Lawmakers Propose Prepaid Debit Cards for TD, Crackdown on Drayage Misclassification

Alan Gurvey said he’s “not dead set” against the idea of using prepaid cards to get TD benefits to injured workers...he doesn’t think creating a new way to pay benefits should be a priority now, especially if State Fund has something to gain from pursuing the project. “I may be jaded, but it seems to me that insurance companies aren’t bending over backwards to help injured workers in this sort of way unless there is something in it for them,” 

California’s largest workers’ compensation carriers could launch a pilot project to evaluate the use of prepaid debit cards for temporary disability benefits, under recently introduced legislation.

Another recently amended bill would hold customers jointly liable for future labor law violations when they contract with port trucking companies that have failed to make court-ordered payments following a verdict that they intentionally misclassified its drivers.

Sen. Richard Pan on Monday amended a bill that originally included nonsubstantive changes to the Labor Code to propose testing whether electronic benefit cards are a viable way for paying TD benefits in California.

Carriers in New York are allowed to use prepaid cards to deliver benefits to injured workers. Ohio’s monopolistic Bureau of Workers’ Compensation also offers injured workers the option of receiving benefits on a prepaid card.

Pan, a Democrat from Sacramento, amended SB 880 to propose allowing State Fund to pay TD benefits with prepaid cards that meet certain requirements intended to allow injured workers to access the money without incurring fees or other charges.

The pilot project would run through Jan. 1, 2023, with State Fund required to prepare a final report for lawmakers documenting the number of workers who opted into the program, and the total amount of benefits sent to the prepaid card accounts.

State Fund views prepaid cards as a way to give injured workers an alternative to receiving a paper check or having money deposited electronically into a bank account, according to Jennifer Vargen, executive vice president of public affairs for the carrier.

Vargen also said prepaid cards can ensure that injured workers have immediate access to funds while reducing the carrier’s administrative costs for providing benefits.

“We believe the use of TD pay cards will streamline the provision of benefits to injured workers by eliminating delays due to mailing time as well as lost or stolen checks,” she said. “There will also be a reduction in fees associated with benefit administration.”

She added that there would be no fee for injured workers to use the cards.

Bill language Pan introduced Monday would require injured workers to request in writing that State Fund provide TD benefits on a prepaid card. It would also require that the card provided to injured workers will allow them to withdraw the entire balance in a single transaction without incurring fees.

State Fund would also have to ensure that claimants have reasonable access to ATMs that are within the card provider’s network, and that injured workers could make purchases without incurring fees from the financial institution providing the card.

The company providing the card would be allowed to charge fees only for a replacement card, making three or more withdrawals from an out-of-network ATM after each deposit, and fees for foreign transactions. The bill would require all surcharges be disclosed to the injured worker, in writing.

Prepaid cards got a bad rap when the National Consumer Law Center in 2011 reported that the ones used to pay unemployment benefits were often larded up with a variety of hidden fees. NCLC said in its report that unemployment beneficiaries in 22 states were charged fees for using in-network ATMs, and 28 states charged an “inactivity fee” of 50 cents to $3.

In a 2013 follow-up report, the National Consumer Law Center said the California Employment Development Department had the “top-rated card” when it comes to protecting unemployment and disability recipients from surcharges. But even then, NCLC estimated that beneficiaries in California pay about $1 million in ATM fees each year and an additional $800,000 for using international ATMs, emergency cash fees and for expedited replacement cards.

NCLC acknowledged that prepaid cards were more convenient for those who don’t have bank accounts, and might otherwise have to pay a fee to cash a paper check and carry around large amounts of cash. The organization said that as long as users are careful, most fees associated with the unemployment cards are avoidable.

Diane Worley, director of policy implementation for the California Applicants’ Attorneys Association, said she was still reviewing the bill on Tuesday. CAAA doesn’t have a position on the bill but would be opposed to any bank fees for using the cards, Worley said.

Alan Gurvey, managing partner of applicants’ firm Rowen, Gurvey & Win in Sherman Oaks, said he’s “not dead set” against the idea of using prepaid cards to get TD benefits to injured workers. But he also said he doesn’t think creating a new way to pay benefits should be a priority now, especially if State Fund has something to gain from pursuing the project.

“I may be jaded, but it seems to me that insurance companies aren’t bending over backwards to help injured workers in this sort of way unless there is something in it for them,” he said.

Gurvey said he would prefer to see time, money and energy being used to improve utilization review and independent medical review, create more transparency regarding medical provider networks, and more scrutiny over the administration of benefits.

Pan’s office did not return calls asking about the bill.

Also on Monday, Sen. Ricardo Lara, D-Bell Gardens, amended SB 1402 to propose language intended to address reports of alleged “rampant misclassification” in the state’s port drayage industry.

The bill would require the Division of Labor Standards Enforcement to create and post to its website a list of companies that help move goods out of the state’s ports that have failed to satisfy a final court judgment following a finding of illegal conduct, including failure to carry workers’ compensation coverage for drivers.

A customer contracting with one of the companies on the division’s list would be held jointly and severally liable with the motor carrier for future unpaid wages, unreimbursed expenses and any associated penalties.

The bill includes a statement that as many as two-thirds of the drivers hauling goods from ports to rail yards, retail stores and warehouses are misclassified as independent contractors when they’re actually employees.

“A common practice is for a company that owns port drayage trucks to enter into a sublease agreement with drivers, with the promise that they will own the truck someday,” the bill says. “Drivers can be terminated at any time and lose the money they thought they were paying toward the truck. Companies deduct money from driver paychecks for business expenses that lead to poverty wages or to the driver owing the company money.”

SB 1402 was referred to the Senate Committee on Labor and Industrial Relations, and SB 880 has not been assigned to a policy committee. No hearings have been scheduled on either measure.