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CIV-130
ATTORNEY OR PARTY WITHOUT ATTORNEY (Name, State Bar number, and address): FOR COURT USE ONLY
[JAMES J. BANKS (SBN 119525) Superior Court of California
W. DAVID CORRICK (SBN 171827) IF F
County of Butte
BANKS & WATSON
CON re otrcer,, Suite 200
|
Sacramento, CA 95814-0733 L 2/21/2020
TELEPHONE NO. 916/325-1000 FAX NO. (Optional): E
E-MAIL ADDRESS (Optional) jbanks@bw-firm.com
ATTORNEY FOR (Name): Petitioners, OMAR JAY ON and BARBARA ON
D ii FOr car D
PY Wut
SUPERIOR COURT OF CALIFORNIA, COUNTY OF BUTTE Electronically FILED
street appress: 1775 Concord Avenue
MaiLinG ADbRess: 1775 Concord Avenue
city ann zip cove: Chico CA 95928
BRANCHNAME: North Butte County Courthouse
PLAINTIFF/PETITIONER:
OMAR JAY ON and BARBARA ON
DEFENDANT/RESPONDENT: STEPHEN A. VANNUCCI, MeDe INC., et al.
NOTICE OF ENTRY OF JUDGMENT ‘SE NUMBER:
OR ORDER
19CV03856
(Check one): X_} UNLIMITED CASE Cd LIMITED CASE
(Amount demanded (Amount demanded was
exceeded $25,000) $25,000 or less)
TO ALL PARTIES :
1 A judgment, decree, or order was entered in this action on (date):February 13, 2020
2. Acopy of the judgment, decree, or order is attached to this notice.
Date: February 21, 2020
W DAVID _CORRICK
(TYPE OR PRINT NAME OF attorney [|__| PARTY WITHOUT ATTORNEY)
b (SIGNATURE)
Page 1 of 2
Form Approved for Optional Use
Judicial Council of California
CIV-130 [New January 1, 2010]
NOTICE OF ENTRY OF JUDGMENT OR ORDER
soli
2/6/2020
F Superior Court of California F
JAMES J. BANKS (SBN 119525) County of Butte
W. DAVID CORRICK (SBN 171827)
BANKS & WATSON E 2/13/2020 L
901 F Street, Suite 200
Sacramento, CA 95814-0733
E :
Tel: (916) 325-1000 D D
Fax: (916) 325-1004 By leputy
Email: jbanks@bw-firm.com
Email: dcorrick@bw-firm.com
PATRICIA A. SAVAGE (SBN 236235)
LAW OFFICES OF PATRICIA A. SAVAGE
1550 Humboldt Road, Suite 4
Chico, CA 95928
Tel: (530) 809-1851
Fax: (530) 592-3865
Email: psavesq@gmail.com
10 Attorneys for Petitioners,
OMAR JAY ON and BARBARA ON
11
12 SUPERIOR COURT OF THE STATE OF CALIFORNIA
3 FOR THE COUNTY OF BUTTE
14
15 In re the Arbitration of: Case, 19CV03856
16 OMAR JAY ON and BARBARA ON, JUDGMENT IN
CONFORMITY WITH FINAL AWARD OF
17 Petitioners, ARBITRATOR
18 Vv. [Code Civ. Proc. § 1285, et seq.]
19 STEPHEN A. VANNUCCI, M.D., INC. and DATE: February 5, 2020
NORTH VALLEY DERMATOLOGY CENTER, TIME: 9:00 A.M.
20 DEPT: 1
Respondents.
21
22
23 [PROPOSED] JUDGMENT
24 The Final Award of Arbitrator Catherine C. Harris, dated December 16, 2019 (“Final Award”) —
25 a copy of which is attached hereto as Exhibit 1 and incorporated herein by this reference — having been
26 rendered in favor of Petitioners OMAR JAY ON (“Mr. On”) and BARBARA ON (“Ms. On”)
27 (referenced collectively as “Petitioners”) and against Respondents STEPHEN A. VANNUCCI, M.D.,
28
{00094506.DOC; 1 }
[PROPOSED] JUDGMENT IN CONFORMITY WITH FINAL AWARD OF ARBITRATOR
INC. (“SAVI”) and NORTH VALLEY DERMATOLOGY CENTER (“NVDC”), and this Court having
confirmed the Final Award in all respects;
NVDC having filed a Voluntary Petition for Non-Individuals Filing for Bankruptcy
(“Bankruptcy Petition”) pursuant to Chapter 11 of United States Code Title 11 on or about January 28,
2020; and,
These proceedings having automatically been stayed against NVDC only pursuant to Title 11
US. Code section 362(a) by virtue of its Bankruptcy Petition.
IT IS HEREBY ORDERED, ADJUDGED AND DECREED that judgment is hereby entered
pursuant to Code of Civil Procedure section 579 in favor of Petitioners and against Respondent SAVI in
10 conformity with the Final Award, including the following:
11 e SAVI is liable to Mr. On for unpaid compensation in the amount of $628,884.00, and
12 prejudgment interest in the amount of $339,293.36 — calculated through December 16,
13 2019 — for a total combined award of $968,177.36, with prejudgment interest continuing
14 to accrue from that date at a simple interest rate of 7%, until the entry of judgment.
15 SAVI is liable to Petitioners for attorneys’ fees in the amount of $1,165,165.07 —
16 comprised of Banks & Watson attorneys’ fees of $965,333.82, and Patricia Savage
17 attorneys’ fees of $199,831.25.
18 SAVI is liable to Petitioners for costs in the amount of $97,706.65 ~ comprised of Banks
19 & Watson costs of $97,306.65, and Patricia Savage costs of $400.00.
20 IT IS FURTHER ORDERED, ADJUDGED AND DECREED that interest at the rate of 10% per
21 annum shall accrue on the foregoing amounts, from the date of entry of judgment until paid, together
To be determined
22 with costs and disbursements in the amount of $
23
24 DATED: February _' 2020
25 By:
HON. TAMARA L. MOSBARGER
26 JUDGE OF THE SUPERIOR COURT
27
28
{00094506.DOC; | } -2-
[PROPOSED] JUDGMENT IN CONFORMITY WITH FINAL AWARD OF ARBITRATOR
EXHIBIT 1
IN ARBITRATION PROCEEDINGS
BEFORE THE AMERICAN ARBITRATION ASSOCIATION
PURSUANT TO THE EMPLOYMENT ARBITRATION RULES
OMAR JAY ON and BARBARA ON, AAA Cast No.: 01-18-0000-4409
10 Claimants, [PROPOSED] FINAL AWARD
iL v.
12 STEPHEN A. VANNUCCI, M.D., INC. and Arbitrator: Catherine C. Harris
NORTH VALLEY DERMATOLOGY CENTER,
13
Respondents,
14
15 Arbitrator Catherine C. Harris (“Arbitrator”) was mutually selected by the parties hereto to
16 render a final Arbitration Decision and Award in the captioned matter; and
17 WHEREAS, this employment dispute came before this Arbitrator for arbitration proceedings
18 commencing on November 5, 2018 and concluding on November 14, 2018, conducted in Butte and
19 Sacramento Counties; and
20 WHEREAS, on June 3, 2019 the Arbitrator issued an Interim Opinion and Award (“Interim
21 Award”) ~ a te copy of which is attached hereto as Exhibit A, and fully incorporated herein by
22 reference. In summary, the Interim Award provides as follows:
« Respondents Stephen A. Vannucci, Inc. (“SAVI") and North Valley Dermatology.
24 Center (“NVDC”) are jointly and severally liable to Claimant Omer Jay On
2s (Mr, On”) for unpaid compensation based upon the reasonable value of his labor in
26 the amount of $470,055.00, in addition to prejudgment interest at a 7% simple interest
27 rate,
28
(90093425.00CX; 7}
“‘TPROPOSED} FNAL AWARD
SAVI and NVDC are jointly and severally lieble to Mr. On for unpaid compensation
based upon the value of missed meal breaks in the amount of $69,939.00, in addition
to prejudgment interest thereon at a 7% simple interest rate.
SAVI and NVDC areJointly and severally liable to Mr. On for unpaid compensation
based upon the value of missed rest breaks in the amount of $88,890.00, and
prejudgment interest thereon at a 7% simple interest rate.
