California Labor Code § 4650 requires workers’ compensation insurance companies to increase their temporary disability and permanent disability payments by 10% whenever they are late. The statute, therefore, incentivizes workers’ compensation insurers to pay out all disability payments in full and on time for fear of hefty financial penalties.
The full text of the statute reads as follows:
4650. (a) If an injury causes temporary disability, the first payment of temporary disability indemnity shall be made not later than 14 days after knowledge of the injury and disability, on which date all indemnity then due shall be paid, unless liability for the injury is earlier denied.
(1) If the injury causes permanent disability, the first payment shall be made within 14 days after the date of last payment of temporary disability indemnity, except as provided in paragraph (2). When the last payment of temporary disability indemnity has been made pursuant to subdivision (c) of Section 4656, and regardless of whether the extent of permanent disability can be determined at that date, the employer nevertheless shall commence the timely payment required by this subdivision and shall continue to make these payments until the employer’s reasonable estimate of permanent disability indemnity due has been paid, and if the amount of permanent disability indemnity due has been determined, until that amount has been paid.
(2) Prior to an award of permanent disability indemnity, a permanent disability indemnity payment shall not be required if the employer has offered the employee a position that pays at least 85 percent of the wages and compensation paid to the employee at the time of injury or if the employee is employed in a position that pays at least 100 percent of the wages and compensation paid to the employee at the time of injury, provided that when an award of permanent disability indemnity is made, the amount then due shall be calculated from the last date for which temporary disability indemnity was paid, or the date the employee’s disability became permanent and stationary, whichever is earlier.
(c) Payment of temporary or permanent disability indemnity subsequent to the first payment shall be made as due every two weeks on the day designated with the first payment.
(d) If any indemnity payment is not made timely as required by this section, the amount of the late payment shall be increased 10 percent and shall be paid, without application, to the employee, unless the employer continues the employee’s wages under a salary continuation plan, as defined in subdivision (g). No increase shall apply to any payment due prior to or within 14 days after the date the claim form was submitted to the employer under Section 5401. No increase shall apply when, within the 14-day period specified under subdivision (a), the employer is unable to determine whether temporary disability indemnity payments are owed and advises the employee, in the manner prescribed in rules and regulations adopted pursuant to Section 138.4, why payments cannot be made within the 14-day period, what additional information is required to make the decision whether temporary disability indemnity payments are owed, and when the employer expects to have the information required to make the decision.
(e) If the employer is insured for its obligation to provide compensation, the employer shall be obligated to reimburse the insurer for the amount of increase in indemnity payments, made pursuant to subdivision (d), if the late payment which gives rise to the increase in indemnity payments, is due less than seven days after the insurer receives the completed claim form from the employer. Except as specified in this subdivision, an employer shall not be obligated to reimburse an insurer nor shall an insurer be permitted to seek reimbursement, directly or indirectly, for the amount of increase in indemnity payments specified in this section.
(f) If an employer is obligated under subdivision (e) to reimburse the insurer for the amount of increase in indemnity payments, the insurer shall notify the employer in writing, within 30 days of the payment, that the employer is obligated to reimburse the insurer and shall bill and collect the amount of the payment no later than at final audit. However, the insurer shall not be obligated to collect, and the employer shall not be obligated to reimburse, amounts paid pursuant to subdivision (d) unless the aggregate total paid in a policy year exceeds one hundred dollars ($100). The employer shall have 60 days, following notice of the obligation to reimburse, to appeal the decision of the insurer to the Department of Insurance. The notice of the obligation to reimburse shall specify that the employer has the right to appeal the decision of the insurer as provided in this subdivision.
(g) For purposes of this section, “salary continuation plan” means a plan that meets both of the following requirements:
(1) The plan is paid for by the employer pursuant to statute, collective bargaining agreement, memorandum of understanding, or established employer policy.
(2) The plan provides the employee on his or her regular payday with salary not less than the employee is entitled to receive pursuant to statute, collective bargaining agreement, memorandum of understanding, or established employer policy and not less than the employee would otherwise receive in indemnity payments.
California Labor Code 4650 LC requires workers’ compensation insurance companies to pay injured workers their temporary- or permanent disability payments on time. If the insurer fails to make these payments in a timely manner, they must pay the worker an extra 10%.
Workers’ comp disability payments must begin within 14 days of the insurer’s knowledge of the injury. And any subsequent payments must be made every two weeks. Otherwise, payments are considered “late” and are subject to the 10% penalty.1
Note that if a disability payment is not just late but also “unreasonably delayed,” then the late penalty is increased to up to 25% or $10,000 (whichever is less). But if the insurer discovers its lateness before the worker makes a late claim, the insurer is required to pay only a 10% penalty as long as it is paid within 90 days of the date of discovery.2
Read our related article, What are the penalties for late payment of workers’ compensation benefits?
- California Labor Code 4650 LC – Time of first payment for temporary or permanent disability indemnity; Increase for late payments; Reimbursement of insurer; Salary continuation plan. See for example: Zurich North American v. Workers’ Comp. Appeals Bd. (Driver) (Cal. App. 2d Dist., 2013), 78 Cal. Comp. Cases 515; Fresno Unified School Dist., PSI v. Workers’ Comp. Appeals Bd. (Barajas) (Cal. App. 5th Dist., 2012), 77 Cal. Comp. Cases 566.
- Labor Code 5814.