Governor Schwarzennegger's budget proposal was unveiled today.

He's shifting his strategy from furloughs to proposed pay cuts.

A recent ruling by Alameda County Superior Court Judge Frank Roesch found that many of the furloughs of state workers were illegal.

Unveiling his plan to plug the gaping hole in California's budget (which may be as much as $20 billion), today the Governor signaled that he will seek a 5% state worker pay cut and an increase in employee retirement contributions equal to 5% of salary, instead of furloughs. If enacted, these cuts could reduce state worker pay by 10%. The affect of furloughs was an effective 14% pay cut for many state workers.

This can't go into effect without legislative approval, and state worker unions contend that the Governor must enter a bargaining process.

But it seems clear that Schwarzenegger has no plans to exempt "user funded" state agencies from the proposed cuts.

Writing in the Sacramento Bee, Kevin Yamamura notes that:
"The administration has said the state needs special-fund savings to help preserve its overall cash flow. It also believe most state workers are paid from a blend of special funds and general funds."

Schwarzenegger apparently believes that $1.6 billion will be saved by this maneuver in the next fiscal year.

This will come as a bitter pill to many of the clerks, raters, and judges at the California Workers' Compensation Appeals Board, and to much of the DWC staff.

If the economy does not recover soon these cuts could be chronic.

While it's good to note that furloughs will increase access time to to the courts, the effect of pay cuts is demoralizing to WCAB and DWC staff.

It's not a pretty picture. And it's particularly galling to employers, insurers and the comp community, all of whom continue to see user funding assessments rise.

Hopefully the state worker unions will prevail in the courts if not in the legislature. User funding should be sacrosanct.

Stay tuned.

Julius Young
www.boxerlaw.com

Just before the end of 2009, Susan Gard of the DWC announced that the administration would not observe the mandate to revise the permanent disability rating schedule by January 1, 2010.

David DePaolo, founder and chief executive officer of WorkCompCentral.com, penned a trenchant response to the DWC scofflaws. Here (in quotes) is DePaolo's commentary in its entirety:
By David J. DePaolo

"Happy New Year to everyone except the people of the State of California."

"For it is the people who have elected a top public official who has decided that he, and his administration, is above the law – laws that he and the administration put into effect."

"I am talking, of course, about Labor Code Section 4660, and the promise of Gov. Arnold Schwarzenegger's administration since 2004 that the gutting of injured worker permanent disability benefits would not only be reviewed and examined, but adjusted to account for the halving of the value of this important social safety net."

"The administration says that now is not the right time to adjust the permanent disability rating schedule because the economy is in the tanks and that adjusting the schedule would put an unnecessary, undue burden on employers."

"Since when does Labor Code 4660 permit discretion in the revision of the schedule?"

"The administration had no problem with interpreting the mandatory language of 4660 when it came to arguing that the “schedule shall promote consistency, uniformity, and objectivity” (and still apparently believes this language to be self-evident based on Department of Industrial Relations Administrator John Duncan’s briefs in Almaraz/Guzman)."

"The administration had no problem with the mandatory language in support of the phrase “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.”

"The administration was apparently quite happy with court rulings that recognized that “shall” was mandatory in reference to the 2005 schedule being applicable to all disability determinations that were not previously the subject of a declaration of permanent and stationary prior to the 2005 schedule."

"And the Division of Workers’ Compensation was good to comply with the law and give us a revised schedule in compliance with 4660(e) (“On or before Jan. 1, 2005, the administrative director shall adopt regulations to implement the changes made to this section by the act that added this subdivision”)."

"But now we’re told that “shall” doesn’t apply if the government doesn’t want it to apply."

"Students of math and English, let’s review:"

"4660(c): “The administrative director shall amend the schedule for the determination of the percentage of permanent disability in accordance with this section at least once every five years.”

"The original schedule amended per the April 2004 edition of 4660 was made effective Jan. 1, 2005. That plus five years equals 2010. Okay, so the math seems pretty clear – five years means that the date by which the schedule shall be amended would be Jan. 1, 2010."

"Maybe the problem is the interpretation of the English language?"

“The administrative director shall amend the schedule.” Seems pretty clear to me – last time I looked up “shall” in the dictionary it meant “must” in the context of laws."

"The duty to amend the schedule under 4660 falls on the administrative director – an appointee of the governor."

"I like Carrie Nevans. I will publicly state that I believe she has been the most effective administrative director DWC has had since I started in workers’ compensation 25 years ago."

