Joined: Jun 2002
Sunday August 14, 2005 6:51 AM
I submitted the following rebuttal editorial to the LBPT in response to the paper's Thursday opinion piece. It is reproduced here in full text:
Re: "Everyone's a winner," (8/10/05)
A major flaw exists in the Press Telegram's opinion that falling workers' compensation rates for employers are "an encouraging sign" and bode "well for California's job market and business climate." It ignores the demise of an important socio-legal function under the same reform law that is credited with driving down employer insurance rates. Much as the abolition of mental-health care under the Reagan administration simply resulted in a shift of the cost of mental illness to other social programs, the "reform" of workers' compensation will only shift liabilities to more expensive legal mandates that are less protective for the employer.
This is a classic case of "be careful what you wish for" scenario, exemplified by vocational rehabilitation.
A fundamental change to the workers' compensation system is the abolition of vocational rehabilitation (which met its demise in the 2003 "reform" legislation AB 227/228). While the vocational rehabilitation program had questionable success, it provided a very significant legal protection for the employer because the mandates in vocational rehabilitation fulfilled the mandates of the Fair Employment and Housing Act (FEHA).
The expense of vocational rehabilitation was limited to $16,000. Once the $16,000 cap was reached, the employer's financial and legal liability stopped.
There is no limitation on the liability or financial exposure under the FEHA.
In addition, the cost of vocational rehabilitation was financed through the employer's workers' compensation policy premium. There is no insurance for FEHA violations.
Without the assistance of vocational rehabilitation, employers must develop proper job descriptions, deal with physicians, assess opportunities for modified and alternative work, make ergonomic assessments, institute return to work programs, and facilitate the interactive process required by the FEHA. Failure to do these things could result in judgments like the one in a recent Riverside case that cost the defendant employer $450,000 in damages.
If that doesn't strike fear in to an employer's bank accounts, then let's look at this sobering fact: The average FEHA lawsuit will cost the employer $380,000 in damages, $150,000 for plaintiff attorney fees, and $200,000 for defense costs.
Worse yet, the FEHA is being increasingly liberally interpreted, as evidenced by the California Supreme Court's decision on Thursday in Yanowitz v. L'Oreal USA, Inc., No. S115154, 08/11/2005.
In the Yanowitz case, the Supreme Court ruled that an employee who refuses to carry out a supervisor's order that the employee believes to be discriminatory has a cause of action under the California Fair Employment and Housing Act (FEHA) even if that employee fails to voice concerns that the action may be discriminatory.
And, while an employer can settle its FEHA liability (see the 2002 Supreme Court decision Mary J. Jefferson v. California Dept. of Youth Authority), the Department of Fair Employment and Housing (DFEH) can still investigate. If it determines that the employer may have engaged in an act or acts of discrimination based on disability, the department can initiate an action against the employer. This can result in thousands of dollars of additional expense.
All because workers' compensation was "reformed" and the allegedly non-productive vocational rehabilitation benefit was eliminated.
The media's current enchantment with the recent announcements of dramatic rate decreases is reminiscent of the legal presumption bestowed on the treating physician's opinion in 1992. Why, who better to opine on an injured workers' disability than the physician responsible for treating that employee? Or so the argument went.
Physicians soon learned that treatment referrals, which came from injured worker's attorneys, would dry up if favorable disability opinions were not expressed. Fraud? No. Simply market economics dictated by the laws of the land.
Precipitating the workers' compensation "reform" movement were abundant media stories concerning job flight from California. Nobody bothered to correlate these anecdotes with actual Department of Labor statistics which, it turns out, reflected the lowest unemployment numbers in history and continuing economic expansion.
The editors of this fine paper asked rhetorically, "How could any reasonable Californian want to return to the old system?" That question will be answered in five to seven years when the next "crisis" makes the news.
(David J. DePaolo is the President and CEO of WorkCompCentral, a workers' compensation industry news and information service. Before founding WorkCompCentral, he practiced workers' compensation law for nearly 20 years and represened employers and insurance companies in California.)
President, Editor in Chief