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City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Human Resources
Meeting Date: April 14, 2025
Report #:2410-3663
TITLE
Approval of Professional Services Contract Number C25191738 with Sedgwick Claims Management Services in an Amount Not to Exceed $612,840 for Administration of Workers Compensation Benefits through June 30, 2025; CEQA Status – Not a Project.
RECOMMENDATION
Staff recommends that Council approve and authorize the City Manager or their designee to execute Professional Services Contract No. C25191738 (Attachment A), with Sedgwick Claims Management Services, to provide interim administration services for Workers Compensation Benefits through June 30, 2025 and to cover outstanding invoices with a total amount not-to- exceed amount of $612,840.
BACKGROUND
Workers’ compensation is a state-mandated benefit program that provides medical care and disability benefits to employees injured on the job. It ensures that employees receive necessary medical treatment and financial support for work-related injuries. Additionally, this program protects the City from legal liability and lawsuits related to workplace injuries and ensures compliance with state laws and labor code. An effective workers compensation program ensures employees get the services, treatment, and diagnosis they need for a healthy recovery to return to their jobs providing service to the community. The purpose of this report is to seek approval for an interim contract for the administration of employee workers compensation claims for the City of Palo Alto.
ANALYSIS
This professional services contract is essential to ensure the continuation of claim handling services for currently open employee workers compensation injury claims. Workers Compensation laws require expert claim handling that is best administered by a team of third- party claims representatives. The approval of this contract with Sedgwick Claims Management Services is for a 7-month period, starting on December 1, 2024. This agreement will compensate Sedgwick for services already rendered to date in Fiscal Year 2025 as well as ensure effective administration of current and new claims up to the end of June 2025.
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Using a third-party administrator to handle workers compensation claims is essential because the specialized claims examiners have certified expertise to navigate complex claims processes and medical guidelines. Additionally, claims examiners stay up to date on new laws, court decisions, medical procedures and prescription drugs. Their day-to-day work is supported by established systems that expedite claims processing, minimizing downtime for injured employees. Human Resources staff has recognized the value of utilizing a third-party administrator for workers compensation claim services and the continuation of these essential services is critical to effectively administer both current and new claims. Human Resources (HR) has completed a Request for Proposals (RFP) competitive solicitation as required by the City’s municipal code. HR initiated the RFP process in January 2023, concluded its selection process and Council approved the new vendor contract with Innovative Claims Solutions on March 24, 2025. During the RFP process, the existing Sedgwick contract expired, and staff worked through an exemption process to ensure continuity of service. In addition, the RFP evaluation and contract completion took longer than anticipated.
Staff is seeking approval of a seven-month interim contract with Sedgwick Claims Management Services, starting on December 1, 2024. This agreement will compensate Sedgwick for services rendered from June 2023 to November 2024 as well as ensure effective administration of current and new claims up to the end of June 2025.
The new third-party administrator will be able to provide ongoing services once the transition is finalized. The interim contract with Sedgwick will bridge the short time period until the new third-party administrator is fully operational.
•Duration: 7 months contract or until the new administrator is fully operational. •Scope of Services: Administration of all workers compensation claims, including:
oClaim intake and processing
oCoordination with medical providers
oCommunication with injured employees
oReporting to State Workers Compensation Appeal Board and compliance management
oPayment processing to medical providers; as well as disability benefit payments required by State law and other expenses
FISCAL/RESOURCE IMPACT
Human Resources will transition to the new third-party workers compensation vendor starting in May 2025. This temporary contract covers outstanding invoices and services up to and during the transition. The new vendor contract was approved by Council on March 24, 2025.1 The budget for these third-party services is included in the Workers Compensation Fund (Internal Services Fund) operating budget.
1 Staff report # 2410 – 3664: Approval of Professional Services Contract #C25187148 with Innovative Claims Solutions (ICS) in an Amount Not-To-Exceed of $760,886 to provide Third-Party Administration of Workers’ 5 8
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•Cost of 7-month interim Contract & File Transfer to New Vendor: $182,008 •Lump-sum for Incurred Charges (June 2023 – November 2024): $430,832 oCovered Under Old Exemption PR 185896: $260,256
oCovered Under New Exemption PR 191738: $170,576
•The total NTE for the 7-month contract plus the incurred charges is $612,840 o$307,970 will be charged to FY 2024 funds while the remaining $304,870 will be charged to FY 2025 funds.
STAKEHOLDER ENGAGEMENT
As part of the interim contract and RFP process, key stakeholders including Human Resources, Administrative Services, the City Attorney’s Office, and the third-party administrator collaborated to ensure current services have not been interrupted. HR outlined requirements, while Administrative Services directed the contracting process and documentation. HR will continue to work with these stakeholders through the new contract process.
ENVIRONMENTAL REVIEW
Council action on this item is not a project as defined by CEQA because adopting a revised salary schedules and compensation plan is an organizational or administrative activity that will not result in direct or indirect physical changes in the environment. CEQA Guidelines section 15378(b)(5).
ATTACHMENTS
Attachment A: Sedgwick Claims Services, INC; Contract C25191738 APPROVED BY:
Sandra Blanch, Human Resources Director
Compensation Benefits for a Period of 9 months with an option to renew for up to four additional years. CEQA status: Not a Project.