BILL ANALYSIS
Senate Committee on Labor and Industrial Relations
Mark DeSaulnier, Chair
Date of Hearing: May 13, 2009 2009-2010 Regular
Session
Consultant: Rodger Dillon Fiscal:No
Urgency: No
Bill No: SB 773
Author: Florez and Steinberg
Version: As amended April 28, 2009
SUBJECT
Workers' compensation: disability benefits.
KEY ISSUE
Should indemnity benefit payments to employees who are injured
at work and who suffer a permanent disability be increased?
PURPOSE
To improve permanent partial disability benefits to injured
workers and to thereby compensate these workers more adequately
for their disabilities.
ANALYSIS
Existing law:
1.Establishes, in the California Constitution and in State Code,
a workers' compensation system, administered by the
Administrative Director of the Division of Workers'
Compensation, that generally requires employers to provide
workers' compensation for employees who are injured in the
course and scope of their employment.
2.Provides for specified permanent partial disability (PPD)
indemnity payments and permanent total disability (PTD)
payments to workers that suffer a permanent disability. The
amount and duration of these indemnity payments are based on
formulas in the Labor Code and on an individual's percentage
permanent disability rating that is derived from a calculation
involving evaluated bodily impairment, estimated future
earnings losses, and an age and occupation adjustment.
3.Provides, in the Labor Code formulas, for minimum and maximum
weekly indemnity payments that amount to two-thirds of
specified minimum and maximum average weekly earnings, which
in turn increase with the severity of the disability (i.e. as
the disability rating increases).
4.Provides that the duration (the number of weeks) of permanent
disability payments also rises as the disability rate
increases. (The injured worker receives a specified number of
weeks of payments for each percentage point of the disability
rating, and the number of weeks increases for each percentage
point as the level of the disability rating rises.)
Finally, it is important to note that the various elements of
the formulas (minimum and maximum average weekly wage for
various levels of disability, number of weeks of benefits for
each percentage point of disability rating) have altered over
the years, and both the older and current specifications are
still set forth in the Labor Code.
This Bill:
1.Makes certain Legislative Findings and Declarations relating
to the importance of providing fair compensation to injured
workers, the need to adjust permanent partial disability
payments to ensure that they are adequate and more in line
with benefits paid to workers in other states, and that it is
not the intention of the Legislature to undermine the positive
effect workers' compensation reform has had on employers and
employees in the state.
2.Increases, effective January 1, 2010, the maximum average
weekly wage that is allowed to be used for the purpose of
calculating weekly benefit payments.
a) For permanent partial disability ratings of less than
70%, the specified maximum is raised from $345 to $555.
Since the weekly benefit amount is two-thirds of the
Hearing Date: May 13, 2009 SB 773
Consultant: Rodger Dillon Page 2
Senate Committee on Labor and Industrial Relations
allowed maximum weekly wage, the new maximum weekly benefit
would be raised from $230 to $370 (.666 x $555 = $370).
b) For permanent partial disability ratings of 70% or
greater, the specified maximum is raised from $405 to $615.
Since the weekly benefit amount is two-thirds of the
allowed maximum weekly wage, the new maximum weekly benefit
for workers with these ratings would be raised from $270 to
$410 (.666 x $615 = $410).
3.For injuries occurring on or after January 1, 2010, increases
the number of weeks of benefit payments to permanently
disabled workers for specified percentages of permanent
disability, as shown on the chart below:
Proposed Schedule of Increases
--------------------------------------------------
| Range of |Current number | Weeks allowed |
| percentage of | of weeks for | effective |
| permanent | which 2/3 of |1/1/2010 |
| disability |average weekly | |
| incurred | earnings are | |
| | allowed for | |
| | each 1% of | |
| | permanent | |
| | disability | |
|-----------------+---------------+----------------|
| 0 - 9.75 | 3 | 4 |
|-----------------+---------------+----------------|
| 10 -14.75 | 4 | 5 |
|-----------------+---------------+----------------|
| 15 - 24.75 | 5 | 7 |
|-----------------+---------------+----------------|
| 25 - 29.75 | 6 | 8 |
|-----------------+---------------+----------------|
| 30 - 49.75 | 7 | 9 |
|-----------------+---------------+----------------|
| 50 - 69.75 | 8 | 11 |
|-----------------+---------------+----------------|
| 70 - 99.75 | 16 |21 |
--------------------------------------------------
COMMENTS
Hearing Date: May 13, 2009 SB 773
Consultant: Rodger Dillon Page 3
Senate Committee on Labor and Industrial Relations
1. Need for this bill?
The existing procedure for determining an injured worker's
permanent disability rating was adopted by the administrative
director subsequent to the passage of SB899 (Poochigian) in
April, 2004. The procedure adopted by the administrative
director was a major departure from the prior procedure for
rating permanent disability. The resulting permanent
disability rating schedule (as distinct from maximum or
minimum average weekly wages or the schedule of weeks of
indemnity payments) has resulted in a general decline in PD
ratings and thus in a decline in indemnity payments to injured
workers. The California Commission on Health and Safety and
Workers' Compensation (CHSWC) has estimated that permanent
disability indemnity benefits have declined by over 50% due to
the new PD rating schedule. CHSWC also noted that many
workers no longer receive any rating under the new procedure.
