The Legacy of Arnold Schwarzenegger's Workers' Compensation "Reform" The Five Year Anniversary of Senate Bill 899

April 19, 2009 marks the fifth anniversary of Governor Arnold Schwarzenegger's assault on Workers' Compensation benefits to injured workers. Upon signing the 100 plus page Senate Bill 899 into law, the Governor changed almost every part of the workers' compensation system. During the last five years, it has been a struggle for injured workers. The "reform" has meant fewer benefits, less treatment and longer delays. The law firm of Gordon, Edelstein, Krepack, Grant, Felton & Goldstein, LLP has helped lead the fight for a fair interpretation of the law and fair benefits for injured workers.

The following is a recap of how Senate Bill 899 affected Workers' Comp benefits and how subsequent interpretations and changes of the law continue to affect injured workers five years later.

Temporary disability: Senate Bill 899 set out to limit temporary disability benefits to 104 weeks (two years). For injuries between April 19, 2004 and December 31, 2007, case law has interpreted this limitation to mean that these benefits are to be paid for no more than two years from the first date of a temporary disability payment. This law had the harsh result of preventing an injured worker from even collecting a full two years of temporary disability if they did not collect it in the two years immediately following the first date of temporary disability payment. A new law was enacted in 2007 that extended this benefit to allow for a maximum of two years of temporary disability to be paid within five years from the date of injury for all injuries after January 1, 2008. The two year cap continues to be a significant reduction in benefits to the most seriously injured workers with injuries that require them to be off work more than two years.

Permanent disability: Senate Bill 899 threw out the old permanent disability rating schedule which physicians, attorneys, injured workers and judges all relied upon in determining an injured worker's level of permanent disability, and created a new schedule in part based on the American Medical Association Guides to Permanent Impairment, 5th Edition (AMA Guides). Because of the way the law has been interpreted by the Governor and the administration, permanent disability benefits have generally been greatly reduced.

Issues first arose as to which cases were to be rated under the old law and which cases were to be rated under the new law. Although the medical condition does not have to have been declared permanent and stationary before January 1, 2005, the doctor must have reported that there was evidence of permanent disability prior to January 1, 2005. Case law is still developing as to exactly what language in a medical report will suffice to support a rating under the old schedule.

Litigation is still continuing regarding efforts to void the new rating schedule claiming it does not follow the legal requirements of the new law and is not equitable. (Boughner)

Over the last five years, physicians and judges have gained greater familiarity with the AMA Guides. A recent court decision (Almarez/Guzman) expanded the scope of information upon which both a physician and judge can rely upon in determining an injured worker's overall level of permanent disability. This case allows more discretion by the doctor in assessing permanent disability. If the AMA Guides rating is unfair and inequitable, the doctor can assign a different rating. This case was appealed by the defendants and the appeal was granted, and we expect case law to further develop on this issue throughout 2009.

Other cases have attacked the mathematical formula for determining the final level of permanent disability. The recent Ogilvie case allows for an adjustment to this formula considering diminished future earning capacity, and in some cases can lead to an increase in the overall level of permanent disability. This case was appealed by both parties, and the appeal was recently granted. We expect case law to further develop on this issue throughout 2009.

Through a better understanding of the use of the AMA Guides and application of this new case law, injured workers hope the future will bring more fair and accurate permanent disability Awards.

Over the last three years, the Governor has vetoed bills that have been passed by the legislature to increase permanent disability payments. These bills were drafted and passed in an effort to fix some of the unintended reduction of permanent disability benefits resulting from Senate Bill 899's implementation. It is anticipated that another bill will be presented to the Governor for review and consideration in to 2009.

Apportionment: Apportionment is a permanent disability concept that deals with the assigning of the percentage of industrial versus nonindustrial permanent disability, or the percentage of permanent disability as between multiple industrial injuries. This issue is initially described by a medical doctor. The new law changed the law of apportionment, relaxing the standard allowing for greater apportionment to nonindustrial factors, thus lowering permanent disability payments to injured workers.