"But the law is the law. The law states that the schedule shall be amended."

"So, either Carrie is breaking the law, or her boss, Mr. Schwarzenegger, told her to break the law. At some point the buck stops. The people of the State of California have a right to know who is responsible and why the laws of the land are not equally enforced."

"So I invite anyone from the administration to take advantage of the First Amendment and to answer one simple question in response to this editorial – who made the decision to not amend the PDRS by Jan. 1, 2010?"

(David J. DePaolo is founder and chief executive officer of WorkCompCentral.)

Well spoken, David.

How about a rejoinder, Ms. Nevans or Ms. Gard? What's the story? Did the DIR's lawyers provide an analysis supporting blowing off the mandate?

Inquiring minds want to know.

Julius Young
www.boxerlaw.com

Here in no particular order are my picks as the 2009 California workers' compensation "Top 10" events. I've included some brief commentary, along with links to posts I did during the year:

1. POIZNER CONTINUES TO REJECT WCIRB RATE INCREASE RECOMMENDATIONS
In the spring of 2009 the WCIRB recommended to Insurance Commissioner Poizner that comp rates (the "pure premium" or "benchmark") be increased by 24.4% (later amended to 23.7%). Poizner eventually responded with a July 2009 non-binding decision and order recommending no increase.

Poizner continued to criticize the WCIRB's methodology and forecasting.
The WCIRB itself was under scrutiny:
http://www.insurance.ca.gov/0400-news/0 ... 060209.pdf

Poizner did order a change in how the WCIRB accounts for medical costs. Here's my post, "Poizner's Directive Bears Fruit":
http://www.workerscompzone.com/index.ph ... 928-203224

Later in 2009 Poizner again rejected a whopping rate increase by the WCIRB (22.8%), recommending no increase in the benchmark rate for 2010. Here's my post on that, "Whac-a-Mole":
http://www.workerscompzone.com/index.ph ... 109-212346

As the year ended it is apparent that carriers are increasing their rates, but nowhere near the levels requested by the WCIRB. Figures from the California Department of Insurance and CHSWC show that average rates filed by insurers had fallen from 2004 as follows: -3.6% (1/1/04), -7.3% (7/1/04), -3.8% (1/1/05), -14.6% (7/1/05), -14.7% (1/1/06), -10.7% (7/1/06), -7.0% (1/1/07), -11.0% (7/1/07), -.05% (1/1/08), and -2.6% (7/1/08). In 2009, despite some claims of market deterioration by A.M. Best, the average rates actually charged rose modestly: 5.8% (1/1/09) and 8.5% (7/1/09).

2. VOCATIONAL REHABILITATION EXPIRES
By statute vocational rehab for pre 1/1/04 benefits expired 1/1/09 unless there was a vested right. Workers have lost a significant benefit. That's the bottom line of the Weiner decision, covered in my post "Sayonara":
http://www.workerscompzone.com/index.ph ... 611-215416

3. GROWING CONCERN ABOUT MEDICAL COSTS AS A SYSTEM COST DRIVER
Citing concerns about the role of medical treatment costs in California workers' comp, Insurance Commissioner Poizner held a special hearing on the issue. As part of its justification for a large rate increase, the WCIRB claimed that the average comp medical bill increased between 2005 and 2007 by 23% (for all claims) and 30% (for indemnity claims). WCIRB chief actuary David Bellusci claimed that drug costs are up 42%, medical containment costs (such as utilization review, nurse case management etc) are up 51% and medical legal expenses are up 59%. A June 2009 study by the California Workers Compensation Institute (commissioned by the WCIRB pursuant to a legislative mandate) documented many of these trends.

The California Workers Compensation Institute raised alarms about the i costs and problems (including drug induced deaths) associated with increasing opioid use in the California comp system.

Efforts to mandate an "explanation of benefits" letter to injured workers fell flat in 2009. Some had pushed this as a solution to the problem of medical provider fraud, on the theory that fraudulent doctors would not bill for bogus treatments if the worker was likely to see the bogus billings.

Later in the year the DWC announced a 12 point regulatory plan to control medical costs. This was largely in response to a RAND paper on regulatory actions that could reduce medical costs:
http://www.dir.ca.gov/chswc/Reports/2009/RANDpaper.pdf

Concern about increasing lien filings choking the WCAB (particularly those out of Southern California) led that to be a factor in "secret negotiations" about further system reform (see #9 below).

