California agency uses workers’ comp funds to probe its employees. What to know

The California Department of Industrial Relations has tapped the state’s workers’ compensation fund to pay for internal investigations of its employees, a practice critics say violates state law restricting how that money can be spent. More than $30 million in DIR contracts were paid out of the fund from 2020 to 2026 with little or nothing to do with workers’ comp. DIR has not provided records showing the fund was reimbursed.

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Here’s our full story, “California agency taps workers comp funds to probe its employees. ‘A huge slush fund’”; and a story detailing of the investigations: “Why was a respected California official investigated by his agency? Here are the details.”

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Here are key takeaways and recent developments:

• Former Cal-OSHA district manager Michael Loupe was investigated for 18 months over allegations including that he shot a toy bow and arrow at photos of Gov. Gavin Newsom and other officials. He was cleared of all seven allegations but says the stress caused a stroke and forced him to retire. The department spent an estimated $80,000 in workers’ comp funds to investigate him.
• Garrett Brown, a former Cal-OSHA compliance officer, called the arrangement “a huge slush fund” used to bankroll pet projects and target whistleblowers, saying it was “a stunning breach of public trust.”
• Labor Code section 62.5 restricts the Workers’ Compensation Administration Revolving Fund to three uses: administering workers’ comp, a return-to-work program and enforcement against uninsured employers. The statute says the money “may not be used or borrowed for any other purpose.”
• DIR spokesperson Denisse Gomez said tapping the fund is “a common practice, used by many state agencies with multiple funding sources,” and the department has said costs can be reimbursed. DIR has declined multiple requests to show whether the workers’ comp fund was repaid.
• On Monday, DIR said it needed two more weeks to answer whether the workers’ compensation fund was ever repaid for the $317,786 it spent on the Shaw law firm’s investigations of employees, including Loupe. “Because your request requires us to search for and collect records from offices separate from our own,” spokesperson Denisse Gomez said, the department would “provide you with an update no later than September 7, 2026.”.
• Records show more than $20 million in contracts went to CPS HR Consulting, now led by former DIR Director Katie Hagen, with 92% of payments through 2025 charged to the workers’ comp fund.