The most important case interpreting the new law, Escobedo, determined that the new apportionment law applied to all pending injury cases, regardless of the date of injury. The Escobedo case did list a very strict standard for doctors to follow when addressing apportionment. Skilled advocates for injured workers holding the doctors to this strict standard have tried hard to limit the negative impact of this new apportionment law.

The Benson case, which is pending an appeal to the Supreme Court of California, changed the law on apportionment between industrial injuries. Again, this case used the new law to conclude that more than one industrial injury may not be combined to produce one larger permanent disability award, but instead the permanent disability must be split up into smaller separate awards if due to separate injuries. An exception to this harsh rule remains, and skilled advocates for injured workers have succeeded in obtaining a combined, larger permanent disability award in some cases.

Return to Work Benefits: In 2003, during the recall campaign of Governor Davis, a bill that abolished vocational retraining benefits to injured workers' was signed into law, leaving a rarely used benefit called a "supplemental job displacement voucher." This is a monetary sum that ranges between $4000 and $10,000 that an injured worker can apply towards an educational school in an effort to assist in returning to the workforce. Unfortunately, Governor Schwarzenegger's administration has not been able to successfully implement rules that would allow for better access for injured workers to the supplemental job displacement voucher. There have been legislative attempts to create rules that would allow for better access to this rarely used benefit. There are two bills pending the legislature in 2009 that seek to improve access to obtaining the voucher or alternative return to work assistance.

Medical Treatment: Prior to the enactment of Senate Bill 899, there had already been some changes in how injured workers were provided medical care. The Legislature put caps on the amount of physical therapy, chiropractic care, and occupational therapy that an injured worker could receive subsequent to an injury. Also, a program called "utilization review" was created to review and authorize medical treatment requests submitted by a physician. Senate Bill 899 did nothing to amend these new rules. Over the last five years, there have been no legal cases or change in the law that has "softened" the hard cap on physical therapy, chiropractic, and occupational therapy. However, a 2008 California Supreme Court case entitled Sandhagan concluded that a workers' compensation insurer had to request utilization review of treatment requests, but this process must be completed in most cases, no less than fourteen days from receipt of the medical treatment request. The Supreme Court recognized that a strict timeline as required by law was necessary to insure that injured workers receive prompt and efficient medical treatment. Despite the Sandhagan case, advocates for injured workers continue to observe significant delays in authorizing medical treatment. In the near future, as the courts enforce the timelines mandated by the Sandhagan case, inured workers hope to get relief from the delays and unreasonable denials in medical treatment.

The new law also allowed employers to create a Medical Provider Network (MPN), which is a list of approved treating doctors. If an MPN is established with proper notice, the employee must seek medical treatment from a doctor on the list. There are strict notice requirements for an employer to require treatment with a doctor in the MPN. Case law (Knight) supports the right to receive treatment outside the MPN if these requirements not met.

Third Party Civil Lawsuits: One potential source of recovery that was not affected to date by Senate Bill 899 was an injured worker's right to sue a third party defendant for negligence that contributed to or directly caused the worker's injury. In a case where a third party civil lawsuit is successful, an injured worker will in most cases obtain a greater recovery for his or her injury.

The law firm of Gordon, Edelstein, Krepack, Grant, Felton & Goldstein, LLP continues to handle both workers' compensation claims and third party lawsuits on behalf of injured workers. The firm continues to be active at the statewide level through active participation in the California Applicant's Attorney's Association, a statewide advocacy group for injured workers, and continues to be active in educating the Legislature in Sacramento about the existing inadequacies in the workers' compensation laws subsequent to enactment of Senate Bill 899. Even though five years have passed since the enactment of Senate Bill 899, there remain many questions regarding interpretation of the law. It is anticipated that over the next five years there will be further development of the law through the local and appellate court processes. The law firm of Gordon, Edelstein, Krepack, Grant, Felton & Goldstein, LLP remains committed to the fight for fair benefits and compensation to injured workers.

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