And throughout 2009, the system lived in the shadow of federal healthcare reform. The final direction of "Obamacare" could have profound secondary effects on workers comp in the long run even though the idea of "24 hour care" is dead.

4. DWC'S ANNOUNCEMENT THAT IT WILL NOT ATTEMPT TO MEET DEADLINE FOR STATUTORY PD RATING SCHEDULE REVISION
At year's end, DWC Chief of Legislation and Policy Susan Gard was
quoted as saying that the DWC will not move forward at this time on a revision of the 2005 PDRS (permanent disability rating schedule), citing concerns about the weakness of California's economy. The DWC has decided not to move forward on an earlier PDRS draft that would have resulted in a modest increase in permanent disability payments. The 2005 PDRS was under unsuccessful attack several years ago in the Boughner case; more recently the WCAB's Ogilvie decision (see more below) allows for a possible rebuttal strategy on the PDRS under limited circumstances. At year's end it was not clear what the legal and political ramifications of the DWC's decision will be. Meanwhile, the issue is not going away. Multiple studies have shown sharp reductions in payments to workers with permanently disabling injuries since the 2004 reforms.
Permanent disability indemnity costs continue to be a relatively small percentage of overall system costs.

5. ALMARAZ, GUZMAN AND OGILVIE DECISIONS ROIL THE COMP COMMUNITY

Groundbreaking decisions by the WCAB in the Almara, Guzman and Ogilvie cases were soon appealed. Almaraz I and Guzman I allowed doctors to go "outside the AMA" guides in rebuttal of the Guides.
The WCAB took the matter under further study and issue a revised decision, Almaraz II and Guzman II. Both allow rebuttal of the Guides, but only from "within the four corners of the Guides":
http://www.dir.ca.gov/wcab/EnBancdecisi ... ep2009.pdf

Ogilvie allows rebuttal of part of the rating "factors" in some cases, dependent on wage loss data and certain mathematical ratios of earnings losses:
http://www.dir.ca.gov/wcab/EnBancdecisi ... ep2009.pdf

These cases provide tools for lawyers to help some workers achieve a rating or settlement result that is more reflective of their true disability.
But the decisions have angered employers and insurers who seek to impose the more cut and dried approach of the "strict AMA" system.

It's the usual debate between system predictibility and individual justice.
Case law has confirmed for many years that the PD rating schedule is rebuttable. It's a loophole that the SB 899 reformers failed to close. To their credit, labor negotiators in the 2004 reform did not trade away rebuttability of the schedule.

Both Almaraz/Guzman and Ogilvie are being appealed, and it may be late in 2010 or even 2011 before all stakeholders can be sure what is the final result in these cases. A legislative deal or a new PD rating schedule may abrogate or moot one or both of these cases.

6. WCAB STRUGGLES WITH EFFECTS OF FURLOUGHS
Although the courts eventually exempted SCIF from furloughs, furloughs were imposed on the WCAB and its district offices. Morale among many WCAB employees suffered, and the division struggled to maintain service despite the furloughs. Many in the "comp community"
were puzzled that furloughs were applied to the WCAB given its "user funding". Unhappiness about this only increased as user funding assessments were substantially increased in the fall of 2009. User funding assessments (which also fund Cal-OSHA and labor standards enforcement programs) increases met resistance from employers.
Here's my post "Assessing Assessments":
http://www.workerscompzone.com/index.ph ... 129-222117
DWC acting administrator Carie Nevans defended the assessments:
http://workerscompzone.com/index.php?m= ... 204-070857

7. SCIF CONTINUES TO BE IN THE NEWS, WITH PLANNED SALE APPARENTLY STALLED
There were more leadership changes at SCIF. But the main reason SCIF was in the news was that the Governor's office hatched a plan to sell off part of SCIF in order to generate revenue to plug California's gaping budget hole. Legislators eventually went along with this plan, although there's much speculation that many voted to do so believing it was not likely to happen. At year's end the plan appears to be hopelessly stalled (see my post "2 Things Not Happening"):
http://www.workerscompzone.com/index.ph ... 229-224536


8. APPELLATE COURTS CONTINUE TO DEAL WITH SIGNIFICANT WORKERS' COMP CASES: BENSON, SMITH/AMAR; XYZZ; HERTZ (AGUILAR)

Disabled workers sustained a big loss in 2009 as the California appellate courts (in Benson, Forzetting and Vilkitis) upheld the WCAB's rationale in the Benson case. Due to the court's interpretation of SB 899 changes, doctors evaluating injuries must allocate PD to each injury separately (unless that is impossible), rather that combining permanent disability where successive injuries become stationary together. As a result, the long-held Wilkinson line of cases appears to have expired. Here's my post:
http://www.workerscompzone.com/index.ph ... 210-134830

One bright spot for workers in the courts this year was a 6th District Court of Appeal decision in the "XYZZ case" (actually now "John Duncan vs. WCAB and X.S."), clarifying when a cost of living computation begins for payments for workers with disability ratings of 70% and above.
My commentary is found here ("A Surprise in the COLA Decision"):
http://workerscompzone.com/index.php?m=11&y=09
The decision continues to be appealed and we may not have heard the final word on this issue.

