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What’s New In Workers’ Compensation?

SB899 made changes to indemnity benefits, how disability is determined and medical treatment and payments

By William E. Malecki

William E. Malecki
Malecki

Workers’ compensation affects every member of the bar in some manner.  Although most lawyers do not represent injured workers or their employers, almost every lawyer is either an employer responsible for providing workers’ compensation benefits to her employees or an employee eligible to receive benefits should he become injured. 

When a person is injured at work, or suffers an injury or illness that is deemed to be work-related, in most cases the employee’s sole remedy will be recovery of workers’ compensation benefits (Labor Code §3600).  All references are to the Labor Code unless otherwise indicated. 

Generally, for a person’s injury or illness to come under the provisions of workers’ compensation law, the injury “must both aris[e] out of and occur in the course of employment, (“AOE/COE”), that is, the employee must be performing service growing out of or incidental to his or her employment and be acting within the course of his or her employment” (3600(2)) and the injury must be proximately caused by the employment (§3600(3)).

Overview of benefits

The benefits payable due to an injury or illness include both compensation and medical benefits. Compensation benefits include temporary disability indemnity (§4650(a)), permanent disability indemnity (§4650(a)) and vocational rehabilitation benefits (§4538). Medical benefits consist of “medical, surgical, chiropractic, acupuncture and hospital treatment” (§4600).

Temporary disability indemnity is paid when an employee is unable to work due to the work-related injury or illness. It amounts to two-thirds of the average weekly earnings during the period of disability (§4653) and is subject to a statutory maximum (currently $728 per week) which varies according to the date of injury (§4453).

Permanent disability indemnity is paid when the injury “impairs a worker’s earning capacity, or a worker’s bodily function, or . . . creates a handicap in the open labor market” (Hanna, Calif. Law of Emp. Inj.  8.01, Rev. Ed. 1999). It may be “total” or “partial,” is assessed according to a schedule that takes into account the nature of the injury, the employee’s occupation and the employee’s age and weeks of employment, and it is subject to a statutory maximum that varies according to the date of injury and the percentage of disability. Payment currently is as high as $230 per week (§4659).

Vocational rehabilitation benefits are provided when the employee is determined to be incapable of “engaging in his or her usual and customary occupation or the position he or she was engaged in at the time of injury” (§4638(a)(1)) and when “the employee can be reasonably expected to return to suitable gainful employment through the provision of vocational rehabilitation services” (§4638(a)(2)).  Benefits include a weekly maintenance allowance, necessary additional living expenses and costs of the program itself, including counseling fees, training costs, tuition, etc., up to a maximum of $16,000 total (§139.5(c)).

If the injury causes death, benefits (§4700) may be recoverable by the deceased employee’s dependents (§3501).   

Senate Bill 899

On April 19, 2002, Senate Bill 899 was enacted into law. Its major provisions can be roughly divided into four major categories: 1) indemnity benefits and vocational rehabilitation; 2) determination of permanent disability; 3) medical treatment and payments to providers; and 4) medical-legal procedure and penalties.     

Division 4 of the Labor Code, consisting of §§3200 - 6000, contains the majority of the provisions related to workers’ compensation. Most of the significant additions or changes to the law in SB 899 affect these sections. The following is not an exhaustive list, but rather highlights the provisions of SB 899 likely to be of most practical interest and relevance to all members of the bar.

Indemnity benefits and vocational rehabilitation

“Indemnity” benefits are generally understood to be those workers’ compensation benefits that provide monetary payments to an injured employee, as distinguished from medical treatment benefits for which payments are generally made directly to the employee’s health care provider.

Since 1979, there has been no limit on aggregate temporary total disability payments for a single injury.  However, temporary disability will now be limited to no more than 104 compensable weeks within a period of two years from the beginning of temporary disability payments, except if an employee suffers from the following conditions: hepatitis B or C, amputations, severe burns, HIV, high-velocity or chemical burn eye injuries, chemical burns to the eyes, pulmonary fibrosis and chronic lung disease (§4656).

The maximum temporary total disability (TTD) rate will increase to $840 for injuries occurring on or after Jan. 1, 2005. The rate is indexed to the state average weekly wage thereafter (§4453 (8-10)). The maximum permanent partial disability (PPD) rate is increased to $220 for disability from 1 percent to 69 percent and $270 per week for disability from 70 percent to 99 percent, and then will increase to $230 and $270 per week, respectively, for injuries occurring on or after Jan. 1, 2006 (§4453(b)(6-7)).

For injuries on or after the adoption of the revised rating schedule, the eligible payable weeks will decrease for less seriously injured employees and increase for those more seriously injured. For larger employers (more than 50 employees), if, within 60 days of a disability becoming permanent and stationary, an employer does not offer the injured employee regular, modified or alternative work for 12 months, each disability payment remaining to be paid shall be increased. Conversely, if the employer offers such work, and regardless of whether the injured employee accepts or rejects the offer, each disability payment remaining to be paid shall be reduced. An employee who voluntarily terminates employment shall not be eligible for payment under this provision. This paragraph shall not apply to an employer that employs fewer than 50 employees (§4658(d)(2-3)).