NVDC is ordered to pay Claimants wage restitution in the amount of $48,729.33,
based upon deductions NVDC took from Mr. On’s compensation to reimburse itself
for its own mandatory employee pension contributions in violation of the Employee
10 Retirement Income Security Act of 1974 (“ERISA”).
Ml WHEREAS, on November 12, 2019, the Arbitrator issued her ruting on Claimants’ Motion for
12 Recovery of Prevailing Party’s Reasonable Attomeys’ Fees, Expert Fees and Costs Following Interim
13 Opinion and Award Dated Jume 3, 2019 (“Fees and Costs Award”)~ a true copy of which is atteched
14 hereto as Exhibit B, and fully incorporated herein by reference. In summary,
the Fees and Costs Award
15 provides as follows:
16 . Claimants prevailed on the bulk of their claims, thus achieving their primary litigation
17 objectives, and are entitled to an award of reasonable attorneys’ fees and costs.
18 Claimants are awarded attorneys’ fees in the amount of $1,328,812.07 ~ comprised of
19 Banks & Watson attorneys’ fees of $1,128,980.82, and Patricia Savage attorneys’
20 fees of $199,831.25.
21 Claimants are awarded costs in the amount of $152,083.65 — comprised of Banks &
Watson costs of $151,683.65, and Patricia Savage costs of $400.00.
NOW THEREFORE, the Arbitrator issues her Final Award as follows:
24 e SAVI and NVDC are jointly and severally liable to Mr. On for unpaid compensation in
the amount of $628,884.00, and prejudgment interest in the amount of $339,293.36 —
26 calculated through December 16, 2019 — for a total combined award of $968,177,360
27
December 16, 2019 is utilized herein as the end date for calculating prej ent interest based upon the Arbitrator’s
order
28 that she receive a [Proposed] Final Award from Claimants by close of business on that date.
{00093425.DOCX; 7} 2
[PROPOSED] FINAL AWARD
NVDC is ordered to pay Claimants Omar Jay On and Barbara On wage restitution in the
amount of $48,729.33 based upon deductions NVDC took from Mr. On’s compensation
to reimburse itself for its own mandatory employee pension contributions in violation of
ERISA.
SAYVI and NVDC are jointly and séverally liable for attorneys’ fees in the emount
of
$1,165,165.07 — comprised of Banks & Watson sttomeys’ fees of $965,333.82,
Patricia Savage attomeys’ fees of $199,831.25.
SAVI and NVDC are jointly and severally liable for costs in the amount of $97,706.65 —
coriprised
of Banks & Watson
costs of $97,306.65, and Patricia Savage costs of $400.00.
10 . NVDC is liable for attorneys’ fees attributable
to Claimants’ successfull recovery of wage
Mt sestitution under ERISA in the amount of $163,647.00 — comprised wholly of Banks &
12 ‘Watson attorneys’ fees.
13 NVODC is Hable for attomeys’ costs attributab le successful recovery of
to Claimants’
14 wage restitution under BRISA in the emount of $54,377.00 — comprised wholly of Banks
15 & Watson costs.
16 ‘This Final Awerd is final and binding upon ail parties to this arbitration proceeding.
17
18 IT IS SO ORDERED.
19 DATED: December 4, 2019
CATHERINE C. Arbitrator
20
21 APPROVED AS TO FORM:
ANGELO, RILDAY & KILDUFP, LLP
WD)
26
ere CCI, MOD.,INC. and
NORTH VALLEY DERMATO!
TOLOGY
27
(90073425. DOCX; 7)
[PROPOSED] FINAL AWARD
EXHIBIT A
IN ARBITRATION PROCEEDINGS
BEFORE THE AMERICAN ARBITRATION ASSOCIATION
3 PURSUANT TO THE EMPLOYMENT ARBITRATION RULES
4
5 | OMAR JAY ON and BARBARA ON,
‘|
7 vs.
Claimants,
INTERIM OPINION AND AWARD
A. VANNUCCTI, M.D., INC. AAA Case No. 01-18-0000-4409
9 | mad NOW TH VALLEY
DERMATOLOGY CENTER,
Respondents.
W
12 This employment dispute came before Catherine Harris, Esq., an arbitrator mutually
13 selected by the parties to render a final and binding decision.!
14 OMAR JAY ON and BARBARA ON. (herein “Claimants”)? were present
at the
15 hearing? and were represented by James J. Banks Esq. and W.
David Cormick, Esq., Banks &
16 | Watson, and Patricia A. Savage, Esq., Law Offices of Patricia A. Savage.
*
17 STEPHEN A. VANNUCCI, M.D., INC. and NORTH VALLEY
18 DERMATOLOGY CENTER (herein “Respondents”) were represented by Serena M.
19 ff Wamer, Esq. Angelo, Kilday & Kilduff: John 8. Knowlton, Esq., the Burton
Law Firm; and
20 | Scott B. Galbreath, Esq., Murphy Austin Adams Schoenfeld,
LLP. *
21
22 ' The arbitrator was selected from a list supplied by the American Arbitration Associati
(herein “A A”, on
23
* Claimant Barbara On is a claimant in this case only’ with respect to claims arising under
24 ERI!
25
* Although Claimant Omar On was present throughout the hearing, Claimant Barbara
26 || attended only portions of the hearing. On
27 * Also present on behalf of Claimants was Scott Thompson, Trial Tech.
28 * Paralegal Tami Redding was also present on behalf of Respondents.
1
1 Hearings
were conducted on November 5, 6, 7, 8, 9,° 13 and 14, 2018 at Chico,
2 } California. Each party was given the opportunity to present testimonial’ and documentary
3 || evidence, to cross-examine the other party's witnesses, and to make argument to the
4 |! arbitrator.” On February 19, 2019, the record was closed and the matter was taken under
5 submission."
6 STATEMENT OF THE CASE
7 | Background
8 In approximately 1980, Claimant Omar Jay On (herein “On”) obtained an Associate
9 || of Science degree from Butte College in Health Science. He then worked as an BMT and
10 | member
of an ambulance
crew at a local hospital. In the fall of 1987, On entered an 18+
|
i
12
13 ©On November 9, 13 and 14, hearings were held in Sacramento due to fire conditions in the
Butte County area,
14
” During seven days of hearing, the arbitrator heard the testimony of the following witnesses
15 || called by Claimants: Stephen A. Vannucci, M.D., Omar On, Kafele Hodari, M.D., Jacqueline
Hollcraft, Joseph Garofolo, Nicholas Briscoe, and Kasey -D'Amato, Respondents called
Fi the following witnesses: Amber Lujan, Stephen A. Vannucci (recalled), and Marcel Weiland. Omar
On was recalled as a rebuttal witness.
* At the hearing, the arbitrator received Bxhibite “1” through “438” excluding Exhibits “2,”
“10,” “11,” “13,” “48” through “59,” “61” through “66,” “85,” “92,” “99" through “104,” “108”
19 “117,” “124,” “127,” “134,” “139” through “247,” “249” through “255,” “259” through
“299,” “304” through “308,” “311” through “324,” “326” through “333,” “335” through “345,”
“349” through “356,” “361” through “366,” “368” through “375,” “377” through “379,” “382”
through “384,” “386,” “388” through “396,” “398” through “429,” and “433” through “435.” See
21
Final Exhibit List (the accuracy of which was mutually agreed to by the parties at the conclusion of
22 | the hearing) for details as to which exhibits were received into evidence, received for a limited
purpose, or judicially noticed.
23
° The parties agreed to the following schedule for filing of post-hearing
briefs by mail:
24 simultaneous opening briefs to be filed and served on January 18 with and reply briefs to be filed by
25 and served on January 29. Each party also supplied the arbitrator with copies of cases and statutes
on which it relies. Consistent with the stipulation, all briefs and authorities had been received in the
26 arbitrator’s office as of February 13.
27 ° Due to the voluminous record and the arbitrator’s scheduled vacation, the parties agreed
that the arbitrator would have until June 3, 2019 in which to submit her award (90 days excluding
28 | the arbitrator's vacation period).
1 month Physician Assistant (PA) program at Stanford University." Upon successful
2 || completion
of the Stanford
PA program, he took and passed the national boards and received
3 a Certificate for Physician Assistant from the National Commission on Certification of
4 Physician Assistants.!2
5 After obtaining his license as a Physician Assistant (herein “PA”),” On returned to
6 Chico where he became employed as a PA by Chico Medical
Group where he worked in
7 |nephrology, pediatrics and dermatology. When Chico Medical Group disbanded in
8 | approximately 1990, he started working on a part-time basis for a nephrologist, a
9 | dermatologist and a pediatrician.“ Eventually, On chose to specialize in dermatology and
10 [bees working with Dr. Schwartz
and Dr. Richey. When Dr. Schwartz retired, On began to
11 }'see the patients who had formerly been seen by Dr. Schwartz. On worked
with Dr. Richey
12 f until 2007, *
13 During the time that he worked under the supervision of Dr. Richey, On paid his own
14 || practice expenses and had his own business account. On’s collections and Dr. Richey’s
15 collections were deposited into their separate accounts. During this same period of time, On
16
"" Tt is undisputed that On has no graduate degree or four-year degree from any program.
