BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 773|
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THIRD READING
Bill No: SB 773
Author: Florez (D) and Steinberg (D)
Amended: 5/19/09
Vote: 21
SENATE LAB. & INDUS. RELATIONS COMMITTEE : 4-1, 5/13/09
AYES: DeSaulnier, Ducheny, Leno, Yee
NOES: Hollingsworth
NO VOTE RECORDED: Wyland
SUBJECT : Workers compensation: disability benefits
SOURCE : Author
DIGEST : This bill, effective January 1, 2010, increases
the maximum average weekly wage that is allowed to be used
for the purpose of calculating weekly disability benefit
payments. Also, 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.
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
CONTINUED
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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
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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
percent, the specified maximum is raised from $345 to
$555. Since the weekly benefit amount is two-thirds of
the 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 percent 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 |
|-----------------+---------------+----------------|
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|25 - 29.75 |6 |8 |
|-----------------+---------------+----------------|
|30 - 49.75 |7 |9 |
|-----------------+---------------+----------------|
|50 - 69.75 |8 |11 |
|-----------------+---------------+----------------|
|70 - 99.75 |16 |21 |
| | | |
--------------------------------------------------
Comments
The existing procedure for determining an injured worker's
permanent disability rating was adopted by the
administrative director subsequent to the passage of SB 899
(Poochigian), Chapter 34, Statutes of 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 percent due to the new PD rating schedule. CHSWC
also noted that many workers no longer receive any rating
under the new procedure.
Prior Legislation :
Three bills designed to increase permanent disability
indemnity payments have been introduced over the past three
years. These bills are SB 815 (Perata) of 2006, SB 936
(Perata) of 2007, and SB 1717 (Perata) of 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
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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.
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."
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 5/19/09)
American Federation of State, County and Municipal
Employees, AFL-CIO
Association for Los Angeles Deputy Sheriffs
California Applicants' Attorneys Association
California Labor Federation
California Nurses Association/National Nurses Organizing
Committee
California School Employees Association
California State Employees Association
Peace Officers Association of California
Riverside Sheriffs' Association
OPPOSITION : (Verified 5/19/09)
Alpha Fund
Associated Builders and Contractors of California
California Association of Joint Powers Authorities
California Chamber of Commerce
California Coalition on Workers' Compensation
California Grocers Association
California Hospital Association
California Independent Grocers Association
California League of Food Processors
California Manufacturers and Technology Association
California Restaurant Association
California Special Districts Association
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California State Association of Counties
CSAC-Excess Insurance Authority
League of California Cities
Lumber Association of California and Nevada
National Federation of Independent Business
Regional Council of Rural Counties
ARGUMENTS IN SUPPORT : The author's office 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 percent of lost
wages. The 2004 law (SB 899 [Poochigian], Chapter 34) and
the new rating schedule has cut the prior meager permanent
disability benefits by 70 percent, 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 percent of premium dollars, $26.1 billion in
profits and $23.9 billion for expenses. Proponents of this
bill, say it 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 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.
ARGUMENTS IN OPPOSITION : Opponents of this bill opposes
this bill because it increases 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 SB 899 (Poochigian), Chapter 34,
Statutes of 2004, should be based on the actual experience
of employers and employees under the current system
consistent with the analysis completed by the Division of
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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 this bill in not
the answer, and will only serve to increase system
utilization and litigation, and encourage system gaming.
AGB:do 5/19/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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