6-6-2016; Springfield/Chicago--Where Democracy Goes to Fail; WCRI Research Analyzes the IL WC System; Matt Ignoffo on Important Wisconsin Insurance Coverage Ruling and more

Synopsis: Springfield/Chicago—Where Democracy Goes to Fail.

Editor’s comment: Political news in this State and Chicago keeps getting worse and worse. Last week, legislative efforts to come up with an annual IL state budget again failed with State Democrats creating a wacky, cut-off-debate budget that fell $7 billion short of its necessary funding. As everyone expected, Governor Rauner quickly and properly vetoed it and State Democrats didn’t have sufficient party unity to override the veto. It appears we may never have an actual state budget, causing fear/consternation and bankruptcies in the private sector for businesses and social agencies that rely on our state government for their well-being. Schools and colleges/universities are also petrified on how to stay open. Without any question, there isn’t enough money and some things are going to have to be wisely cut and State Democrats simply won’t address these important issues, as they strain to give away more and more money they simply don’t have.

On the workers’ comp side, the Governor’s suggested “Turnaround Agenda” reforms or what we prefer to call minor ideological tweaking (other than the slashing of some medical fees again), also were lost in the shuffle. Due to the infighting in Springfield, every indication is nothing is going to happen to reform IL WC this year or any time soon. As we have advised our readers, we expect our state’s WC costs to continue to drop as the Arbitrators and Commissioners appointed by this Governor quietly exert their best efforts to bring Illinois into the mainstream of U.S. WC costs. We should have a better idea at the end of year when the State of Oregon issues their every-other-year analysis of WC insurance premiums—you can watch this spot for those important stats. You may also want to carefully review the next article below.

IL WC veterans can only grin to hear the public relations silliness spun by Steve Brown, the press secretary for House Speaker Michael Madigan, our leading State Democrat. “Workers’ compensation has always been on the table,” said Mr. Brown. But Brown claimed last Wednesday that IL workers’ comp reforms passed in 2011 resulted in significant savings that those evil but unnamed WC insurers somehow did not pass along to employers, “which is no surprise to anyone,” per Mr. Brown. Democrat Lawmakers are considering mysterious and magical ways to “force” insurers to pass along those ethereal and hard-to-define savings.

The last we looked, almost all of our defense clients had self-insured retentions for their WC coverage which means if the benefits are lower, they pay out less.

Mr. Brown is also threatening to expand the IL WC Fraud Unit. “More employers are being investigated for fraud than individual workers,” Brown said without the slightest bit of evidence to support this claim. “We’re looking at all those things. The Governor and his friends, the business guys, say just take everything out of the pockets of the doctors and employees. He would basically deny workers any kind of benefits.”

When you stop giggling to read such tripe, please note Governor Rauner has recommended four fairly minor legislative changes that will keep most of IL WC the same as it has been for years. Those changes don’t take “everything out of the pockets” of anyone.

On the continuing Chicago Fake Government Pension Funding Catastrophe, Mayor Rahm Emanuel fought for and got an extension to further “unfund” the Chicago Police and Fire fake gov’t pensions until year 2020. As Mayor Emanuel already has to come up with about $700M by the end of this month that he doesn’t have to fund the fake Chicago Teacher’s Union pensions, he would have had to dramatically and immediately raise taxes to pay this additional police/fire pension debt. From a purely political perspective, he went begging to Springfield, not to try to make any sense of a fake pension program that can’t be made to make sense; he just wants more time, as his current mayoral tenure coincidentally ends in 2019. This is “I’ll Be Gone; You’ll Be Stuck” Illinois politics at its very worst.

As stunning as it may sound, the IL General Assembly voted to override Gov. Bruce Rauner’s veto of Mayor Rahm Emanuel’s plan to delay payments to Chicago’s police and fire pension funds — at a cost to Chicago taxpayers of an additional $18.6 billion over the next 40 years. Worst of all, delaying the pension payments sets Chicago taxpayers up for massive tax hikes. The law calls for Chicago to automatically begin dramatically raising property taxes in 2020 to pay for the postponed pension contributions. You may want to diary the year 2020 as a date to reconsider maintaining a business in Chicago, as real estate taxes are sure to skyrocket and/or the next mayor of Chicago may try to get a law passed to allow them to file for bankruptcy.