17
18 "? While this certification was required to become licensed in California, On was not
required to maintain it once he became licensed to practice in California. He allowed his national
19 || certificate to lapse. On has, during times material, maintained his license to practice in California
by taking the required 100 hours of Continuing Medical Education (CME) every two years.
20
'? Pursuant to 22 Cal. Code of Regulations, § 51240, PA s are “non-physician medical
at} practitioners” subject to delegation of services and supervision guidelines set forth in 16 Cal. Code
22 of Regulations § 1399.540. California Business and Professions Code § 3501 (b) states that a
“physician assistant acts as an agent of the supervising physician” when performing the delegated
23
24 ™ The parties agree that in order to treat patients, a PA must be under the supervision
of a
licensed physician.
25
2 18 During this period of time, On formed his own professional corporation (Omar On PA-C,
Inc.) on the advice of his accountant (Dan Tebo) who recommended it for tax purposes. Dr.
27 Richey paid On’s corporation and the corporation paid On as an employee of the corporation.
Beginning in May of 1997, Omar On PA-C, Inc. had 401 (k) profit sharing plan which named On
28 as the plan administrator. This 401 (k) plan was terminated in 2012.
3
‘was earning approximately 50% of his practice receipts and his annual collections were
‘always in excess of $1 million.
On August 1, 2000, Stephen A. Vannucci, M.D. (herein “Dr. Vannucci") became an
employee of Dr. Richey. Dr. Vannucci began his employment with a salary of approximately
$10,000.00 per month, including a bonus if he exceeded a certain level of collections. At this
time, Dr. Vannucci understood that On and Dr. Richey had an expense sharing agreement
and that Dr. Richey and On each had their own suites, their own staff, and their own
patients. As an employee of Dr. Richey, Dr. Vannuoci practiced out of Dr. Richey’s suite
and used Dr. Richey’s exam rooms to see patients. ' In approximately 2002, Dr. Vannucci
10 formed his own medical corporation, i.e., Stephen A. Vannucci, Inc. (herein “SAVI"), and he
1 also became an equal one-third partner in a medical office expense sharing agreement with
12 On and Dr. Richey.
13 The Center Partnership Agreement
14 As set forth in a document entitled “Medical Office Expense Sharing Agreement
15 (herein “the Center Partnership Agreement”), On, Dr. Richey and Dr. Vannucci, described as
16 join venturets,” each agreed to be responsible for their own expenses and to share common.
17 flexpenses based on the number of patients seen by each of the joint venturers. The term of this
18 | agreement is from January 1, 2002 and continues until terminated in accordance
with
19 I procedures
set forth in the agreement.'” According to On, Dr. Richey did not charge him a
|
20 supervisory fee. '* On performed PA services under this agreement for approximately 6%
21
22 ‘6 Dr. Vannucci is a board certified dermatologist who has an additional board certification
in a second specialty, i.e., dermatopathology, Dr. Vannucci responded to a notice from Dr. Richey
23 || that he was looking for a partner. At the time he started working with Dr. Richey, the practice was
|
already known as North Valley Dermatology Center.
"7 There is no evidence that any party ever took any ection to terminate this agreement.
25
26 "* During times material, Ronnie Boogaling was the office administrator
who handled
human resources and insurance issues, as well as helping with the 401 (k) plans, His duties also
27 || included the regular calculation of collections and expenses. A profit and loss statement prepared by
Boogaling (to reflect On’s income and expenses from 2002-2012) reflects that, dating back to 2003,
@ supervisory fee ($32, 500) was being charged by Dr. Richey.
4
J |lyears under the supervision
of Dr. Richey.
2 By the terms of the Center Partnership Agreement, “Individual Expenses” are defined
3 |/as “all expenses of operating
the individual practices
of the Parties which are not Common
4 Expenses.” “Common Expenses” are defined as “.,, those expenses relating to the operation
5 | of the Joint Venture...” and include rent, office equipment and supplies, insurance, legal and
6 || accounting expenses and all expenses relating
to the employees of the Joint Venture
7 | excluding employees hired to work for the individual practices of the joint venturers). The
8 |jagreement specifically provides that “each party shall be solely responsible for the payment
9 of all Individual Expenses” and that “Common Expenses shall be allocated among the Parties
10 jj and paid by them in accordance with a formula that bases the allocation on the number of
11 || patients seen.”
12 | The 2007 SAVI Employment Agreement
13 In 2006, Dr. Richey decided to expand his cosmetic practice and needed to hire
14 j additional PA s. Under California law, a physician may supervise no more than two PA s. In
15 order to comply with this requirement, Dr. Richey asked Dr. Vannucci if he would supervise
16 ]On. After receiving advice from Attorney Herb McGuire, now deceased, Dr, Vannucci’s
17 || professional corporation (SAV) entered into an employment agreement with On (herein
18 “the SAVI Employment Agreement”) on or about January 1, 2007.” The SAVI Employment
19 |] Agreement clearly identifies SAVI as the employer and On as the employee. The SAVI
20 | Employment Agreement also provides that On would devote full-time to Dr. Vannucci's
21 || practice and that all of the collections associated with On’s activities belong to SAVL By the
22 iterms of the agreement, the SAVI Employment Agreement is non-assignable absent the
23
24 '° Dr, Vannucei testified thet it was his understanding that the Center Partnership Agreement
continued in existence even after the 2007 SAVI Employment Agreement was entered into between
2s SAVI and On; however, at his deposition, he stated that he was not sure whether or not On remained
26 || # party to the agreement after becoming an employee.
27 © On's accountant Dan Tebo also recommended that On be treated as an employee because
it was his understanding that non-physicians are not permitted under California law to partner with
28 |! physicians,
written consent of the other party.
On’s Compensation
Pursuant to the compensation provisions of the SAVI Employment Agreement, On
agreed to pay SAVI a supervisory fee, beginning at 5% of collections for the first year and
increasing to 10% of collections thereafter, in return for Dr. Vannucci’s su 2
SAVI agreed that every two weeks On would be paid a salary to be determined by subtracting
On’s individual expenses (including the supervisory fee), as well as his allocetion of common
expenses (for rent, office supplies etc),” and any other “Employee Related Expenses”
(including payroll taxes, employee insurance, pension contributions and any other expenses
10 incurred by the Employer as a direct result of the employment of the Employee) * from the
1 “Employee Generated Collections.” * After gross salary had been computed, the required
12 withholdings
were made to arrive at net salary, i¢., such amount to be paid “as soon as it is
13 determined.” On testified that during the course of his employment both before and after the
14 | creation of the NVDC partnership (discussed herein), he was never provided with any
15 f spreadsheets or reports showing his practice expenses.
16
17
21 Dr. Vannucoi testified that he felt that his supervisory services should be compensated at
ng
that this would
10% but, realizi a more modest
be a big change for On (who had paid Dr. Richey
18
supervisory fee), Dr. Vannucei agreed to charge 5% of collections in the first year with an increase
19 || to 10% thereafter.
20| as the
2 Shared expense worksheets reflect that the number of patients seen by On, as well
physicians, was carefully tracked for the purpose of allocating shared expenses.
21
|
% This resulted in the charging of not only the cost of providing benefits to On but also the
cost of providing salaries and benefits to employees (medical assistants) working in On’s suite under
On’s direction.
1
a ™ On testified that this was essentially the same that had
existed previously pursuant to the Center Partnership Agreement except thet the Center Partnership
25 Agreement applied only to sharing common expenses and the SAVI Employment Agreement
26 changed his status from independent contractor to employee. On testified that when he signed the
as well as the
agreement, he did not realize that he would be charged for his health insurance,
27 employer's pension contributions, whereas Dr. Vannucol insisted that On was fully informed as to
the offsets which would be made against his collections pursuant to the contractual formula for
28 determining
his wages.