In Smith v. WCAB and Amar v. WCAB the California Supreme Court overturned an appeals court decision allowing fees against the insurer for applicant attorneys fighting medical treatment denials. Applicant attorneys had convinced the lower appellate court to allow fees under Labor Code 4607 where they were successful in enforcing the right to treatment on behalf of workers who received denials of specific treatment requests. The Supreme Court held 4607 only authorizes an award of attorney fees when defendant institutes proceedings to terminate an award. The effect of this decision will likely make it hard for many workers experiencing treatment denials under their "future medical" awards to get attorney help challenging the denial. Here's my post "Smith is Here":
http://www.workerscompzone.com/index.ph ... 511-214324

In Hertz v. WCAB (Aguilar) the Court of Appeal dealt with the thorny issue of applying SB 899 rules in a case where the worker alleged inability to compete in the open labor market under the "old schedule" LeBoeuf case. Although the employer prevailed in the case, a concurring opinion by once justice raised the issue of whether we would start to see an "Aguilar factor" in cases alleging total impairment under LeBoeuf,
total earnings incapacity or Labor Code 4662 (permanent total disability according to fact). The case has now been taken by the California Supreme Court, although a date for argument is not currently set. At year's end, it was not clear whether, in light of the Aguilar case, one must be a "perfect man" before an injury to qualify as 100% disabled post-injury. Here's my post "An Aguilar Factor?" on the issue:
http://workerscompzone.com/index.php?en ... 223-213426


9. SECRET NEGOTIATIONS OVER FURTHER COMP REFORM POINT TO LIKELY FUTURE LEGISLATIVE TINKERING

Over the Summer of 2009 word leaked that secret negotiations over a "grand reform bargain" were being held by a couple members of CHSWC (notably, Sean McNally, a Grimmway Farms executive and Angie Wei of the California Labor Federation), with staff support from CHSWC.
The talks appear to have centered around cost savings generated by putting restrictions on lien claimants and ending the rebuttability of the PD schedule, in exchange for a one-time PD increase.
My post "Uncloaking" can be found here:
http://www.workerscompzone.com/index.ph ... 022-214830

The "secret negotiations" documents were released by CHSWC in November 2009:
http://workerscompzone.com/index.php?m= ... 105-110204

Most observers assume that talks among various stakeholders will increase in 2010. The 2010 governor's race looms large over any talks, as does the outcome of appeals in Almaraz/Guzman and Ogilvie.

10. LEGISLATIVE SESSION RESULTS IN MODEST CHANGES IN COMP

2009'S California legislative session resulted in no major change. Disabled workers received no legislative benefit increase, as a PD increase bill that had been vetoed in 3 previous years was not moved to the Governor's desk in 2009.
Notable bills that did get signed included these:
-AB 483, which requires establishment of an internet website to assist in determining whether an employer is insured for workers' comp
-AB 1093, Taneka's Law:
http://workerscompzone.com/index.php?en ... 011-220507
-SB 186, which extended the right to predesignate a doctor, which otherwise was schedule to sunset at the end of 2009

Readers who would like to pour over stats and graphs on California workers comp should download the 2009 CHSWC report:
http://www.dir.ca.gov/chswc/Reports/CHS ... rt2009.pdf

Check back soon to take my quiz on the likely developments in California workers' comp in 2010.


Julius Young
www.boxerlaw.com

At the end of the year its becoming clearer that 2 things are NOT happening:

The sale of SCIF (or a part of SCIF) is not happening. It's no big surprise that this has become tied up in court. I suspect that many legislators who voted for this sale knew that the proposed sale was a big shell game.
But it looked good enough on paper for legislators to use it to kick the budget debacle down the road a bit.