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

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Synopsis: Real and Important Research Analyzing the Illinois Work Comp System—Is the System Truly Getting Better?

Editor’s comment: While looking up other things we saw the great team at WCRI or the Work Comp Research Institute put out a series of reports provides ongoing annual monitoring of how IL WC indemnity benefits, medical payments, and benefit delivery expenses per claim change over time,  as well as how the Illinois workers’ compensation system compares with other study states on many key metrics. Their research analyzed claims with injury dates between 2009 and 2014 (evaluated as of March 31, 2015). In some cases, they used a longer time frame to supply a historical context for what they felt were key metrics and to provide a broader context for evaluating effects of changes related to the 2011 WC legislative reforms in Illinois.

In 2011, Illinois legislation HB 1698 introduced several changes to our workers’ compensation system that was designed to impact key claim cost components. These changes included a 30 percent reduction in the medical fee schedule rates, the introduction of WC preferred provider programs (WC PPPs) for selecting a network of treating physicians, and the addition of the option to use utilization review based upon recognized treatment guidelines and evidence-based medicine. In addition, the 2011 Amendments to our IL WC Act introduced the American Medical Association Guides, 6th edition, for the evaluation of impairment ratings and set specific limits on the duration of benefits for carpal tunnel injuries and wage differential benefits.

Major Statistical Findings For IL WC System

The major findings for the WRCI research are as follows:

·         The average total cost per WC claim with more than seven days of lost time decreased since 2011, which they felt was due mainly to the reduction in medical fee schedule rates. Compared with the other study states, total costs per claim in Illinois remained higher than typical for 2012/2015 claims.

·         Indemnity benefits per claim were higher than those in the other study states due to the following:

o    More frequent and larger permanent partial disability lump-sum settlements coupled with longer duration of temporary disability in Illinois compared with other study states with PPD benefit systems.

o    The average lump-sum payment per claim changed little, and the percentage of claims with lump-sum settlements decreased. These changes were observed after 2009 for both less and more mature claims.

o    Offsetting components resulted in typical litigation expenses per claim: Illinois had among the lowest defense attorney payments per claim (with payment greater than $500) of all the study states.

o    Defense attorney involvement was higher than typical. Both the use of medical-legal services and the average medical-legal expense per claim were higher than typical in Illinois. Litigation expenses grew faster in Illinois than in most study states.

·         Medical payments per claim were closer to the median study state for 2012/2015 claims than they were before the 30 percent reduction in the medical fee schedule rates in 2011. Prior to the medical fee schedule rate reduction, medical payments per claim were among the highest of the study states.

Total Costs Per IL WC Claim Were Clearly Reduced Since 2011

The average total cost per claim with more than seven days of lost time in Illinois was 19 percent higher than the cost in the median study state for 2012 injuries evaluated as of the first quarter of 2015. For 2008/2011 claims, total costs per claim in Illinois were 37 percent higher than the median study state. The change in Illinois’ interstate ranking mainly reflects the impact of the 30 percent reduction in the fee schedule rates for all medical services. Between 2010 and 2012, based on more mature claims, total costs per claim decreased 8.0 percent in Illinois. This was the largest decrease of the study states. In 2013 and 2014, based on less mature claims, total costs per claim in Illinois grew moderately, reflecting small to moderate increases in medical payments per claim, indemnity benefits per claim, and benefit delivery expenses per claim.

Indemnity Benefits in IL WC Remain Higher Due to Higher Value Settlements and Duration of TTD/TPD

Indemnity benefits per claim with more than seven days of lost time in Illinois were higher than those in the median study state in 2012 (evaluated as of 2015). This result reflected longer duration of temporary disability coupled with more frequent and more costly PPD/lump-sum settlements.

