All parties to a workers’ compensation proceeding retain the fundamental right to due  process and a fair hearing under both the California and United States Constitutions. (Rucker v. Workers’ Comp. Appeals Bd. (2000) 82 Cal. App. 4th 151, 157-158 [65 cal. Comp. Cases 805].) A fair hearing is “…one of the ‘rudiments of fair play’ assured to every litigant…” (Id.at 158.) A fair hearing includes but is not limited to the opportunity to call and cross-examine witnesses; introduce and inspect exhibits; and to offer evidence in rebuttal. (See Gangwish v. Workers’ Comp. Appeals Bd. (2001) 89 Cal. App. 4th 1284, 1295 [66 Cal. Comp. Cases 584]; Rucker, supra, at 157-158; Katzin v. Workers’ Comp. Appeals Bd. (1992) 5 Cal. App. 4th 703,710 [57 Cal. Comp. cases 230].) Moreover, these is a strong public policy favoring disposition of cases on their merits. (Litzman v. Workers’ Comp. Appeals Bd. (1968) 266 Cal. App. 2d 203, 205 [33 Cal. Comp. Cases 584]; see Shamblin v. Brattain (1988) 44 Cal.3d 474, 478.) Due porcess requires that a party be provided with reasonable notice and an opportunity to be heard. (Katzin v. Workers’ Comp. Appeals Bd. (1992) 5 Cal. App.4th 703, 711-712 [57 Cal. Comp. cases 230].)

We acknowledge that the issue of whether a lien claimant timely filed its declaration may be raised by a party and proceed to a hearing, but we emphasize that in the absence of an adjudication that a declaration was untimely, a lien claimant is not barred from proceeding on its lien.

It remains to be seen whether the liens which were the subject of this litigation will be deemed dismissed by operation of law.

However, the Board’s reaffirmation of the application of principles of fairness and due process with regard to lien claims in its en banc decision is a welcome and heartening development.