Synopsis: IL Workers’ Comp Reforms Appear Dropped Despite the Unending IL State Budget Impasse.

Editor’s comment: As we advised last week, Governor Rauner and his supporters appear determined to get at least one part of his “Turnaround Agenda” in place via four very limited work comp legislative reforms. They are basically holding the IL State Budget “hostage” by not agreeing to move forward with a budget at all. The state budget process is now 11 months into fiscal 2016 and neither side appears ready to truly compromise.

For the IL work comp industry, we have outlined our many concerns with the Governor’s four WC reform proposals that we don’t feel are going to dramatically change work comp law and practice in our state. We don’t know the metrics or research on them but we don’t feel there will be a dramatic drop in IL WC costs if they were put into effect.

We point out there are numerous other possible changes or “reforms” that could be done on a bipartisan basis to greatly increase State government efficiency and effectiveness in the work comp sector that both sides might more easily agree to. Here are a couple of quick thoughts:

· Find a new TPA to change how IL State Government WC programs are managed—get CCMSI, Gallagher Bassett, IPMG or another Illinois-based third party administrator engaged to streamline and actually “defend” our State when their employees file workers’ comp claims; Right now the TPA for the State of IL is a California-based company that we don’t feel is helping cut claim costs. In our view, IL State Gov’t pays over $150M a year in work comp costs and that staggering amount could be dramatically cut to save the money for taxpayers.

· Get a WC PPP network for IL State Government workers to cut medical costs and outlays—we feel the State could save about $50M with this simple change that one of our great defense clients called a “complete no-brainer.”

· “Right-Size” the IL Workers’ Comp Commission—as new and pending IL WC claims continue to drop, do we have the right number of staff, hearing officers and sites? Efficiency would equal savings for IL Business/Local Gov’ts.

· Delete/Drop/Eliminate the Second Injury Fund the way most other states have done—this money is used for about 100 workers a year in a state of 8M people. No one knows what it is for and how to get these benefits. If you dropped this unneeded and arcane fund, the money would be saved to the benefit of IL business and taxpayers.

· Ditto with Dropping the Rate Adjustment Fund—this money is unneeded because IL WC already has some of the highest rates in the U.S.; do we need to double them in about 20 years at the sole cost of IL Business/Local Governments?

“Turnaround-Dis,” It Appears Speaker Madigan Isn’t Agreeing to More IL WC Reform

A spokesman for IL House Speaker Michael Madigan said last Thursday the State already reformed its workers’ compensation system five years ago, resulting in decreased costs, with more on the way. Madigan press secretary Steve Brown blames the impasse on Republican Gov. Bruce Rauner for pressing a “personal” agenda totally unrelated to budgetary issues. Brown, who represents one of the longest-serving and most dysfunctional State House speakers in U.S. history, accused Rauner of wanting “to bring down wages,” and to abolish the current workers’ compensation system to drive down benefits and the ability of injured workers to receive treatment.

Governor Rauner, facing a Democratic legislature with a super-majority, vowed to consider signing a moderate income tax hike to fund the State budget only if Democrats agree to the four workers’ comp legislative reforms, and other pro-business and anti-union measures.

Speaker Madigan is not strong on further workers’ comp reforms, his spokesman said, because the system was overhauled in 2011; the linchpin was a 30% reduction in medical fee schedules which caused consternation in the hospital and medical community. Yet the reforms brought about modest results, according to the Illinois Policy Institute, a nonprofit think tank that supports limited government and free-market principles.

Illinois Senate President John Cullerton was quoted as confirming his view Illinois’ workers’ comp costs have been cut in half over the past 20 years.

If Illinois lawmakers and the governor fail to agree on a budget before the legislature adjourns May 31, any deal would require a three-fifths vote by both the House of Representatives and Senate to pass. Until May 31, budget passage requires only a simple majority.

In our view, these parties are going to continue to battle/deadlock for months, and possibly years to come. We would appreciate your views. Please post them on our award-winning blog.

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Synopsis: New U.S. DOL Rule Increasing Salary for White Collar Workers Likely Affects You! Analysis by Bradley J. Smith, J.D.

Editor's Comment: The Department of Labor’s (DOL) new law goes into effect on December 1, 2016, which increases the standard salary threshold to $913.00 per week ($47,476 for a full-year worker), which will affect the way you label certain employees under FLSA. It’s time to take another look at how you classify your salaried employees.

The new DOL law (29 CFR Part 541) defines and delineates the exemptions of FLSA for executive, administrative, professional, outside sales, and computer employees. The final rules will become effective on December 1, 2016. This rule does not make any changes to the duties test for executive, administrative, and professional employees.

The final rule was announced on May 18, 2016, when President Obama and Secretary Perez announced the publication of the DOL’s final rule updating the overtime regulations, which will automatically extend overtime pay protections to over 4 million workers within the first year of implementation. See http://blog.dol.gov/2016/05/18/who-benefits-from-the-new-overtime-rule/ (Accessed on May 22, 2016) for a map demonstrating the number of workers the law affects in each state. The law stems from a 2014 Presidential Memorandum directing the DOL to update the regulations defining which white-collar workers are protected by FLSA’s minimum wage and overtime standards. The DOL then published a Notice of Proposed Rulemaking in the Federal Register on July 6, 2015 (80 FR 38515) and invited interested parties to submit written comments on the proposed rule by September 4, 2015. The DOL received over 270,000 comments in response.

The final rule will:

Raise the salary threshold indicating eligibility from $455/week to $913 ($47,476 per year).
Automatically update the salary threshold every three years, based on wage growth over time, increasing predictability. Future automatic updates to the thresholds will occur every three years, beginning on January 1, 2020.
Sets the total annual compensation requirement for highly compensated employees subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally ($134,004).
Amends the salary basis test to allow employers to use non discretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.