In Illinois, temporary total disability (TTD) benefits are paid at a rate equal to 66⅔ percent of the worker’s pre-injury wage, capping at 133.3% of the SAWW; in most study states the maximum benefit rate is set at 100 percent of the SAWW. The higher weekly benefit maximum in Illinois than in other study states likely contributed to higher-than-typical average weekly benefit rates. In addition, compared with the other study states, Illinois had among the largest gaps between the maximum weekly TTD benefit rate ($1,337) and PPD benefit rate ($735). This difference in benefit rates likely affects the duration of temporary disability benefits and proportion of claims with temporary disability and PPD benefits.

An important component of indemnity benefits is the duration of temporary disability benefits. In 2012 (evaluated as of 2015), Illinois had a longer duration of temporary disability benefits than most other study states. On average, injured workers stayed away from work for 19 weeks compared with 13 weeks in the median of states with PPD benefit systems. Longer-than-typical duration of temporary disability in Illinois might be related to lack of limits on duration of benefits, except as indicated in the PPD schedule. In contrast, other study states have features that lead to lower average duration, such as statutory caps on temporary disability benefits and allowing termination or modification of TTD benefits without a formal hearing.

One provision of the 2011 reforms, the introduction of the AMA Guides for the evaluation of impairment, may have a long-term impact on both the percentage of claims with PPD/lump-sum settlements and the average PPD/lump-sum payment per claim. Such an impact can be realized if the ratings for determination of the degree of impairment are applied consistently in the majority of cases. It is important to note that, under the reform legislation, the degree of disability is determined by five factors: the level of impairment (AMA rating); the injured worker’s occupation, age, and future earning capacity; and evidence of disability corroborated by medical records. The legislation specifies that the AMA Guides will be used to set the ratings, yet there is no provision for automatic admissibility of the ratings when determining the overall degree of disability. In 2011, the Illinois Workers’ Compensation Commission (IWCC) guidance to arbitrators provided that they do not need an impairment rating to approve settlement contracts, and they are not prevented from awarding PPD benefits at a hearing if there is no impairment rating on the record. System stakeholders noted some observations: starting in 2014, more cases have been reaching maximum medical improvement when an evaluation of impairment rating is done; and when submitted, the AMA rating is generally considered by arbitrators. Furthermore, not all cases need an impairment rating; for instance, when the negotiated amount is relatively small, the parties may decide that the cost of obtaining the rating is not reasonable compared with the amount in dispute. Prior to the 2011 amendments and introduction of the AMA Guides,7 there was no part of the statute that provided any instructions to the IWCC with respect to determining PPD benefits. As a result, PPD benefits were awarded based only on historical precedents, applying multiple factors.

In Illinois, a PPD benefit is viewed as a settlement after the injured worker completes medical treatment and is at maximum medical improvement. That is why 37 percent of Illinois claims with more than seven days of lost time received lump-sum payments, half as many as the median study state in 2012 (for claims with an average maturity of 36 months). The average lump-sum settlement per claim with more than seven days of lost time in Illinois was in the middle of the states with PPD benefit systems for 2012/2015 claims. For 2010/2015 claims, the average lump-sum payment per claim was among the highest of the PPD study states. Note than in Illinois, 49 percent of claims settled within 60 months of injury compared with 11 percent of claims that settled within 12 months after the injury. This means that any sizeable impact from the legislative changes related to PPD/lump-sum settlements may be seen only for more mature claims.

The trend in the average lump-sum payment per claim changed little in Illinois after 2009. However, the percentage of claims with settlements decreased between 4 to 7 points depending on claim maturity. System participants indicated that this result likely reflects the impact of the recession and especially slower recovery in Illinois, when higher unemployment rates might have created limited opportunities for injured workers to return to work with their preinjury employer or to find a job with a new employer. In addition, uncertainty related to the application of the new law for impairment rating evaluations may have also contributed to the observed results after 2012.

