Permanent disability once again will be front and center in the 2008 California legislative debate over workers’ comp. The question that has lingered since the effects of the new permanent disability rating schedule became manifest is, if indeed the employer community is interested in addressing PD at all before it is compelled to, what would balance the hundreds of millions of new dollars in benefits a PD increase would generate?
AMEs are clearly in the crosshairs. The delays and confusion created by this largely unregulated “centerpiece” of the ossified dispute resolution process punish employers and workers alike. While this is certainly a good piece to put on the table in 2008 – if indeed there will be a table – there is more that could be done for both disabled workers and their employers.
Workers’ comp is intended to provide incentives for returning to work. Way back when, that incentive was a PD benefit that allowed a worker to provide for his or her family during a period of time deemed necessary to allow the worker to reenter the workforce. The courts called this the “rehabilitation theory” of PD. As successive benefit increases were enacted, the wages that these increases were based on increasingly lagged relative to the statewide average weekly wage – for those with permanent partial disability – because policymakers primarily changed the number of weeks that the benefit was to be paid out as the way to raise benefits.
Even in AB 749 (Calderon), the massive benefit increase signed into law by former Gov. Gray Davis, benefit increases for those with PPD were significantly less than the increases in temporary disability and PD over 70%. We are now in a situation where the maximum wages for PPD purposes (ratings less than 70%) are less than 40% of the statewide average weekly wage.
Prior to SB 899, the Legislature tacitly acknowledged that those with lower PD ratings were indeed well equipped to reenter the workforce. Benefit increases enacted in 1993 (AB 110) and 2002 (AB 749) clearly were geared toward higher compensation for more severely injured workers.
But the problem with the old PD system was that California perennially had the highest frequency of PD claims in the nation. In essence, the small PD benefits paid to those with lower PD ratings were reflective of a system that gave a little PD to a lot of injured workers. The reforms enacted in SB 899, making the use of the AMA Guides, 5th Edition, the cornerstone of the PD system, have significantly reduced both the frequency of PD claims and, as recent data indicate, the amount of money going to injured workers who are determined to be permanently disabled.
In addition, the changes in the law of apportionment, especially to prior workplace injuries, acknowledge the frustration of many employers toward the old system, where workers could obtain multiple PD awards and still function quite well in the workplace. Now we have a system where disabled workers are in fact disabled. But accommodating those disabilities remains a struggle.
For most of the history of the workers’ comp system, the Legislature was content to leave the return-to-work issue to the crafting of the PD benefit. That changed in 1975, when the vocational rehabilitation (VR) program was made a mandatory benefit, placing California in the distinct minority of states mandating such a program.
By 1993, costs associated with VR were significant, and caps were placed on the amount that could be spent on rehabilitation. By 2002, the Legislature decided that VR benefits could be cashed out as part of an overall settlement of a claim (AB 749) and in 2003 the benefit was repealed outright (AB 227).
In its place were grants to small employers to make job modifications to facilitate return to work and the supplemental job displacement benefit, which itself can be cashed out as part of an overall claims settlement.
In 2004, SB 899 amplified the uneasy relationship between return to work and workers’ comp by adding a PD adjustment at the end of the claim, increasing or decreasing payouts by 15%, depending on whether there is a qualifying job offer. By all accounts, the cost of administration of that adjustment far outweighs the benefit.
If we assume that post-SB 899 workers with a permanent disability award are indeed disabled, which is a fair assumption, then the focus of policymakers should be more on assistance to those with disabilities rather than coercion of employers whose employees are injured on the job. Isn’t it at least a bit ironic that the month Gov. Schwarzenegger vetoes SB 936 (Perata) is the same month he proclaims “Disability Employment Awareness Month” – a joint federal/state program coordinated through the Employment Development Department (EDD) within the Labor and Workforce Development Agency? A few miles away from EDD headquarters is the Department of Rehabilitation, the entity responsible for making sure federal rehabilitation dollars are well spent. Don’t hear much of that program in workers’ comp circles either, do we?
As the workers’ comp system becomes more focused on compensating those who are truly disabled, policymakers need to focus on marshalling all available resources to help these disabled individuals return to the workforce. To date, this clearly has not happened in cases where the disability arises from an on-the-job injury. If we continue to play the same tired game of how much in PD benefits will have to be paid to make these programs work, nothing will happen.
Return to work needs to be a coordinated statewide priority and no longer a chip to be flipped between labor and employers in the workers’ comp game.