Here's the L.A. Times article on the SCIF sale:
http://www.latimes.com/business/la-fi-s ... 0174.story

Meanwhile, Susan Gard (Chief of Legislation and Policy at the California Division of Workers' Compensation) was quoted today in the Workers' Comp Executive as saying the the DWC will not unveil a new PD rating statue by January 1, 2010 as required by statute. Gard is said to have noted that the DWC is deferring action on a fix for the PDRS.

The DWC had begun the process of developing another schedule a couple of years ago, but never completed the process. The newsflash from Brad Cain of the Executive indicates that the DWC is waiting to see whether a legislative fix arises.

No big surprise there. Some stakeholders were involved in secret talks months ago, and its likely that we'll see talks among various stakeholders heating up in early 2010.

Meanwhile, the DWC ignores a legislative mandate to refresh and revise the 2005 PD rating schedule. In a case of possible unintended consequences, the DWC's refusal to meet its mandated obligation may strengthen the hand of proponents of the Almaraz II and Ogilvie cases, which allow individual applicants to challenge elements of the PD rating (Almaraz) and/or elements of the "adjustment factor" (Ogilvie).

Stay tuned.

I'll be following up my last post ("The Twelve Days of Christmas") with the Top 10 Developments in California Workers Comp of 2009.

Stay tuned.

Julius Young
www.boxerlaw.com

(Workerscompzone awoke from a dream after seeing "Nine", the Rob Marshall homage to the Italian cinema era of Fellini and Antonioni, featuring Penelope Cruz, Nicole Kidman, Sophia Loren etc etc; but workerscompzone's dream was more pedestrian.....a choir was singing "The Twelve Days of Christmas" as the WCAB staff and comp community litigators left the local WCAB on Christmas eve....."

"On the first day of Christmas
My true love sent to me
A stip with an Ogilvie-eee"

"On the second day of Christmas
My true love sent to me
Two EAMS licenses
And a stip with an Ogilvie-eee"

"On the third day of Christmas
My true love sent to me
3 Benson filings
2 EAMS licenses
And a stip with an Ogilvie-eee"

"On the fourth day of Christmas
My true love sent to me
4 XYZ Colas
3 Benson filings
2 EAMS licenses
And a stip with an Ogilvie-eee"

"On the fifth day of Christmas
My true love sent to me
5 Premier liens
4 XYZ colas
3 Benson filings
2 EAMS licenses
And a stip with an Ogilvie-eee"

"On the sixth day of Christmas
My true love sent to me
6 Cheez-Whiz studies
5 Premier liens
4 XYZ colas
3 Benson filings
2 EAMS licenses
And a stip with an Ogilvie-eee"

"On the seventh day of Christmas
My true love sent to me
7 writs pending
6 Cheez-Whiz studies
5 Premier liens
4 XYZ colas
3 Benson filings
2 EAMS licenses
And a stip with an Ogilvie-eee"

"On the eighth day of Christmas
My true love sent to me
8 UR docs denying
7 writs pending
6 Cheez-Whiz studies
5 Premier liens
4 XYZ colas
3 Benson filings
2 EAMS licenses
And a stip with an Ogilvie-eee"

"On the ninth day of Christmas
My true love sent to me
9 Guides experts guiding
8 UR docs denying
7 writs pending
6 Cheez-Whiz studies
5 Premier liens
4 XYZ colas
3 Benson filings
2 EAMS licenses
And a stip with an Ogilvie-eee"

"On the tenth day of Christmas
My true love sent to me
10 RAND researchers writing
9 Guides experts guiding
8 UR docs denying
7 writs pending
6 Cheez-Whiz studies
5 Premier liens
4 XYZ colas
3 Benson filings
2 EAMS licenses
And a stip with an Ogilvie-eee"

"On the eleventh day of Christmas
My true love sent to me
11 judges furloughing
10 RAND researchers writing
9 Guides experts guiding
8 UR docs denying
7 writs pending
6 Cheez-Whiz studies
5 Premier liens
4 XYZ colas
3 Benson filings
2 EAMS licenses
And a stip with an Ogilvie-eee"

"On the twelfth day of Christmas
My true love sent to me
12 Almaraz ratings rising
11 judges furloughing
10 RAND researchers writing
9 Guides experts guiding
8 UR docs denying
7 writs pending
6 Cheez-Whiz studies
5 Premier liens
4 XYZ colas
3 Benson filings
2 EAMS licenses
And a stip with an Ogilvie-eee"

Happy holidays to my readers and all of my clients, friends and colleagues in the comp world.

Julius Young
www.boxerlaw.com