1 The SAV] Employment Agreement transfers various business risks from SAVI to On
2 |/a8 follows: The agreement provides that if the offsets against On's collections are not
3 Jallowed as federal tax deductions, the increased tax amount incurred by the Employer will be
4 ||repaid by the Employee. The SAVI Employment Agreement also specifically provides that if
5 }ithe gross salary computation yields a negative amount, nothing shall be paid to the employee
6 ||for the relevant two-week period. At the hearing, Dr. Vannucci confirmed that it was his
7 J understanding that pursuant to section 2.6 of the SAVI Employment Agreement, if Claimant
8 lon's expenses exceeded his collections, he had the rightto compel On to return that amount
9 Ito him.*
10 On performed PA services, as outlined in the agreement, from approximately 2007
11 |funtil he left North Valley Dermatology Center. On testified that during this period of time,
12 [he was consistently seeing 50-70" patients per day and working long hours. He further
13 f explained that while he was seeing a patient, he would talk out loud (describing his
14
15 | observations or diagnosis) and a medical assistant would transcribe his chart notes. At the
end of the day, he would review the chart notes and co-sign them, i.e., mainly checking the
16 || diagnosis and treatment plans to make sure that they were written accurately,
7 Dr. Vannucei started supervising On at the beginning of 2007 and remained
18
19
20
al
* In his testimony Dr. Vannucei emphasized that the parties waated to continue the same
22 compensation arrangement that had previously existed between On and Dr. Richey (except for the
increased supervisory fee). Per Dr. Vannucci, this is why they continued the same formula under
23 the SAVI Employment Agreement with On having the same autonomy, access to Boogaling, and
voting participation in ownership meetings that he had been given when working with Dr. Richey.
24 Consistent with this approach, On kept the same staff and continued to perform the same services at
the same location and in the same manner. Consistent with Dr. Vannucci’s testimony concerning
25 this arrangement, Section 2.4 of Exhibit A (Compensation) incorporates by reference the Center
26 Partnership Agreement.
27 % The arbitrator notes in passing that On testified that he saw 50-60 patients per day
whereas Amber Lujan, who formerly worked under On’s direction as a medical assistant, estimated
28 that he was seeing 60-70 patients per day.
his supervising physician until On chose to resign in July of 2013.” The supervisory fee was
paid to Dr. Vannucci by his medical corporation, i.e. SAVL Under the SAVI Employment
Agreement, once collections materialized, the supervisory fee was immediately deducted and
then the remaining funds were put into an account with both Dr. Vannucci’s
and On’s name
‘on it, According to Dr. Vannucci, On drew at least $5000.00 (a number that was not
negotiated into the SAVI Employment Agreement) from the account every two weeks.” Dr,
‘Vannucci understood that this “base salary” was available to On whether or not he actually
8 worked, i.e., if he was on vacation or out sick.”” In his testimony, Dr. Vannucci
9 acknowledged that the amount paid to On each pay period was not fixed or pre-determined,
10 but rather based on an ongoing discussion between On and Boogaling as to how much money
|
11 ‘was available to On after offsetting expenses.” Dr. Vannucei further testified that On was
12 || free to establish his own start time, end time, breaks, lunches and days of work. After the
13 J employment agreement was executed, On continued to practice in his own suite with his own
14 |} staff and check-in.
15 f//
16|
|
17 ”* Dr. Vannucci reviewed at least 10% of his charts, consulted with him on complicated
18 cases, and, as a dermatopathologist, read his pathology reports after he had performed a biopsy.
19 * Documentary evidence presented at the arbitration hearing reveais that the amounts paid
to On, whether by direct deposit or check, varied considerably over the course of the relevant time
period (see summary presented as part of Claimant’s reply brief).
21 Although On was permitted to schedule vacation days, he received no paid vacation or sick
22 leave,
> Tn his testimony before the arbitrator, Dr. Vannucci confirmed that during the years that
he supervised On, On’s yoarly collections were approximately $1 million, i.e. a sum that was
24 |i routinely higher than the other PA s° collections, He also confirmed that after the supervisory fee
was deducted from On’s collections, the amount of his safe harbor contributions, as well as the safe
25 harbor contributions of other employees, were deducted, Also deducted from On’s collections were
2 employer contributions to social security, payroll taxes, and SDI (made on behalf of On or other
employees working in his suite). Any expense that the employer incurred as a result of Claimant
27 | On’s practice could be and was charged against On’s collections under Section 2.3. of Bxhibit “A”
23 to the SAVI Employment Agreement in order to determine On’s compensation, The expenses
deducted from On’s collections were paid out of an account thet had Dr. Vannuocl’s name on it.
8
1 | The NVDC Partnership Agreement
2 At some point, On became aware that the physicians were forming a new entity but he
3 did not recall being present during any discussions of the new entity that may or may not
4 have occurred during meetings that he attended, On September 13, 2010, SAVI, Donald F.
5 Richey, M.D., Inc., and F. Paul Sajben, M.D., Inc. entered into a written General Partnership
6 || Agreement for North Valley Dermatology Center (herein ‘the NVDC Partnership
Agreement”)?!
After the NVDC partnership was formed, the parties to the employment relationship
continued to apply the same wage formula to arrive at On’s compensation. * Pursuant to
10 Article 4 of the NVDC Parmership Agreement, the partners are credited with the income
11 from their respective practices,
as well as with
the income of any of the PA s whom they
12 supervise. Each partner also assumes the burden of the overhead associated with any PA
13 under his supervision (both On’s individual and shared expenses). As part of a formula for
14 computing each partner’s share of profits, each partner is also charged a pro rata share of
15 common expenses (office supplies, administrative staff etc) based on usage and patient visits,
16 jas well as his individual expenses (malpractice, health insurance etc).* Under the NVDC
17 Partnership Agreement, each physician is entitled to draw twice a month from a positive
18 balance in his capital account for which the partnership
takes a tax deduction.
19 Although there never was a written assignment of the SAVI Employment Agreement
20 (with or without notice to On) from SAVI to NVDC, the parties continued the employment
21
3" Dr, Kafele Hodari, a former employee of Dr. Richey, joined the practice in November of
2012 and Dr. Richey retired in 2015.
* In this regard, Dr. Vannucci testified that even though On was not an owner, “... the way
24 he was compensated tried to mimic the way that the owners were compensated.” Dr. Vannucei
acknowledged that prior to 2007, On was essentially a partner.
26 ® NVDC’s tax returns, in tandem with profit and loss statements, show that NVDC was
taking tax deductions for the same expenses that were being charged to Mr. On.
27
* It is undisputed that under the SAVI Employment Agreement (both before and after the
28 agreement was purportedly assigned to NVDC), On never paid expenses directly.
9
1 relationship without substantial modification until On left his employment in July of 2013,
2 } The only significant changes that occurred were that a new 401 (k) plan was established
and
3 fthat, on some unknown date towards the end of 2010, On began to receive his checks from a
4 different entity (NVDC). Although Dr. Vannucci testified that SAVI “assigned” the
employment agreementto NVDC, On provided testimony
that it was always his
understanding thet he continued to be employed by Dr. Vannucci up until the time of his
7 |iresignation. The record contains no writings that document either the assignment of the
| SAVI Employment Agreement by SAVI to NVDC, or any notification to On that his
9 [employment agreement would be assigned at some known or unknown date in the future.
10 | On’s Special Status in the NVDC Practice
11 During the period from 2007 up until the time of his resignation, On, unlike the other
12 [ra 8, attended
all of the owners’ meetings
that happened on a weekly
or biweekly basis, **
13 Unlike the other PA s, who typically operated out of the same suite with their supervising
14 | physicians, On continued to operate out of his own suite with his own staff and check-in.
15 | According to Dr. Vannucci, On had an equivalent vote to the votes of the physicians in
16 | determining issues related to the dermatology practice. Additionally, On fell into the rotation
17 for the call schedule, i.e., when consults were required at Enloe Hospital, just like the
18 doctors. Although On was not expected to work for another medical practice, he was allowed
19 | {to perform some outside work for pharmaceutical companies with Dr. Vannucci’s
20 | permission. New patients were assigned to On and the physicians on a rotational basis but
21 On generally saw more patients than the other PA s or physicians. According to Dr.
22 Vannucci, a properly trained PA (such as On) is able to do just about everything that is done
23 | by a dermatologist physician except for reading pathology reports and performing Mohs
24 | surgery (a treatment for skin cancer that involves pathology). As reflected in the provider
25 reports included in the arbitrator’s record, On worked long hours, i.e., setting appointments
26 |
27 55 On stopped attending owners’ meetings in May of 2013 after Dr. Hodar! raised the issue
ttl that @ non-owner should not be hearing sensitive information related to the practice. Dr. Hodari also
28 | felt that On’s attendance at owners’ meetings impeded free discussion of PA supervision issues.
10
from 7:00 am to 5:00 p.m., coming in 20-30 minutes early to get set up, and staying late (for
60-90 minutes) to complete his charting.