Medical Payments Per WC Claim Were Closer to the Median Study State for 2012/2015 Claims than prior to the IL WC Fee Schedule Reduction

For 2012 injuries (evaluated by WCRI as of 2015), the average medical payment per claim with more than seven days of lost time in Illinois was closer to the median study state than in previous years. Prior to the reduction in the fee schedule rates, Illinois had among the highest medical payments per claim of the study states. Medical payments per claim incorporate both utilization and price of services delivered by medical providers. Because utilization of medical services was relatively stable between 2010 and 2012 (at 12 months of claim maturity), most of the impact on medical payments per claim in Illinois could be attributed to lower prices resulting from the decrease in the fee schedule rates.11 As documented by WCRI, higher-than-typical medical payments per claim in Illinois reflected higher prices paid for professional services (except for evaluation and management services) and higher utilization, largely driven by physical medicine. After the reduction in the fee schedule rates, the average hospital payment per claim (both for inpatient and outpatient care) in Illinois was in the middle group of study states.

Between 2013 and 2014 (claims with an average maturity of 12 months), medical payments per claim in Illinois increased 2.0 percent. One component of medical payments, prices paid for professional services, decreased slightly (1.7 percent) in 2014. Medical cost containment expenses are an important metric for showing whether the 2011 reforms in Illinois resulted in changes in the ways payers control growth in medical payments. Medical cost containment expenses per claim reflect the combined impact of fees for bill review, case management, utilization review, and preferred provider networks. After 2011, the growth in medical cost containment expenses per claim in Illinois continued (except in 2014). Such growth is not unusual because the reduction in the fee schedule rates may require more frequent use of bill review. It is also reasonable to expect, in light of the new utilization review rules, that companies would spend more on utilization review to determine the reasonableness and necessity of medical treatment. Under the new rules, when utilization review is invoked, the provider is required to provide a clinical report to support the request for treatment. The utilization review has to be based upon recognized treatment guidelines and evidence-based medicine.

If you want to purchase this important research for your organization, please go to this site: http://www.wcrinet.org/

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Synopsis: Wisco Court of Appeals: WC/EL Insurer has no duty to defend employee accused of sexual assault. Analysis by Matthew Ignoffo, J.D., M.S.C.C.

Editor’s Comment: The facts in Rhyner v. Rydberg involve Plaintiff Rhyner alleging Defendant Rydberg committed battery and intentional infliction of emotional distress when he manhandled her at work. Court of Appeals of Wisconsin, No. 2015AP2010 (May 25, 2016). Rhyner and Rydberg both worked at Veterinary Medical Services Corp. (VMS). Rydberg sought coverage for Rhyner's claims with VMS's worker's compensation and employer's liability carrier, General Casualty Company of Wisconsin. General Casualty intervened in the action and sought a determination that General Casualty had no initial duty to defend, no ongoing duty to defend, and no duty to indemnify Rydberg. The Circuit Court agreed and dismissed General Casualty from the case. Rydberg appealed.

The Court of Appeals indicated to determine whether there is a duty to defend it first must consider whether the policy granted coverage.

Regarding the WC policy, the Court noted the general rule of worker's compensation law is if an employee has suffered a job related injury then the right to recover worker's compensation benefits "shall be the exclusive remedy against the employer, any other employee of the same employer and the worker's compensation insurance carrier." An exception to the exclusive remedy provision is an employee injured by another employee by "an assault intended to cause bodily harm" is not limited to a worker's compensation remedy. Plaintiff Rhyner brings her allegations of battery and intentional infliction of emotional distress against Defendant Rydberg under the assault exception and was not seeking WC benefits.

Defendant Rydberg’s argument for why he should be covered under the WC policy was because Plaintiff could recover WC benefits based on her allegations if the claim were brought as a WC claim, then General Casualty’s WC policy should provide his defense. The Court disagreed noting Rhyner was not seeking a WC claim. General Casualty's WC policy did not cover individual employees, it provided worker's compensation coverage to VMS for worker's compensation claims. Rydberg was not the insured under General Casualty's WC policy. General Casualty's policy language states that it has "the right and duty to defend at our expense any claim, proceeding or suit against [VMS] for benefits payable by this insurance," and the benefits payable by this insurance are only "benefits required of [VMS] by the workers compensation law." As it was clear that General Casualty's WC policy was "not intended to cover the claim asserted, the analysis ends [here]."

