Commentators tell us that it will take a decade to know whether the new law is better than the old. But in the meantime, the way workers’ compensation business is transacted in California is in for some big changes. In this issue of the E-zine we discuss one change that we think will have a substantial impact on employers generally, and on employers facing non-insurable claims for “serious and willful misconduct” specifically.

The new law replaces the old vocational rehabilitation scheme with a “Carrot and the Stick” incentive for employers to bring injured workers back to work.

The Carrot: When the new, improved permanent disability schedule mandated by the law becomes effective, employers with more than 50 employees will be able to choose whether to offer injured employees return to work. The offer must be made within 60 days after the worker’s medical condition has been determined to be permanent and stationary. The offer can be for regular, modified or alternative work. The job offered must last for 12 months or longer. If an offer is made, the worker’s permanent disability (PD) payments will be decreased by 15%.

The key to this provision is the OFFER. If the worker rejects the offer, his or her PD benefits will still be decreased.

The Stick: If the employer chooses not to offer return to work, the employee’s PD benefits will be increased by 15%. Further, if the employer terminates this new employment during the time in which the employee is still receiving PD payments, the remaining payments will be increased by 15%.

When you play around with the possible scenarios, it becomes clear that the law adds a new level of complexity to the employer’s decision matrix. This is especially true where the employee has also filed a “serious and willful misconduct” petition, since the employer's penalty is calculated as one-half the value of all benefits paid. Employers who previously cried crocodile tears for workers who were found unqualified to return to their old jobs will now have to consider the question: How much is it worth to not take this employee back?

Another question: When does this new provision become effective? The act suggests on or before January 1, 2005, when revisions to the permanent disability schedule are expected to be implemented. Others, including the WCAB, may interpret the law differently.

And another question: How will worker’s compensation insurance carriers react to employers which are willing to take the hit to their experience modification rate rather than re-employ an injured worker? Certainly the employer’s future premiums will increase, but the carrier will be out real dollars well before that.

The most realistic scenario is that the 15% swing will be folded into the rest of the issues negotiated at settlement, which is to say that the value of some cases will increase, and some decrease. But for those that increase, how many carriers will want to pay the “bump” in their statutory liability?

Our bottom-line advice is the same as it has been ever since before the ADA was passed: Hire wisely. You may be in a relationship with your employees longer than you might like.

Other Legislative Actions

The Legislature has rejected three bills that would have reversed the “Private Attorneys General Act of 2004" which gives employees the right to bring lawsuits against their employers for violations of Labor Code laws and regulations. [See our March 2004 E-zine.] On a brighter note, the Legislature deactivated AB 3037, which would have mandated employer-employee safety committees for all employers in high hazard industries.

Test Your Knowledge

Few of us have the time to become mavens on OSHA's record keeping and recording rules. Now Cal/OSHA’s Compliance Unit has made that easier with an inter-active site that teachs the subject through a series of 49 questions. We took the test, which takes about 10 minutes and comes complete with sound effects, and answered 40 of the questions correctly on the first pass. Go to http://sf1000.registeredsite.com/~user848095/