According
to Dr. Vannucei, On had the authority to hire and fire, as well as the
authority to approve raises for employees working under his direction both before and after
the NVDC partnershi
was formed,
p On the other hand, On claims that he was told only that
he needed to help interview prospective employees
to make sure that he wanted to work with
them, i.¢., adding that he did not participate in setting the wage rates of new hires working in
his suite under his direction. On further testified that it was his understanding that the only
people with authority to hire and fire were the office administrator (Boogaling)” and the
10 Physicians, There is no evidence that On ever terminated an employee working in his suite.
il On acknowledged that he would be consulted about whether or not an employee should
12 receive
a merit increase and that th
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CIV-130 ATTORNEY OR PARTY WITHOUT ATTORNEY (Name, State Bar number, and address): FOR COURT USE ONLY [JAMES J. BANKS (SBN 119525) Superior Court of California W. DAVID CORRICK (SBN 171827) IF F County of Butte BANKS & WATSON CON re otrcer,, Suite 200 | Sacramento, CA 95814-0733 L 2/21/2020 TELEPHONE NO. 916/325-1000 FAX NO. (Optional): E E-MAIL ADDRESS (Optional) jbanks@bw-firm.com ATTORNEY FOR (Name): Petitioners, OMAR JAY ON and BARBARA ON D ii FOr car D PY Wut SUPERIOR COURT OF CALIFORNIA, COUNTY OF BUTTE Electronically FILED street appress: 1775 Concord Avenue MaiLinG ADbRess: 1775 Concord Avenue city ann zip cove: Chico CA 95928 BRANCHNAME: North Butte County Courthouse PLAINTIFF/PETITIONER: OMAR JAY ON and BARBARA ON DEFENDANT/RESPONDENT: STEPHEN A. VANNUCCI, MeDe INC., et al. NOTICE OF ENTRY OF JUDGMENT ‘SE NUMBER: OR ORDER 19CV03856 (Check one): X_} UNLIMITED CASE Cd LIMITED CASE (Amount demanded (Amount demanded was exceeded $25,000) $25,000 or less) TO ALL PARTIES : 1 A judgment, decree, or order was entered in this action on (date):February 13, 2020 2. Acopy of the judgment, decree, or order is attached to this notice. Date: February 21, 2020 W DAVID _CORRICK (TYPE OR PRINT NAME OF attorney [|__| PARTY WITHOUT ATTORNEY) b (SIGNATURE) Page 1 of 2 Form Approved for Optional Use Judicial Council of California CIV-130 [New January 1, 2010] NOTICE OF ENTRY OF JUDGMENT OR ORDER soli 2/6/2020 F Superior Court of California F JAMES J. BANKS (SBN 119525) County of Butte W. DAVID CORRICK (SBN 171827) BANKS & WATSON E 2/13/2020 L 901 F Street, Suite 200 Sacramento, CA 95814-0733 E : Tel: (916) 325-1000 D D Fax: (916) 325-1004 By leputy Email: jbanks@bw-firm.com Email: dcorrick@bw-firm.com PATRICIA A. SAVAGE (SBN 236235) LAW OFFICES OF PATRICIA A. SAVAGE 1550 Humboldt Road, Suite 4 Chico, CA 95928 Tel: (530) 809-1851 Fax: (530) 592-3865 Email: psavesq@gmail.com 10 Attorneys for Petitioners, OMAR JAY ON and BARBARA ON 11 12 SUPERIOR COURT OF THE STATE OF CALIFORNIA 3 FOR THE COUNTY OF BUTTE 14 15 In re the Arbitration of: Case, 19CV03856 16 OMAR JAY ON and BARBARA ON, JUDGMENT IN CONFORMITY WITH FINAL AWARD OF 17 Petitioners, ARBITRATOR 18 Vv. [Code Civ. Proc. § 1285, et seq.] 19 STEPHEN A. VANNUCCI, M.D., INC. and DATE: February 5, 2020 NORTH VALLEY DERMATOLOGY CENTER, TIME: 9:00 A.M. 20 DEPT: 1 Respondents. 21 22 23 [PROPOSED] JUDGMENT 24 The Final Award of Arbitrator Catherine C. Harris, dated December 16, 2019 (“Final Award”) — 25 a copy of which is attached hereto as Exhibit 1 and incorporated herein by this reference — having been 26 rendered in favor of Petitioners OMAR JAY ON (“Mr. On”) and BARBARA ON (“Ms. On”) 27 (referenced collectively as “Petitioners”) and against Respondents STEPHEN A. VANNUCCI, M.D., 28 {00094506.DOC; 1 } [PROPOSED] JUDGMENT IN CONFORMITY WITH FINAL AWARD OF ARBITRATOR INC. (“SAVI”) and NORTH VALLEY DERMATOLOGY CENTER (“NVDC”), and this Court having confirmed the Final Award in all respects; NVDC having filed a Voluntary Petition for Non-Individuals Filing for Bankruptcy (“Bankruptcy Petition”) pursuant to Chapter 11 of United States Code Title 11 on or about January 28, 2020; and, These proceedings having automatically been stayed against NVDC only pursuant to Title 11 US. Code section 362(a) by virtue of its Bankruptcy Petition. IT IS HEREBY ORDERED, ADJUDGED AND DECREED that judgment is hereby entered pursuant to Code of Civil Procedure section 579 in favor of Petitioners and against Respondent SAVI in 10 conformity with the Final Award, including the following: 11 e SAVI is liable to Mr. On for unpaid compensation in the amount of $628,884.00, and 12 prejudgment interest in the amount of $339,293.36 — calculated through December 16, 13 2019 — for a total combined award of $968,177.36, with prejudgment interest continuing 14 to accrue from that date at a simple interest rate of 7%, until the entry of judgment. 15 SAVI is liable to Petitioners for attorneys’ fees in the amount of $1,165,165.07 — 16 comprised of Banks & Watson attorneys’ fees of $965,333.82, and Patricia Savage 17 attorneys’ fees of $199,831.25. 18 SAVI is liable to Petitioners for costs in the amount of $97,706.65 ~ comprised of Banks 19 & Watson costs of $97,306.65, and Patricia Savage costs of $400.00. 20 IT IS FURTHER ORDERED, ADJUDGED AND DECREED that interest at the rate of 10% per 21 annum shall accrue on the foregoing amounts, from the date of entry of judgment until paid, together To be determined 22 with costs and disbursements in the amount of $ 23 24 DATED: February _' 2020 25 By: HON. TAMARA L. MOSBARGER 26 JUDGE OF THE SUPERIOR COURT 27 28 {00094506.DOC; | } -2- [PROPOSED] JUDGMENT IN CONFORMITY WITH FINAL AWARD OF ARBITRATOR EXHIBIT 1 IN ARBITRATION PROCEEDINGS BEFORE THE AMERICAN ARBITRATION ASSOCIATION PURSUANT TO THE EMPLOYMENT ARBITRATION RULES OMAR JAY ON and BARBARA ON, AAA Cast No.: 01-18-0000-4409 10 Claimants, [PROPOSED] FINAL AWARD iL v. 12 STEPHEN A. VANNUCCI, M.D., INC. and Arbitrator: Catherine C. Harris NORTH VALLEY DERMATOLOGY CENTER, 13 Respondents, 14 15 Arbitrator Catherine C. Harris (“Arbitrator”) was mutually selected by the parties hereto to 16 render a final Arbitration Decision and Award in the captioned matter; and 17 WHEREAS, this employment dispute came before this Arbitrator for arbitration proceedings 18 commencing on November 5, 2018 and concluding on November 14, 2018, conducted in Butte and 19 Sacramento Counties; and 20 WHEREAS, on June 3, 2019 the Arbitrator issued an Interim Opinion and Award (“Interim 21 Award”) ~ a te copy of which is attached hereto as Exhibit A, and fully incorporated herein by 22 reference. In summary, the Interim Award provides as follows: « Respondents Stephen A. Vannucci, Inc. (“SAVI") and North Valley Dermatology. 24 Center (“NVDC”) are jointly and severally liable to Claimant Omer Jay On 2s (Mr, On”) for unpaid compensation based upon the reasonable value of his labor in 26 the amount of $470,055.00, in addition to prejudgment interest at a 7% simple interest 27 rate, 28 (90093425.00CX; 7} “‘TPROPOSED} FNAL AWARD SAVI and NVDC are jointly and severally lieble to Mr. On for unpaid compensation based upon the value of missed meal breaks in the amount of $69,939.00, in addition to prejudgment interest thereon at a 7% simple interest rate. SAVI and NVDC areJointly and severally liable to Mr. On for unpaid compensation based upon the value of missed rest breaks in the amount of $88,890.00, and prejudgment interest thereon at a 7% simple interest rate. NVDC is ordered to pay Claimants wage restitution in the amount of $48,729.33, based upon deductions NVDC took from Mr. On’s compensation to reimburse itself for its own mandatory employee pension contributions in violation of the Employee 10 Retirement Income Security Act of 1974 (“ERISA”). Ml WHEREAS, on November 12, 2019, the Arbitrator issued her ruting on Claimants’ Motion for 12 Recovery of Prevailing Party’s Reasonable Attomeys’ Fees, Expert Fees and Costs Following Interim 13 Opinion and Award Dated Jume 3, 2019 (“Fees and Costs Award”)~ a true copy of which is atteched 14 hereto as Exhibit B, and fully incorporated herein by reference. In summary, the Fees and Costs Award 15 provides as follows: 16 . Claimants prevailed on the bulk of their claims, thus achieving their primary litigation 17 objectives, and are entitled to an award of reasonable attorneys’ fees and costs. 18 Claimants are awarded attorneys’ fees in the amount of $1,328,812.07 ~ comprised of 19 Banks & Watson attorneys’ fees of $1,128,980.82, and Patricia Savage attorneys’ 20 fees of $199,831.25. 