2. Proponent Arguments :
The authors and supporters of this bill argue that increases
in permanent disability indemnity payments to injured workers
are urgently needed. An independent RAND study found that
benefits under the old, pre-2005 schedule replaced only 37% of
lost wages. The 2004 law (SB899) and the new rating schedule
has cut the prior meager permanent disability benefits by 70%,
affecting more than 400,000 injured workers and their
dependents so far, and many more will be affected. According
to the U.S. Chamber of Commerce, California's PD benefits are
now among the lowest in the nation. This bill would not
restore benefits to their pre-2005 levels; it would result in
only a minor increase in benefit costs. The worker's comp
industry reported unprecedented profits in each of the last
four years; they have collected $84.5 billion in premiums but
paid out only $34.5 billion for all benefits - medical and
indemnity - for injured workers. Insurers thus kept $50
billion, 60% of premium dollars, $26.1 billion in profits and
$23.9 billion for expenses. This bill, proponents say, would
neither create any additional burden for employers nor harm
the state's business climate. The Governor stated that he had
no intention of harming injured workers, and if the data bore
Hearing Date: May 13, 2009 SB 773
Consultant: Rodger Dillon Page 4
Senate Committee on Labor and Industrial Relations
it out he would support necessary corrections. The data are
in, and they overwhelmingly confirm the magnitude of the
benefit cuts. This bill is a good first step in restoring
balance to the system, supporters conclude.
3. Opponent Arguments :
Opponents of SB773 oppose the bill because it would increase
costs for employers. They cite the past high costs of the
workers' compensation system and say they believe legislation
to alter the formulas established in SB899 should be based on
the actual experience of employers and employees under the
current system consistent with the analysis completed by the
Division of Workers' Compensation. The California Association
of Joint Powers Authorities agrees that some workers may be
under-compensated, but not all workers. An across-the-board
increase as proposed in SB773 in not the answer, and will only
serve to increase system utilization and litigation, and
encourage system gaming.
4. Prior Legislation :
Three bills designed to increase permanent disability
indemnity payments have been introduced over the past three
years. These bills were SB815 (Perata) in 2006, SB936
(Perata) in 2007, and SB1717 (Perata) in 2008. All three
bills were identical and sought to increase indemnity payments
by doubling, over a three-year period, the number of weeks of
payments for each percentage of disability rating. All three
bills were vetoed by the governor. In his veto message on the
last of these three bills the governor said:
The workers' compensation reforms I enacted in 2004
have worked. Costs to employers have decreased and
return-to-work rates for injured workers have
increased. Our work, however, is not done. Medical
costs in the workers' compensation system are climbing,
leading the Workers' Compensation Insurance Rating
Bureau to recommend a 16 percent increase in premiums
starting next year. Given this fact, we must proceed
cautiously before adding any other costs to the system.
Hearing Date: May 13, 2009 SB 773
Consultant: Rodger Dillon Page 5
Senate Committee on Labor and Industrial Relations
As such, the billion dollar benefit increase proposed
by this bill cannot be justified at this time. For
these reasons, I am returning this bill without my
signature.
5. Repeated language, and need for amendment.
Essentially identical language appears twice in this bill, for
no apparent reason. On page 2, lines 12-15, and on the same
page, lines 21-24, the same intent language appears. Staff
recommends that lines 12-15 be amended out of the bill.
SUPPORT
American Federation of State, County and Municipal Employees,
AFL-CIO
California Applicants' Attorneys Association
California Labor Federation
California Nurses Association/National Nurses Organizing
Committee
OPPOSITION
Alpha Fund
California Association of Joint Powers Authorities
California Coalition on Workers' Compensation
California Special Districts Association
California State Association of Counties
CSAC-Excess Insurance Authority
League of California Cities
Regional Council of Rural Employers
* * *
Hearing Date: May 13, 2009 SB 773
Consultant: Rodger Dillon Page 6
Senate Committee on Labor and Industrial Relations