Regarding the EL policy, Rydberg argues in the alternative that General Casualty owed a duty to defend Rydberg under the EL policy, which provides coverage for "bodily injury by accident" arising "out of and in the course of the injured employee's employment." Again the Court noted Plaintiff was not suing VMS and Defendant had no coverage under the EL policy as Defendant was not an “insured” under the policy. Plaintiff’s claim was an intentional tort action against Defendant, personally. As Defendant was not a named insured and as there is "no duty to defend a claim, proceeding or suit that is not covered by this insurance," the EL policy did not provide a duty to defend.

We note Defendant Rydberg is the owner of VMS and it appears he attempted to secure coverage for the intentional tort claim brought against him personally, under the policies of his corporation. It is clear General Casualty had no interest in doing so under its policies and the Courts agreed. Although this is a Wisconsin case we feel under similar facts and policy language the result would be similar in alternative venues.

This article written by one of our top Wisconsin defense team members, Matthew Ignoffo, J.D., M.S.C.C. Please feel free to contact Matt at mignoffo@keefe-law.com.

5-30-2016; Why are Illinois WC Rates So Expensive? Thoughts from a Reader; Overview of IL WC Benefits; Why It Is Challenging to Create Teaching Materials in Work Comp and more

Synopsis: Why are Illinois Workers Compensation Rates So Expensive? Thoughts from a Reader.

Editor’s comments: Following our KCB&A Update about Governor Rauner’s Turnaround Agenda, a reader provided his best thoughts on needed IL WC reform for your consideration. We have heard similar thoughts from many readers and publish this important article for your consideration and comment.

Why are IL WC Costs So Expensive:

It is a simple answer that is directly linked to the symbiotic relationship Petitioner attorneys sometimes have with a selected group of medical providers. These medical providers (typically the proprietors of their practice) have an endless stream of referrals and financially benefit from prolonging the course of treatment which in turn drives up the value of the claim for their attorney counterparts.

The high cost and duration of supposedly work-related medical care then extends far beyond what would normally be considered reasonable or necessary if there was no underlying litigation. And if that was not enough, these money-driven medical providers legally have the ability to offer and direct unlimited referrals to their counterparts. This endless and unhappy cycle leads to ballooning work comp settlements or awards which in turn increases Illinois insurance rates which are presently the 7th highest in the nation, and far beyond any of our neighboring states.

Medical Accountability Needed

Illinois needs to hold accountable those medical providers seeking to game the system by creating a way to effectively discipline them. This discipline needs to be enforced at the state level and most importantly by Illinois arbitrators. Arbitrators are far more likely to rule fairly if legislation provides specific guidelines, as it did with the recent limit on the value of carpel tunnel claims.

One of the only saving graces insureds and self-insureds in Illinois currently have, is the ability to request utilization reviews (URs), which are based on ODG guidelines. URs are used to demonstrate what is considered reasonable medical treatment and are presented to all parties involved in the case. It is commonplace for massive amounts of medical treatment to overshadow UR non-certifications and those attorneys who directed the medical care are fully aware of that. Arbitrators become mediators over medical care, forcing insureds to pay for medical care and bills that were deemed medically unwarranted by the UR. Under the present system, IL WC Arbitrators decide what is medically warranted/reasonable, rather than deferring to the expert tool specifically designed by the state legislature for this purpose.

IL WC Has No True Remedy for Unneeded and Expensive Medical Treatment But Needs One!

If an employer or claims handler would like to take an aggressive stance against a medical provider, they can presently file a claim with the IDFPR. However, you will likely be rewarded for your trouble with a complete lack of any response no matter how egregious the medical provider’s excessive medical treatment or billing is. In my view, that has to change and something has to be done about unneeded, endless and expensive medical care in the workers’ comp arena.

At some point, we hope the IL WC Commission itself consider steps to black-list or bar some medical providers from the system. The IWCC can’t stick its head in the sand forever—when everyone knows a medical provider is abusing the process, something needs to be done to push back.