21 Claimants are awarded costs in the amount of $152,083.65 — comprised of Banks & Watson costs of $151,683.65, and Patricia Savage costs of $400.00. NOW THEREFORE, the Arbitrator issues her Final Award as follows: 24 e SAVI and NVDC are jointly and severally liable to Mr. On for unpaid compensation in the amount of $628,884.00, and prejudgment interest in the amount of $339,293.36 — 26 calculated through December 16, 2019 — for a total combined award of $968,177,360 27 December 16, 2019 is utilized herein as the end date for calculating prej ent interest based upon the Arbitrator’s order 28 that she receive a [Proposed] Final Award from Claimants by close of business on that date. {00093425.DOCX; 7} 2 [PROPOSED] FINAL AWARD NVDC is ordered to pay Claimants Omar Jay On and Barbara On wage restitution in the amount of $48,729.33 based upon deductions NVDC took from Mr. On’s compensation to reimburse itself for its own mandatory employee pension contributions in violation of ERISA. SAYVI and NVDC are jointly and séverally liable for attorneys’ fees in the emount of $1,165,165.07 — comprised of Banks & Watson sttomeys’ fees of $965,333.82, Patricia Savage attomeys’ fees of $199,831.25. SAVI and NVDC are jointly and severally liable for costs in the amount of $97,706.65 — coriprised of Banks & Watson costs of $97,306.65, and Patricia Savage costs of $400.00. 10 . NVDC is liable for attorneys’ fees attributable to Claimants’ successfull recovery of wage Mt sestitution under ERISA in the amount of $163,647.00 — comprised wholly of Banks & 12 ‘Watson attorneys’ fees. 13 NVODC is Hable for attomeys’ costs attributab le successful recovery of to Claimants’ 14 wage restitution under BRISA in the emount of $54,377.00 — comprised wholly of Banks 15 & Watson costs. 16 ‘This Final Awerd is final and binding upon ail parties to this arbitration proceeding. 17 18 IT IS SO ORDERED. 19 DATED: December 4, 2019 CATHERINE C. Arbitrator 20 21 APPROVED AS TO FORM: ANGELO, RILDAY & KILDUFP, LLP WD) 26 ere CCI, MOD.,INC. and NORTH VALLEY DERMATO! TOLOGY 27 (90073425. DOCX; 7) [PROPOSED] FINAL AWARD EXHIBIT A IN ARBITRATION PROCEEDINGS BEFORE THE AMERICAN ARBITRATION ASSOCIATION 3 PURSUANT TO THE EMPLOYMENT ARBITRATION RULES 4 5 | OMAR JAY ON and BARBARA ON, ‘| 7 vs. Claimants, INTERIM OPINION AND AWARD A. VANNUCCTI, M.D., INC. AAA Case No. 01-18-0000-4409 9 | mad NOW TH VALLEY DERMATOLOGY CENTER, Respondents. W 12 This employment dispute came before Catherine Harris, Esq., an arbitrator mutually 13 selected by the parties to render a final and binding decision.! 14 OMAR JAY ON and BARBARA ON. (herein “Claimants”)? were present at the 15 hearing? and were represented by James J. Banks Esq. and W. David Cormick, Esq., Banks & 16 | Watson, and Patricia A. Savage, Esq., Law Offices of Patricia A. Savage. * 17 STEPHEN A. VANNUCCI, M.D., INC. and NORTH VALLEY 18 DERMATOLOGY CENTER (herein “Respondents”) were represented by Serena M. 19 ff Wamer, Esq. Angelo, Kilday & Kilduff: John 8. Knowlton, Esq., the Burton Law Firm; and 20 | Scott B. Galbreath, Esq., Murphy Austin Adams Schoenfeld, LLP. * 21 22 ' The arbitrator was selected from a list supplied by the American Arbitration Associati (herein “A A”, on 23 * Claimant Barbara On is a claimant in this case only’ with respect to claims arising under 24 ERI! 25 * Although Claimant Omar On was present throughout the hearing, Claimant Barbara 26 || attended only portions of the hearing. On 27 * Also present on behalf of Claimants was Scott Thompson, Trial Tech. 28 * Paralegal Tami Redding was also present on behalf of Respondents. 1 1 Hearings were conducted on November 5, 6, 7, 8, 9,° 13 and 14, 2018 at Chico, 2 } California. Each party was given the opportunity to present testimonial’ and documentary 3 || evidence, to cross-examine the other party's witnesses, and to make argument to the 4 |! arbitrator.” On February 19, 2019, the record was closed and the matter was taken under 5 submission." 6 STATEMENT OF THE CASE 7 | Background 8 In approximately 1980, Claimant Omar Jay On (herein “On”) obtained an Associate 9 || of Science degree from Butte College in Health Science. He then worked as an BMT and 10 | member of an ambulance crew at a local hospital. In the fall of 1987, On entered an 18+ | i 12 13 ©On November 9, 13 and 14, hearings were held in Sacramento due to fire conditions in the Butte County area, 14 ” During seven days of hearing, the arbitrator heard the testimony of the following witnesses 15 || called by Claimants: Stephen A. Vannucci, M.D., Omar On, Kafele Hodari, M.D., Jacqueline Hollcraft, Joseph Garofolo, Nicholas Briscoe, and Kasey -D'Amato, Respondents called Fi the following witnesses: Amber Lujan, Stephen A. Vannucci (recalled), and Marcel Weiland. Omar On was recalled as a rebuttal witness. * At the hearing, the arbitrator received Bxhibite “1” through “438” excluding Exhibits “2,” “10,” “11,” “13,” “48” through “59,” “61” through “66,” “85,” “92,” “99" through “104,” “108” 19 “117,” “124,” “127,” “134,” “139” through “247,” “249” through “255,” “259” through “299,” “304” through “308,” “311” through “324,” “326” through “333,” “335” through “345,” “349” through “356,” “361” through “366,” “368” through “375,” “377” through “379,” “382” through “384,” “386,” “388” through “396,” “398” through “429,” and “433” through “435.” See 21 Final Exhibit List (the accuracy of which was mutually agreed to by the parties at the conclusion of 22 | the hearing) for details as to which exhibits were received into evidence, received for a limited purpose, or judicially noticed. 23 ° The parties agreed to the following schedule for filing of post-hearing briefs by mail: 24 simultaneous opening briefs to be filed and served on January 18 with and reply briefs to be filed by 25 and served on January 29. Each party also supplied the arbitrator with copies of cases and statutes on which it relies. Consistent with the stipulation, all briefs and authorities had been received in the 26 arbitrator’s office as of February 13. 27 ° Due to the voluminous record and the arbitrator’s scheduled vacation, the parties agreed that the arbitrator would have until June 3, 2019 in which to submit her award (90 days excluding 28 | the arbitrator's vacation period). 1 month Physician Assistant (PA) program at Stanford University." Upon successful 2 || completion of the Stanford PA program, he took and passed the national boards and received 3 a Certificate for Physician Assistant from the National Commission on Certification of 4 Physician Assistants.!2 5 After obtaining his license as a Physician Assistant (herein “PA”),” On returned to 6 Chico where he became employed as a PA by Chico Medical Group where he worked in 7 |nephrology, pediatrics and dermatology. When Chico Medical Group disbanded in 8 | approximately 1990, he started working on a part-time basis for a nephrologist, a 9 | dermatologist and a pediatrician.“ Eventually, On chose to specialize in dermatology and 10 [bees working with Dr. Schwartz and Dr. Richey. When Dr. Schwartz retired, On began to 11 }'see the patients who had formerly been seen by Dr. Schwartz. On worked with Dr. Richey 12 f until 2007, * 13 During the time that he worked under the supervision of Dr. Richey, On paid his own 14 || practice expenses and had his own business account. On’s collections and Dr. Richey’s 15 collections were deposited into their separate accounts. During this same period of time, On 16 "" Tt is undisputed that On has no graduate degree or four-year degree from any program. 17 18 "? While this certification was required to become licensed in California, On was not required to maintain it once he became licensed to practice in California. He allowed his national 19 || certificate to lapse. On has, during times material, maintained his license to practice in California by taking the required 100 hours of Continuing Medical Education (CME) every two years. 20 '? Pursuant to 22 Cal. Code of Regulations, § 51240, PA s are “non-physician medical at} practitioners” subject to delegation of services and supervision guidelines set forth in 16 Cal. Code 22 of Regulations § 1399.540. California Business and Professions Code § 3501 (b) states that a “physician assistant acts as an agent of the supervising physician” when performing the delegated 23 24 ™ The parties agree that in order to treat patients, a PA must be under the supervision of a licensed physician. 25 2 18 During this period of time, On formed his own professional corporation (Omar On PA-C, Inc.) on the advice of his accountant (Dan Tebo) who recommended it for tax purposes. Dr. 27 Richey paid On’s corporation and the corporation paid On as an employee of the corporation. Beginning in May of 1997, Omar On PA-C, Inc. had 401 (k) profit sharing plan which named On 28 as the plan administrator. This 401 (k) plan was terminated in 2012. 3 ‘was earning approximately 50% of his practice receipts and his annual collections were ‘always in excess of $1 million. On August 1, 2000, Stephen A. Vannucci, M.D. (herein “Dr. Vannucci") became an employee of Dr. Richey. Dr. Vannucci began his employment with a salary of approximately $10,000.00 per month, including a bonus if he exceeded a certain level of collections. At this time, Dr. Vannucci understood that On and Dr. Richey had an expense sharing agreement and that Dr. Richey and On each had their own suites, their own staff, and their own patients. As an employee of Dr. Richey, Dr. Vannuoci practiced out of Dr. Richey’s suite and used Dr. Richey’s exam rooms to see patients. ' In approximately 2002, Dr. Vannucci 10 formed his own medical corporation, i.e., Stephen A. Vannucci, Inc. (herein “SAVI"), and he 1 also became an equal one-third partner in a medical office expense sharing agreement with 12 On and Dr. Richey. 