Permanent disability

Previously, the permanent disability indemnity primarily was concerned with the “diminished capacity of such injured employee to compete in an open labor market” (§4660).  Under SB899, that definition has been modified so that the relevant consideration is now “the employee’s diminished future earning capacity” (§4660). The prior schedule will be replaced with a system that incorporates the “descriptions and measurements of physical impairments and the corresponding percentages of impairments published in the American Medical Association (AMA) Guides to the Evaluation of Permanent Impairment (5th Edition)” (§4660(b)(1)). Also, “an employee’s diminished future earning capacity shall be a numeric formula based on empirical data and findings that aggregate the average percentage of long-term loss of income resulting from each type of injury for similarly situated employees.” SB899 also provides that “the schedule shall promote consistency, uniformity, and objectivity . . . and that it shall apply prospectively and shall apply to and govern only those permanent disabilities that result from compensable injuries received or occurring on and after the effective date of the adoption of the schedule” (§4660(b)(1)).

Until the adoption of SB899, the Labor Code allowed for the apportionment of an employee’s permanent disability in the case of “aggravation of pre-existing disease” (§4663) or if the employee was suffering from a “previous permanent disability or physical impairment” (§4750).

These sections were repealed and replaced with a new version of §4663. It holds that apportionment of permanent disability shall be based on causation (§4663(a)), that any physician who prepares a report on permanent disability shall address the issue of causation of the permanent disability, and that in order for a physician’s report to be considered complete, it must include an apportionment determination (§4663(b)). A physician shall make an apportionment determination by finding what approximate percentage of the permanent disability is the direct result of the injury and what approximate percentage of the permanent disability was caused by other factors. If the physician is unable to include an apportionment determination, he or she shall state the specific reasons why no determination could be made.

New §4664 holds that the employer shall only be liable for the percentage of permanent disability directly caused by the injury. If the employee has received a prior award of permanent disability, it shall be conclusively presumed that the disability exists at the time of any subsequent industrial injury. This presumption affects the burden of proof (§4664(b)). The accumulation of all permanent disability awards issued for any one region of the body shall not exceed 100 percent over the employee’s lifetime unless the employee’s injury or illness is conclusively presumed to be total, pursuant to §4662 (§4664(c)).

Medical treatment and payments to providers

to the enactment of SB899, the employer or their insurer was required to provide all medical services “reasonably required to cure or relieve the injured worker from the effects of the injury” (§4600). This is still the law except that what is “reasonably required” is now defined specifically as “treatment that is based upon the guidelines adopted by the administrative director pursuant to §5307.27 or, prior to the adoption of those guidelines, the updated American College of Occupational and Environmental Medicine’s Practice Guidelines” (§4600(b)).

SB899 establishes that on or after Jan. 1, 2005, an insurer or employer may establish or modify a medical provider network for the provision of medical treatment to injured employees. Some of the requirements for the medical network are: it shall include both physicians primarily engaged in the treatment of occupational injuries and physicians primarily engaged in the treatment of non-occupational injuries; it must have enough providers sufficient to enable treatment for injuries or conditions to be provided in a timely manner; and it must be readily available. Also, physician compensation may not be structured in order to achieve the goal of reducing, delaying or denying medical treatment or restricting access to medical treatment (§4616).

Provided that “the employer or insurer meets the requirements of this section, the administrative director may not withhold approval or disapprove an employer’s or insurer’s medical provider network based solely on the selection of providers . . . [and] shall have the exclusive right to determine the members of their network” (§4616 (d)). Other provisions indicate that “all treatment provided shall be provided in accordance with the medical treatment utilization schedule established pursuant to §5307.27 or the American College of Occupational Medicine’s Practice Guidelines, as appropriate (§4616(e)). No person other than a licensed physician who is competent to evaluate the specific clinical issues involved in the medical treatment services, when these services are within the scope of the physician’s practice, may modify, delay or deny requests for authorization of medical treatment (§4616(f)).

Current law that provides that for injuries occurring on and after Jan. 1, 2004, an employee shall be entitled to no more than 24 chiropractic and 24 physical therapy visits per industrial injury would continue, but in addition, an employee shall be entitled to no more than 24 occupational therapy visits per industrial injury (§4605(d) (1)). Fees payable to medical providers will be limited to the amounts paid for these services to the reasonable maximum amounts in the official medical fee schedule in effect on the date of service (§4603.2(b)(1)).

Medical-legal procedure, penalties

Once the employee has filed a claim form, the employer shall authorize treatment for the alleged injury and continue to provide treatment, up to a maximum of $10,000, until the date that liability for the claim is accepted or rejected (§5402(c)).

Present law governing how an employee not represented by an attorney may obtain an evaluation from a physician selected from a randomly selected panel is not substantially changed (§4062.1). However, when an employee is represented by an attorney, rather than each party selecting its own evaluator, the law, effective Jan. 1, 2005, will require the selection of a mutually agreeable medical evaluator (§4062.2). Also, the presumption of correctness of the treating physician (§4062.9) is now completely eliminated.