Summary

Issues of causation, fraud, prescription of medically questionable durable equipment and compounds and excessive medical costs are topics for another day, but much of it would not be allowed to sully our system if these aforementioned relationships did not exist. These medical providers, some of which can be tracked back to the Federal investigations and scandals of Raghuveer Nayak, Blagojevich and Jesse Jackson Jr (notice a trend), will continue to damage the state of Illinois’ workers compensation system and financial well being if there is no legal recourse in place to keep them in check. If we had the ability to cut the head off the snake, the snake could not bite us. If we develop effective ways to challenge and possibly bar questionable medical providers in this state, we would be better able to get to the goal of moving IL WC costs to the middle of the pack of all U.S. WC systems.

Ben Lewis, Surestaff Risk Manager

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Synopsis: Overview and Definition of Illinois Work Comp Benefits

Editor’s comment: As we begin the summer, we wanted to provide our readers with a WC teaching update.

Workers’ compensation throughout Illinois and the world provides three main benefits for injured workers: medical care, temporary total disability and permanency. This is a quick outline of Illinois WC benefits:

Medical benefits: Injured workers are entitled to full medical coverage of all reasonable, necessary and related medical care arising from their injury. Illinois enacted a medical fee schedule, effective February 1, 2006, for all related and necessary medical treatment. The fee schedule is changed every year to follow inflation.

Temporary total disability: Illinois allows for 66-2/3% of an employee’s average weekly wage during all periods they are temporarily totally disabled from all work.

Temporary partial disability: If an employee returns to any work following injury—part-time or full-time light duty work at a lower rate of pay on a temporary basis—Illinois law requires an employer make up the difference as TPD, or continue to pay temporary total disability until the employee returns to full duty.

Permanent disability in the IL WC system is awarded in six ways:

1.    Serious and permanent disfigurement: Typically, burns or scarring outside the ‘strike zone’.

2.    Specific loss: Some relative legal definition of percentage of loss of a specified body part or ‘member’—Illinois relies in part on AMA ratings in determining specific permanent loss.

3.    Nonspecific loss (typically referred to as ‘body as a whole’): Some relative legal definition of percentage of loss of the whole body—again Illinois relies on AMA ratings as one of five factors in determining permanent loss/impairment/disability.

4.    Wage differential benefits: Two-thirds of the difference between what the employee would have been making in his old job at present wage levels versus a new, permanent lower-paying job caused by work-related injury or disability.

5.    Total and permanent disability: Two-thirds of the average weekly wage for life. Please note Illinois has a very high minimum and maximum rate for total and permanent disability, and unlike other states there is no cap on the number of years.

6.    Death: Two-thirds of the average weekly wage is payable to the surviving spouse and dependents for twenty-five years. Please note Illinois has a very high minimum and maximum rate for death benefits.

Other matters which may be characterized as WC benefits which any adjuster should be fully aware of:

Vocational rehabilitation is a benefit that may be claimed and/or awarded in specific circumstances. In rare instances, the Commission may order complete re-education or retraining of an individual at the employer’s expense due to an injury-related limitation and job change.

‘Maintenance’ was a term with a tortuous history in Illinois. In 2006, it was codified to equate with the TTD benefit when someone is in vocational counseling and hasn’t yet returned to any work. We always thought we were smart enough to know TTD and maintenance are the same thing but our old Chairman fought to use a duplicate term for the same thing!

Mileage to treating doctors is also a question mark in Illinois—there is no requirement that Illinois employers pay mileage to medical providers in our Rules or Act. There is one odd case that says it is due—the ruling has been routinely ignored. We tell all of our defense clients, don’t, please don’t pay mileage to treating doctors.

For Respondent to schedule an Independent Medical Examination and have the employee legally required to attend, the employee is entitled to mileage, meals, and time lost from work in advance of the appointment. Effective July 20, 2005, the mileage amount based on the current IRS mileage rate is required to be sent to the employee with notice of the IME.

An Illinois employee can seek civil damages for retaliatory discharge and termination or failure to recall as a result of seeking workers’ compensation benefits. This would arise from a separate common law action and would not be heard by the IL WC Commission.

