Home > Legal Updates >

California Enacts Sweeping Workers' Compensation Reforms

In recent years, the California workers' compensation system has become infamous for providing some of the lowest benefits in the country at the highest costs. Governor Schwarzenegger has made reform of the ailing system a priority for his new administration.

On April 19, 2004, Governor Schwarzenegger signed legislation enacting a workers' compensation reform package. The bill, SB 899, was backed by the California Chamber of Commerce and numerous other business groups and became effective immediately upon the Governor's signing. Among its more significant changes, SB 899:

• tightens standards for determining impairment ratings by removing subjectivity and requiring doctors to follow nationally recognized standards;
• permits employers to create a medical provider network to treat injured employees;
• strengthens an employer's ability to "apportion" liability for injuries by requiring doctors to address "causation" of disabilities or impairments in their reports and employees, upon request, to disclose all previous permanent disabilities or physical impairments;
• caps temporary disability benefits for most injuries at 2 years;
• enhances benefits for individuals with the most severe permanent disabilities while lowering benefits for minor permanent injuries;
• repeals the "presumption of correctness" currently afforded the opinion of an employee's pre-selected treating physician concerning the extent and scope of medical treatment;
• expressly exempts workers' compensation laws from the new private right of action for penalties known as the "bounty hunter" law;
• requires that findings of fact made by the Workers' Compensation Appeals Board be made impartially to ensure employees and employers are considered equal under the law;
• re-authorizes "vocational rehabilitation" benefits for pre-December 31, 2003 injuries; and
• increases permanent disability payments by 15% when reinstatement is not offered or possible while reducing benefits by 15% when employees receive reinstatement offers.

Properly implemented, these modifications can help proactive employers limit their workers' compensation exposure. At a minimum, employers should re-examine potential return-to-work programs or efforts to seize the financial opportunities provided by the reforms. In developing such programs, employers should remain mindful of leave laws such as the federal Family and Medical Leave Act and California Family Rights Act whose requirements must be integrated with the new workers' compensation provisions. In addition, and perhaps more significantly, employers now have increased opportunities to avoid liability for injuries or impairments they did not cause. The value of this reform will depend on the ability of employers to identify and prove employees' pre-existing impairments. To prepare their defense to future workers' compensation claims, employers should explore ways of obtaining baseline information about employee functional limitations. Of course, any medical examination or testing procedure must comply with federal and state laws including the Americans with Disabilities Act.

SB 899 hopefully will begin to turn the tide for California employers seeking to regain control over workers' compensation costs. Yet, many employers still do not know what is driving their workplace injuries and costs. Even fewer employers have programs to cut such costs and almost all wonder how they are impacted by federal and state employment laws protecting injured workers. Members of the Jackson Lewis Disability Management Practice are available to assist companies attempting to diagnose the root cause of workplace health problems and implement more effective employee health and injury management initiatives. Among other strategies, employers seeking to leverage the opportunities created by SB899 should consider:

• creating and empowering internal disability and health management committees to audit corporate experience related to occupational and non-occupational absences;
• developing individualized assessment plans for employees on long term leaves including aggressive return to work programs;
• developing new "tools" for evaluating the ability of applicants and employees to safely perform essential job functions; and 
• implementing systems to track and manage workplace absences.

Employers interested in discussing these issues or auditing internal disability and absence management efforts with the goal of enhancing corporate profitability while respecting employee rights, should contact the Jackson Lewis Disability Management Practice Group coordinators.