In response to the new overtime rule, U.S. employers do have options.

Obviously, you can pay time-and-a-half for overtime work. You can also raise workers’ salaries above the new threshold. Lastly, you can work to strongly limit workers’ hours to 40 per week. Some combination of these options can also qualify as complying with the new rule. The standard salary thresholds will affect most workers, however, 65,000 will be affected due to the highly compensated employees level alone. In fact, 64,000 will become eligible for overtime while 1,000 will remain exempt because their employers are expected to raise their salaries above the new highly compensated employees threshold.

Essentially, the new rule puts more money in the pockets of middle class workers, or gives them more free time. The rule will also require automatic updates every three years. These automatic updates will start in 2020. The new updates will raise the standard threshold to the 40th percentile of full-time salaried workers in the lowest-wage census region, estimated to be $51,168 in 2020. The highly compensated employees threshold will increase to the 90th percentile full-time salaried works nationally, estimated to be $147,524 in 2020. The DOL will post these new salary level thresholds 150 days in advance of their effective dates, beginning August 1, 2019.

The new rules affects all employers that FLSA affects. Consequently, the law likely affects all employers’ businesses. In other words, employers’ classification of employees will need to revisited and possibly adjusted prior to this new law taking effect on December 1, 2016. Based on the breadth of the Presidential Memorandum, it is likely that the DOL will be strictly and actively enforcing this new rule. Strict and unforgiving penalties are imposed for violations of FLSA, so it is worth it to assess and revise your current overtime exemption classifications and statuses of employees.

The research and writing of this article was performed by Bradley J. Smith, J.D. Bradley can be reached with any questions regarding the FLSA, employment law, and general liability defense at bsmith@keefe-law.com.

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Synopsis: The OSHA Administration Under Obama Can Act As a Pseudo-EEOC To Enforce Their Version of Employment Rights.

Editor’s comment: We caution our readers that Big Brother is always watching business’ actions. If you need help in dealing with OSHA, Bradley Smith, J.D. is our KCB&A lead defense team member and is very familiar with investigation and defense of all things OSHA.

While researching other things, we noticed a national truck repair company was ordered to pay back wages and punitive damages for demoting, and eventually forcing out, a manager who complained about safety violations, the U.S. Occupational Safety and Health Administration announced last Wednesday.

The company has been ordered to reinstate the manager to his original position and pay nearly $89,000 in back wages. It was also told to pay $100,000 in punitive damages and $1,700 in compensatory damages.

"Censuring a worker for complying with the law clearly violates the whistleblower provisions of the Surface Transportation Assistance Act. This Act is designed to protect the safety of the motoring public," said Ken Nishiyama Atha, OSHA's regional administrator in Chicago. "This employee did the right thing to protect others and was punished for it. OSHA is committed to protecting the rights of America's workers to refuse unsafe and unlawful orders from their employer."

On Sept. 12, 2013, Polar Service Centers suspended the service manager indefinitely, and later demoted and barred him from talking to customers or the Department of Transportation in reprisal for reporting a potential safety violation of a Polar customer's suspected improper certification of tank trailers to haul hazardous waste. The manager had also requested that a driver of the Polar customer provide information concerning the potential safety violation to DOT. After the suspension, demotion and censure, he was forced to resign from his employment.

OSHA has ordered Polar Service Centers to reinstate the manager to his position, pay $88,847 in back wages minus applicable employment taxes, $100,000 in punitive damages and $1,700 in compensatory damages as well as reasonable attorney fees.

OSHA enforces the whistleblower provisions of 22 statutes protecting employees who report violations of various airline, commercial motor carrier, consumer product, environmental, financial reform, food safety, motor vehicle safety, health care reform, nuclear, pipeline, public transportation agency, railroad, maritime and securities laws.

Both parties have 30 days from the receipt of OSHA's findings to file objections and request a hearing before an administrative law judge.

We appreciate your thoughts and comments. Please post them on our award-winning blog.

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Synopsis: Need WC Training? Learn from the KCB&A Experts about New WC Rules and Decisions from 2015 and Beyond .

Editor’s comment: In our view, training and expertise in new work comp developments is critically important for you to keep ahead of your competition in claims and risk management. We have culled out the important decisions and changes to law for the last year to add to our 2016-17 IL WC Law Textbook. We can present the most important of them for you and your adjusting/risk management staff in a complimentary onsite lunch and learn at your office. We can also “webinar” your remote workers who want to keep pace with the office staff. Let us know if you are interested in a lunch hour presentation that we assure you will be informative and entertaining.

Here is the outline created by John P. Campbell, J.D. and Nathan Bernard, J.D. for your consideration:

When is a Physical Problem Repetitive Trauma versus Repetitive Working?

Question: How Exactly Do You Tackle an IL WC Fraud Claim? IL Courts Play the Laurel and Hardy Game of “Who’s on First?”

IL WC Wage Differential Exposure Expanding based on Recent Appellate Court Ruling.

Defense/Respondent Contact with Treating Doctors Met with Shocking Penalty and Sanction from Circuit Court Judge.

Traveling Employee Expansion When Handling Work Equipment While at Home.

Medicare Set-Aside Process as SMART Act is Implemented.

Comparing How Impairment Ratings are Considered at the IWCC.

We can also do a half-day or whole day seminar to teach all the nuances of IL WC. Let us know is you have interest—all you have to do is send a reply.

KCBA Blog

5-23-2016; IL WC Reforms Appear to be Dropped; Bradley Smith on New US DOL Overtime Rule and What It Means to You; OSHA Acts Like Pseudo-EEOC to Punish Employer and more