13 The Center Partnership Agreement 14 As set forth in a document entitled “Medical Office Expense Sharing Agreement 15 (herein “the Center Partnership Agreement”), On, Dr. Richey and Dr. Vannucci, described as 16 join venturets,” each agreed to be responsible for their own expenses and to share common. 17 flexpenses based on the number of patients seen by each of the joint venturers. The term of this 18 | agreement is from January 1, 2002 and continues until terminated in accordance with 19 I procedures set forth in the agreement.'” According to On, Dr. Richey did not charge him a | 20 supervisory fee. '* On performed PA services under this agreement for approximately 6% 21 22 ‘6 Dr. Vannucci is a board certified dermatologist who has an additional board certification in a second specialty, i.e., dermatopathology, Dr. Vannucci responded to a notice from Dr. Richey 23 || that he was looking for a partner. At the time he started working with Dr. Richey, the practice was | already known as North Valley Dermatology Center. "7 There is no evidence that any party ever took any ection to terminate this agreement. 25 26 "* During times material, Ronnie Boogaling was the office administrator who handled human resources and insurance issues, as well as helping with the 401 (k) plans, His duties also 27 || included the regular calculation of collections and expenses. A profit and loss statement prepared by Boogaling (to reflect On’s income and expenses from 2002-2012) reflects that, dating back to 2003, @ supervisory fee ($32, 500) was being charged by Dr. Richey. 4 J |lyears under the supervision of Dr. Richey. 2 By the terms of the Center Partnership Agreement, “Individual Expenses” are defined 3 |/as “all expenses of operating the individual practices of the Parties which are not Common 4 Expenses.” “Common Expenses” are defined as “.,, those expenses relating to the operation 5 | of the Joint Venture...” and include rent, office equipment and supplies, insurance, legal and 6 || accounting expenses and all expenses relating to the employees of the Joint Venture 7 | excluding employees hired to work for the individual practices of the joint venturers). The 8 |jagreement specifically provides that “each party shall be solely responsible for the payment 9 of all Individual Expenses” and that “Common Expenses shall be allocated among the Parties 10 jj and paid by them in accordance with a formula that bases the allocation on the number of 11 || patients seen.” 12 | The 2007 SAVI Employment Agreement 13 In 2006, Dr. Richey decided to expand his cosmetic practice and needed to hire 14 j additional PA s. Under California law, a physician may supervise no more than two PA s. In 15 order to comply with this requirement, Dr. Richey asked Dr. Vannucci if he would supervise 16 ]On. After receiving advice from Attorney Herb McGuire, now deceased, Dr, Vannucci’s 17 || professional corporation (SAV) entered into an employment agreement with On (herein 18 “the SAVI Employment Agreement”) on or about January 1, 2007.” The SAVI Employment 19 |] Agreement clearly identifies SAVI as the employer and On as the employee. The SAVI 20 | Employment Agreement also provides that On would devote full-time to Dr. Vannucci's 21 || practice and that all of the collections associated with On’s activities belong to SAVL By the 22 iterms of the agreement, the SAVI Employment Agreement is non-assignable absent the 23 24 '° Dr, Vannucei testified thet it was his understanding that the Center Partnership Agreement continued in existence even after the 2007 SAVI Employment Agreement was entered into between 2s SAVI and On; however, at his deposition, he stated that he was not sure whether or not On remained 26 || # party to the agreement after becoming an employee. 27 © On's accountant Dan Tebo also recommended that On be treated as an employee because it was his understanding that non-physicians are not permitted under California law to partner with 28 |! physicians, written consent of the other party. On’s Compensation Pursuant to the compensation provisions of the SAVI Employment Agreement, On agreed to pay SAVI a supervisory fee, beginning at 5% of collections for the first year and increasing to 10% of collections thereafter, in return for Dr. Vannucci’s su 2 SAVI agreed that every two weeks On would be paid a salary to be determined by subtracting On’s individual expenses (including the supervisory fee), as well as his allocetion of common expenses (for rent, office supplies etc),” and any other “Employee Related Expenses” (including payroll taxes, employee insurance, pension contributions and any other expenses 10 incurred by the Employer as a direct result of the employment of the Employee) * from the 1 “Employee Generated Collections.” * After gross salary had been computed, the required 12 withholdings were made to arrive at net salary, i¢., such amount to be paid “as soon as it is 13 determined.” On testified that during the course of his employment both before and after the 14 | creation of the NVDC partnership (discussed herein), he was never provided with any 15 f spreadsheets or reports showing his practice expenses. 16 17 21 Dr. Vannucoi testified that he felt that his supervisory services should be compensated at ng that this would 10% but, realizi a more modest be a big change for On (who had paid Dr. Richey 18 supervisory fee), Dr. Vannucei agreed to charge 5% of collections in the first year with an increase 19 || to 10% thereafter. 20| as the 2 Shared expense worksheets reflect that the number of patients seen by On, as well physicians, was carefully tracked for the purpose of allocating shared expenses. 21 | % This resulted in the charging of not only the cost of providing benefits to On but also the cost of providing salaries and benefits to employees (medical assistants) working in On’s suite under On’s direction. 1 a ™ On testified that this was essentially the same that had existed previously pursuant to the Center Partnership Agreement except thet the Center Partnership 25 Agreement applied only to sharing common expenses and the SAVI Employment Agreement 26 changed his status from independent contractor to employee. On testified that when he signed the as well as the agreement, he did not realize that he would be charged for his health insurance, 27 employer's pension contributions, whereas Dr. Vannucol insisted that On was fully informed as to the offsets which would be made against his collections pursuant to the contractual formula for 28 determining his wages. 1 The SAV] Employment Agreement transfers various business risks from SAVI to On 2 |/a8 follows: The agreement provides that if the offsets against On's collections are not 3 Jallowed as federal tax deductions, the increased tax amount incurred by the Employer will be 4 ||repaid by the Employee. The SAVI Employment Agreement also specifically provides that if 5 }ithe gross salary computation yields a negative amount, nothing shall be paid to the employee 6 ||for the relevant two-week period. At the hearing, Dr. Vannucci confirmed that it was his 7 J understanding that pursuant to section 2.6 of the SAVI Employment Agreement, if Claimant 8 lon's expenses exceeded his collections, he had the rightto compel On to return that amount 9 Ito him.* 10 On performed PA services, as outlined in the agreement, from approximately 2007 11 |funtil he left North Valley Dermatology Center. On testified that during this period of time, 12 [he was consistently seeing 50-70" patients per day and working long hours. He further 13 f explained that while he was seeing a patient, he would talk out loud (describing his 14 15 | observations or diagnosis) and a medical assistant would transcribe his chart notes. At the end of the day, he would review the chart notes and co-sign them, i.e., mainly checking the 16 || diagnosis and treatment plans to make sure that they were written accurately, 7 Dr. Vannucei started supervising On at the beginning of 2007 and remained 18 19 20 al * In his testimony Dr. Vannucei emphasized that the parties waated to continue the same 22 compensation arrangement that had previously existed between On and Dr. Richey (except for the increased supervisory fee). Per Dr. Vannucci, this is why they continued the same formula under 23 the SAVI Employment Agreement with On having the same autonomy, access to Boogaling, and voting participation in ownership meetings that he had been given when working with Dr. Richey. 24 Consistent with this approach, On kept the same staff and continued to perform the same services at the same location and in the same manner. Consistent with Dr. Vannucci’s testimony concerning 25 this arrangement, Section 2.4 of Exhibit A (Compensation) incorporates by reference the Center 26 Partnership Agreement. 