Present law provides that when payment has been unreasonably delayed or refused, the amount of the payment unreasonably delayed or refused shall be increased up to 25 percent or $10,000, whichever is less. These new provisions apply to all injuries, without regard to the date of the injury. The new law also allows an employer or insurer to pay a self-imposed penalty in lieu of the penalty that may be awarded by the appeals board if the delay is rectified within 90 days of the delay.

The complete text of SB899 can be accessed at www.leginfo.ca.gov. SB899 is integrated into the text of the Insurance and Labor Codes in Workers’ Compensation Laws of California, 2004 Supplement, Matthew Bender and Co. available through LexisNexis. The text may also be ordered from the Legislative Bill Room, 712 R Street, Sacramento, CA, 95814 or at 916-445-2323.

The Workers’ Compensation Section of the State Bar of California  publishes the Workers’ Compensation Quarterly and offers classes at its own Spring and Summer Educational Conference as well as the State Bar Annual Meeting and the State Bar Spring and Fall Education Institutes. The section also has a Web page accessible through the Sate Bar Web site at calbar.ca.gov.

Other excellent resources include the California Applicant’s Attorney’s Association (“CAAA”) and the California Workers’ Compensation Defense Attorney’s Association. They can be accessed at www.caaa.org and www.cwcdaa.org.

On the publication side, Hanna, Calif. Law of Emp. Inj., Rev. Ed. 2002; Herlick, California Workers’ Compensation Law, Rev Ed. 2002 and California Workers’ Compensation Practice, CEB, Rev. Ed. 2002 are very informative resources. 

William E. Malecki is an attorney with State Compensation Insurance Fund, a certified specialist in workers’ compensation law and a member of the State Bar Workers’ Compensation Section.

Certification

  • This self-study activity has been approved for Minimum Continuing Legal Education credit by the State Bar of California in the amount of one hour of legal ethics.

  • The State Bar of California certifies that this activity conforms to the standards for approved education activities prescribed by the rules and regulations of the State Bar of California governing minimum continuing legal education.

Self-assessment test

Answer the following true-false statements after reading the MCLE article on Rule of Professional Conduct 2-100. Use the answer form provided to send the test, along with a $20 processing fee, to the State Bar. If you do not receive your certificate within four weeks, call 415-538-2504.

  1. The benefits payable due to an injury or illness include both compensation and medical benefits.
  2. Permanent disability benefits are only paid when an injured employee is totally disabled.
  3. If the injury causes death, benefits may be recoverable by the deceased employee’s dependents.
  4. Under SB899, temporary disability benefits will be limited to 52 weeks of payments.
  5. For injuries on or after the adoption of the revised rating schedule, the eligible payable weeks will increase for all injured employees.
  6. Under SB899, that definition has been modified so that the relevant consideration is now “the employee’s diminished future earning capacity.”
  7. The new permanent disability rating schedule will be based on the guidelines of the California Occupational Physician’s Association.
  8. SB899 also provides that the permanent disability rating schedule shall apply prospectively and shall apply to and govern only those permanent disabilities that result from compensable injuries received or occurring on and after the effective date of the adoption of the schedule.
  9. Formerly, the Labor Code allowed for the apportionment of an employee’s permanent disability in the case of aggravation of pre-existing disease or if the employee was suffering from a previous permanent disability or physical impairment.
  10. New §4663 states that apportionment of permanent disability shall be based on causation and that any physician who prepares a report on permanent disability shall address the issue of causation of the permanent disability.
  11. Any physician who prepares a report on permanent disability may address the issue of causation if requested by either party.
  12. A physician shall make an apportionment determination by finding what approximate percentage of the permanent disability is the direct result of the injury and what approximate percentage of the permanent disability was caused by other factors.
  13. What is “reasonably required” treatment is now defined specifically as “treatment that is based upon the guidelines adopted by the administrative director pursuant to §5307.27 or, prior to the adoption of those guidelines, the updated American College of Occupational and Environmental Medicine’s Practice Guidelines.”
  14. SB899 establishes that on or after Jan. 1, 2005, an insurer or employer may establish or modify a medical provider network for the provision of medical treatment to injured employees.
  15. One requirement for the medical network is that it shall include only physicians primarily engaged in the treatment of occupational injuries.
  16. Also, physician compensation may not be structured in order to achieve the goal of reducing, delaying or denying medical treatment or restricting access to medical treatment.
  17. The administrative director may withhold approval or disapprove an employer’s or insurer’s medical provider network based solely on the selection of providers.
  18. A registered nurse who has received training and is certified in utilization review may modify, delay or deny requests for authorization of medical treatment.
  19. Once the employee has filed a claim form, the employer shall provide treatment for an alleged injury and continue to provide treatment, up to a maximum of $25,000, even if liability for the claim is accepted or rejected (§5402(c)).
  20. Effective June 1, 2004, a new version of §5814 provides that when the payment of compensation has been unreasonably delayed or refused, the amount of the payment unreasonably delayed or refused shall be increased up to 25 percent or $10,000, whichever is less.
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