Defending EDD Liens: A Sixty-Second Seminar in Workers’ Compensation Claims Handling

Of the numerous stakeholders who are involved in the resolution of a claim for workers’ compensation benefits, the role of the Employment Development Department (EDD) is often overlooked. However, in practice, an early determination of whether the EDD has paid money to the injured worker, and meaningful contact with the EDD thereafter, are critical.

The EDD becomes involved in an injured worker’s claim for workers’ compensation benefits once the injured worker has made a claim for SBI benefits, and the EDD advises the claim administrator that the EDD has begun paying benefits to the worker.

Notice from the EDD to the claim administrator is made via a written “Notice of Lien.” Such notice informs the claim administrator that it asserts a lien against any future payment to the worker. It also serves as a request for information from the administrator’s claim file as to any temporary disability benefits paid/being paid to the worker. This allows the EDD to potentially avoid the issuance of erroneous or excessive SDI payments to the worker. As a matter of course, once the EDD pays SDI benefits, they always file a lien in related claim for workers compensation benefits.

Upon receipt of a written lien notice, the administrator must respond to the EDD no later than 15 working days after the commencement of disability indemnity payments, under Labor Code 4904(a). The clock begins to tick once the notice is received. In our experience, very few adjusters are aware of the 15-day time limit under LC 4904(a). Responding immediately by telephone is allowed but only if a follow up in writing is sent. Failure to reply may result in the administrator being held liable to reimburse EDD for any SDI over-payments that may occur.

Note that within its response to the EDD’s lien notice the administrator can provide information supporting a defense to the lien. For example: a simple note stating: “Please apply a WC offset as we have been and are currently paying PD advances of $290 per week as of the first of the year,” may prove invaluable when resolving a future lien claim.

Whenever retroactive TD benefits are to be paid, a claims administrator should always first check with EDD before issuing payment. Ask yourself, “If TD was not paid, then how was the injured worker able to survive without an income?” Chances are the employee filed for SDI benefits once work comp TD benefits were denied or discontinued. Failure to check with EDD may result in a duplicative payment of SDI and TD benefits, which once again may end up being the employer’s liability.

Also, do not allow an EDD representative at the Board to “hustle” you into a disadvantageous settlement of its lien. Sometimes the first notice of a lien occurs at a WCAB hearing when an EDD representative pops into the hearing demanding full reimbursement of their payout before the Court approves a proposed settlement. We often see this situation when an injured worker has multiple claims against different employers. Although EDD may have advised a co-defendant of their lien, it does not excuse them from their failure to notify you. The law is quite clear on this. The EDD is required pursuant to LC 4904(a) to provide YOU with written notice of their lien. Oral notice is insufficient (Quiros v. Superior Tank Co., Inc., 2021 Cal. Wrk. Comp. P.D. LEXIS 380). The EDD’s failure to timely provide you with notice can be a basis by which their lien can be defeated in its entirety! Ask for a copy of the EDD’s written notice, along with a copy of the corresponding “Proof of Service,” executed under the penalty of perjury. Then apply the Labor Code’s timing requirements to your possible benefit!