California Overhauls Workers Compensation Law

On Tuesday, September 18, 2012, CA Governor Jerry Brown signed SB863, the new Worker’s Compensation legislation which significantly reformed California’s Workers’ Compensation Law.  The law, which was passed in California’s legislature last month, was passed by a wide majority.  However, attorneys across the State of California are wondering if the changes are as positive as the State would like everyone to believe. 

The new law has multiple elements including a reduction in insurance premium costs to employers and an increase in payouts to permanently disabled workers injured on the job.  It also amends the law to remove coverage for conditions such as insomnia, sexual dysfunction, and mental health issues unless they are directly related to workplace injuries. 

With cooperation from state labor unions, Governor Jerry Brown discussed substantial revisions to a system plagued by heavy insurance costs, costly litigation, and rising insurance premiums.  The group’s primary goal was to increase permanent disability benefits without raising insurance premiums, which might prove too great a strain to the thousands of small businesses in California.

A recent study out of the University of California at Berkeley found that over the past 8 years, the average benefits paid to workers with permanent disabilities has fallen sharply from $25,000 to $12,000.  The 30% increase in benefits that the revision guarantees is a far cry from the costs that many of these permanently disabled individuals need to live on.  California attorneys argue that the $750 million trust fund the law establishes is not enough and that disabled employees should be entitled to more benefits.

The reduction in coverage remains another troubling element of the new law.  Mental anxiety and depression are severely traumatic problems that many workers experience after a traumatic workplace accident.  And these problems can bleed over into other areas of a person’s life so they experience symptoms that are seemingly unrelated. Many California attorneys argue that this is discrimination against employees who lost their benefits due to a badly crafted law.

The main benefit that Brown’s office touts is a statewide reduction in premiums.  Governor Brown’s office estimates that over the past 2 years, Workers’ Compensation costs have risen significantly from $14.8 billion to $19 billion.  The office estimates that these costs were on track to continue to rise. Under the new law, businesses could save a total of $1 billion next year due to lower premiums. For businesses already feeling the pinch in this economy, these savings are a welcome relief. As an employer, the State of California anticipates a savings of over $40 million a year in insurance premiums with another $170 million in savings to local governments.

Said Governor Brown, “These significant reforms save hundreds of millions of dollars for California’s employers while preventing an imminent crisis of skyrocketing rates that would have hurt both injured workers and businesses.” 

Are these changes really the benefits that Governor Brown wants us to believe they are?