27 % The arbitrator notes in passing that On testified that he saw 50-60 patients per day whereas Amber Lujan, who formerly worked under On’s direction as a medical assistant, estimated 28 that he was seeing 60-70 patients per day. his supervising physician until On chose to resign in July of 2013.” The supervisory fee was paid to Dr. Vannucci by his medical corporation, i.e. SAVL Under the SAVI Employment Agreement, once collections materialized, the supervisory fee was immediately deducted and then the remaining funds were put into an account with both Dr. Vannucci’s and On’s name ‘on it, According to Dr. Vannucci, On drew at least $5000.00 (a number that was not negotiated into the SAVI Employment Agreement) from the account every two weeks.” Dr, ‘Vannucci understood that this “base salary” was available to On whether or not he actually 8 worked, i.e., if he was on vacation or out sick.”” In his testimony, Dr. Vannucci 9 acknowledged that the amount paid to On each pay period was not fixed or pre-determined, 10 but rather based on an ongoing discussion between On and Boogaling as to how much money | 11 ‘was available to On after offsetting expenses.” Dr. Vannucei further testified that On was 12 || free to establish his own start time, end time, breaks, lunches and days of work. After the 13 J employment agreement was executed, On continued to practice in his own suite with his own 14 |} staff and check-in. 15 f// 16| | 17 ”* Dr. Vannucci reviewed at least 10% of his charts, consulted with him on complicated 18 cases, and, as a dermatopathologist, read his pathology reports after he had performed a biopsy. 19 * Documentary evidence presented at the arbitration hearing reveais that the amounts paid to On, whether by direct deposit or check, varied considerably over the course of the relevant time period (see summary presented as part of Claimant’s reply brief). 21 Although On was permitted to schedule vacation days, he received no paid vacation or sick 22 leave, > Tn his testimony before the arbitrator, Dr. Vannucci confirmed that during the years that he supervised On, On’s yoarly collections were approximately $1 million, i.e. a sum that was 24 |i routinely higher than the other PA s° collections, He also confirmed that after the supervisory fee was deducted from On’s collections, the amount of his safe harbor contributions, as well as the safe 25 harbor contributions of other employees, were deducted, Also deducted from On’s collections were 2 employer contributions to social security, payroll taxes, and SDI (made on behalf of On or other employees working in his suite). Any expense that the employer incurred as a result of Claimant 27 | On’s practice could be and was charged against On’s collections under Section 2.3. of Bxhibit “A” 23 to the SAVI Employment Agreement in order to determine On’s compensation, The expenses deducted from On’s collections were paid out of an account thet had Dr. Vannuocl’s name on it. 8 1 | The NVDC Partnership Agreement 2 At some point, On became aware that the physicians were forming a new entity but he 3 did not recall being present during any discussions of the new entity that may or may not 4 have occurred during meetings that he attended, On September 13, 2010, SAVI, Donald F. 5 Richey, M.D., Inc., and F. Paul Sajben, M.D., Inc. entered into a written General Partnership 6 || Agreement for North Valley Dermatology Center (herein ‘the NVDC Partnership Agreement”)?! After the NVDC partnership was formed, the parties to the employment relationship continued to apply the same wage formula to arrive at On’s compensation. * Pursuant to 10 Article 4 of the NVDC Parmership Agreement, the partners are credited with the income 11 from their respective practices, as well as with the income of any of the PA s whom they 12 supervise. Each partner also assumes the burden of the overhead associated with any PA 13 under his supervision (both On’s individual and shared expenses). As part of a formula for 14 computing each partner’s share of profits, each partner is also charged a pro rata share of 15 common expenses (office supplies, administrative staff etc) based on usage and patient visits, 16 jas well as his individual expenses (malpractice, health insurance etc).* Under the NVDC 17 Partnership Agreement, each physician is entitled to draw twice a month from a positive 18 balance in his capital account for which the partnership takes a tax deduction. 19 Although there never was a written assignment of the SAVI Employment Agreement 20 (with or without notice to On) from SAVI to NVDC, the parties continued the employment 21 3" Dr, Kafele Hodari, a former employee of Dr. Richey, joined the practice in November of 2012 and Dr. Richey retired in 2015. * In this regard, Dr. Vannucci testified that even though On was not an owner, “... the way 24 he was compensated tried to mimic the way that the owners were compensated.” Dr. Vannucei acknowledged that prior to 2007, On was essentially a partner. 26 ® NVDC’s tax returns, in tandem with profit and loss statements, show that NVDC was taking tax deductions for the same expenses that were being charged to Mr. On. 27 * It is undisputed that under the SAVI Employment Agreement (both before and after the 28 agreement was purportedly assigned to NVDC), On never paid expenses directly. 9 1 relationship without substantial modification until On left his employment in July of 2013, 2 } The only significant changes that occurred were that a new 401 (k) plan was established and 3 fthat, on some unknown date towards the end of 2010, On began to receive his checks from a 4 different entity (NVDC). Although Dr. Vannucci testified that SAVI “assigned” the employment agreementto NVDC, On provided testimony that it was always his understanding thet he continued to be employed by Dr. Vannucci up until the time of his 7 |iresignation. The record contains no writings that document either the assignment of the | SAVI Employment Agreement by SAVI to NVDC, or any notification to On that his 9 [employment agreement would be assigned at some known or unknown date in the future. 10 | On’s Special Status in the NVDC Practice 11 During the period from 2007 up until the time of his resignation, On, unlike the other 12 [ra 8, attended all of the owners’ meetings that happened on a weekly or biweekly basis, ** 13 Unlike the other PA s, who typically operated out of the same suite with their supervising 14 | physicians, On continued to operate out of his own suite with his own staff and check-in. 15 | According to Dr. Vannucci, On had an equivalent vote to the votes of the physicians in 16 | determining issues related to the dermatology practice. Additionally, On fell into the rotation 17 for the call schedule, i.e., when consults were required at Enloe Hospital, just like the 18 doctors. Although On was not expected to work for another medical practice, he was allowed 19 | {to perform some outside work for pharmaceutical companies with Dr. Vannucci’s 20 | permission. New patients were assigned to On and the physicians on a rotational basis but 21 On generally saw more patients than the other PA s or physicians. According to Dr. 22 Vannucci, a properly trained PA (such as On) is able to do just about everything that is done 23 | by a dermatologist physician except for reading pathology reports and performing Mohs 24 | surgery (a treatment for skin cancer that involves pathology). As reflected in the provider 25 reports included in the arbitrator’s record, On worked long hours, i.e., setting appointments 26 | 27 55 On stopped attending owners’ meetings in May of 2013 after Dr. Hodar! raised the issue ttl that @ non-owner should not be hearing sensitive information related to the practice. Dr. Hodari also 28 | felt that On’s attendance at owners’ meetings impeded free discussion of PA supervision issues. 10 from 7:00 am to 5:00 p.m., coming in 20-30 minutes early to get set up, and staying late (for 60-90 minutes) to complete his charting. According to Dr. Vannucei, On had the authority to hire and fire, as well as the authority to approve raises for employees working under his direction both before and after the NVDC partnershi was formed, p On the other hand, On claims that he was told only that he needed to help interview prospective employees to make sure that he wanted to work with them, i.¢., adding that he did not participate in setting the wage rates of new hires working in his suite under his direction. On further testified that it was his understanding that the only people with authority to hire and fire were the office administrator (Boogaling)” and the 10 Physicians, There is no evidence that On ever terminated an employee working in his suite. il On acknowledged that he would be consulted about whether or not an employee should 12 receive a merit increase and that th