Penalties in Illinois are 50% of the amounts payable for temporary total disability or permanent partial disability which are not paid for frivolous reasons or withheld solely for delay. Penalties can be awarded for not paying penalties resulting in an additional 50% of the 50% already awarded. Although we are not aware of it happening, this could occur on an indefinite basis!

There is an additional penalty of $30 dollars a day with a cap of $10,00.00 which can be awarded for not paying temporary total disability for frivolous reasons or solely for delay.

There is an additional penalty of $30 dollars a day with a cap of $10,000.00 which can be awarded for not paying medical bills that are submitted with appropriate documentation after thirty days has passed.

Attorneys’ fees in Illinois, typically 20% of the disputed benefits can be ordered payable by the Respondent at the discretion of the Commission when benefits are withheld frivolously or solely for delay.

If you have questions or concerns about any of these issues, send a reply. We appreciate your thoughts and comments. Please post them on our award-winning blog.

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Synopsis: Why It Is Challenging to Create Teaching Materials in Work Comp Across the U.S.

Editor’s comment: We are asked all the time why there aren’t more solid resources for beginners and mid-level execs + claims handlers to understand WC law and practice. In Illinois Workers’ Compensation Practice, there is a distinct challenge when creating reference materials. It is the goal of our lawyers and firm to provide you with the ‘rules’ or what is sometimes called the ‘letter of the law.’ The difficulty is that portions of the Illinois Workers’ Compensation Act and administrative rules are virtually impossible to accurately decipher. For one simple example, take a look and try to make sense of Section 10 on the calculation of the average weekly wage. Because of this arcane nature and the vague and unpredictable rulings which result, a student of the law could spend years reading the statute and still have no idea how to predict the outcome of a fact situation based on Commission and reviewing courts interpretations of those laws.

Illinois workers’ compensation law may be intentionally or unintentionally drafted to allow administrators substantial leeway in interpretation depending on the political group in power or even the whim of the interpreter. By contrast, Indiana WC law is clear and their administrators work hard to keep it simple and patent for both sides.

Illinois workers’ compensation rules and law also are subject to reinterpretation as rapidly as the turnover from state and judicial elections, along with the quirky political tides between elections. For those reasons and more, if you are going to understand the ‘letter of the law,’ you must not look solely at the language of the statute or rules—you must also investigate the chatter, gossip and rulings with the current interpretation of the statutes.

Another problem present today is the daunting complexity of the issues involved. For example, our average weekly wage calculation has been the subject of endless debate yet remains a convoluted concept. It is easy to understand the problem of the writers of this legislation when faced with the task of drafting a statute that will fairly value the wage of the minimum wage earner, the seasonal construction laborer, the truck driver, and the professional who may pay their own expenses from earnings, and all the other means that income is paid to a particular worker. Some courts have expressly indicated that they interpret this Section to provide a ‘windfall’ to the worker - others have recoiled from such largesse. The current Section 10 is not a brilliant effort as enacted but it is the reality of what you will face when handling Illinois workers’ compensation law.

Another issue with consistent application of a statute is that many times the letter of the law is simply ignored by the court or arbitrator but no one has a sufficient monetary stake to actually fight to a conclusion in the Appellate or Supreme Court. A clear example of this concept is ‘mileage to treating medical providers.’ We challenge anyone reading the Illinois statute or administrative rules to locate language that indicates this expense is to be paid by the employer.

If you become challenged in understanding how longstanding IL workers’ compensation law can be routinely changed by the reviewing courts, we recommend you review the Illinois State Chamber’s 2013 treatise The Impact of Judicial Activism in Illinois, Workers’ Compensation Rulings from the Employer’s Perspective. This document remains available online at

http://ilchamber.org/wp-content/uploads/2012/05/1WorkersComp.pdf

This source indicates how the Illinois reviewing courts’ analysis of the law may change rapidly. This document outlines the problems of accurately advising our readers and students ‘this is what the Commission is doing’ without being able to point to clear legislative language which indicates why.

Either way, like it or not, much of Illinois workers’ compensation practice requires that you keep in close touch with knowledgeable defense counsel like the team at KCB&A. You sometimes need to know what is currently happening at the IWCC rather than read a boring statute!

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

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.